Adoption of escm in Centralized and Decentralized Manufacturing Organizations

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1 Association for Information Systems AIS Electronic Library (AISeL) PACIS 2017 Proceedings Pacific Asia Conference on Information Systems (PACIS) Summer 2017 Adoption of escm in Centralized and Decentralized Manufacturing Organizations Zayyad Danlami Tsiga University of Nottingham Ningbo China,, Alain Yee-Loong Chong University of Nottingham Ningbo China, Xiaodie PU The Hong Kong Polytechnic University Pei-Lee Teh Monash University,Malaysia, Follow this and additional works at: Recommended Citation Tsiga, Zayyad Danlami; Chong, Alain Yee-Loong; PU, Xiaodie; and Teh, Pei-Lee, "Adoption of escm in Centralized and Decentralized Manufacturing Organizations" (2017). PACIS 2017 Proceedings This material is brought to you by the Pacific Asia Conference on Information Systems (PACIS) at AIS Electronic Library (AISeL). It has been accepted for inclusion in PACIS 2017 Proceedings by an authorized administrator of AIS Electronic Library (AISeL). For more information, please contact

2 Adoption of escm in Centralized and Decentralized Manufacturing Organizations Research in Progress Zayyad Danlami Tsiga, University of Nottingham Ningbo China, Alain Yee-Loong Chong, University of Nottingham Ningbo China, Xiaodie PU, The Hong Kong Polytechnic University, Pei Lee Teh, Monash University Malaysia, Abstract Organizations today face great challenges from the unpredictable, globalized and competitive business environment. One of the ways that organizations achieve competitive advantage is by adopting various technologies including Electronic Supply Chain management (escm) to improve their supply chain relationships. However, despite the benefits that are promised by escm, some organizations find it difficult to realize its benefits and often fail in its adoption. In trying to explain this, researchers have suggested that the models used to understand the adoption of such systems are still incomplete. Drawing from the coordination theory and resource management model, this study proposes various hypotheses to explore the difference in the intention to adopt escm in centralized and decentralized organizations, and the impact of supply chain information visibility and top management strategic implementation. The data collection procedures and future data analysis plans are further discussed. Keywords: Electronic supply chain management, Inter-organizational systems, Coordination Theory, Resource Management Model, Centralization, Decentralization 1

3 Introduction The use of electronic supply chain management (escm) is without doubt an increasingly important part of organizational chains and indeed necessary for improved performances (Flynn et al. 2010; Liu et al. 2016). Since the significant development of the internet and e-commerce in the 1990 s, we have witnessed several changes in the methods that organizations function and operate, all in order to improve performance and reduce costs. One of the ways organizations use information systems is to improve the links between themselves and their suppliers and customers through the implementation of escm (Bala 2013; Liu et al. 2010). In comparison with older types of interorganizational systems, escm provides even more enhanced features that facilitate collaboration such as shared database and joint decision making support (Liu et al. 2016). This enables organizations towards being more tightly linked with their stakeholders and be more agile in environments where demand and supply are always changing. However, despite such benefits, the adoption of escm and similar technologies can be unpredictable and sometimes results in some party s benefiting more than others (Ke et al. 2009). Such uncertainties and consequences often make it more difficult to adopt and sometimes cause failure of adoption. Research on the adoption on escm remains significant in aiding our understanding of how to facilitate its adoption. Electronic supply chain management (escm) Impacts most the processes that organizations are involved with, this includes sourcing and procurement, design and development, forecasting and replenishment, distribution and logistics, and collaborative planning through technologies like SAP, Oracle and IBM ebusiness (Chen and Paulraj 2004; Ke et al. 2009). The effective usage of escm is critically important to organizational performance and the achievement of sustainable competitive advantage (Barratt and Barratt 2011). Because of these benefits, organizations are spending millions of dollars on IT investments including escm and other interorganizational systems. With these technologies, organizations can have access to more resources that they otherwise would not. Such resources include applications, networks, and databases. The technologies enable its users to work together by sharing data (structured and unstructured) stored in repositories. Their implementation facilitates the collaboration and management of conflicts through the electronic integration of resources, which results in the redesign of interorganizational processes and the expansion of the organizations business scope. Previous research on escm has shown that while its implementation helps organizations achieve improved performances, it also often provides a dilemma for organizations. Some major organizations that have shown that indeed escm and other similar IT innovations do provide substantial benefits include Wal-Mart, Amazon, Dell, and Toyota. However before the implementation of the technology, organizations have to be well prepared to fully achieve its benefits. In this study, we look to make a contribution by linking the investment of escm technology to centralized and decentralize organizational coordination structures. Unlike majority of previous research that approach this from either the centralized or decentralized perspective (Davis-Sramek et al. 2015; Huang et al. 2010; Chechen. Liao et al. 2011), this study will be examining how the intention to adopt escm is affected by both centralization and decentralization. The study also looks at the role that information visibility and top management play with regards to their level of strategic implementation. Theoretical Background Coordination Theory and Formal Coordination Mechanisms The coordination theory has been used to explore how activities of multiple organizations can be integrated so the organizations can work together towards achieving goals of mutual benefit. Coordination theory posits that to carry out tasks and generate alternate processes first involves identifying the dependencies and coordination problems that is faced by the organization and then determining what coordination mechanisms can be applied to manage them. Coordination mechanisms as introduced by Malone & Crowston (1994) are activities that are put in effect to limit the coordination problems that arise in organizations. Coordination mechanisms ensure the reduction of coordination costs, better allocation of resources towards activities and tasks, and an efficient coordination structure (Im and Rai 2014). Coordination mechanisms from early literatures are generally grouped into two categories, the first being structural and formal mechanisms, and the second being informal and more subtle mechanisms. From amongst the structural and formal mechanisms, examples include centralization and decentralization, departmentalization, formalization. While for informal mechanisms, examples include informal communications, 2

4 socialization, and other interorganizational relations. For the purpose of this study, we focus only on centralization and decentralization, and how each of them affects the intention to adopt escm. Centralization refers to the extent to which the decision making authority is concentrated or dispersed in an organizational setting. In organizations with high centralization, decisions are made at the higher organizational levels with little to no input from the lower levels. When organizations take a more decentralized approach, the decision making is often delegated to the lower hierarchical levels of the organizational (Olson et al. 2005). While centralization and decentralization have been extensively studied in the management fields, they have not been as studied in the information systems and operations management field and in particular, in the context of escm. Centralization and decentralization can be found in varying areas including knowledge management (Chechen Liao et al. 2011), and production strategy (Huang et al. 2010). Ranganathan et al. (2004) and Davis-Sramek et al. (2015) explore the impact of centralization towards the deployment of web technologies and R&D investments respectively in supply chains. This study makes it contribution by empirically examining both centralization and decentralization separately in the adoption of escm. Information visibility The effective management of products and services in supply chains is only possible with the availability of timely, accurate and relevant information. The extent to which supply chain members have updated information for planning and control management is referred to as information visibility. Information visibility can be seen as an outcome of interorganizational communication, and it is differentiated from other concepts such as information sharing primarily because such concepts can be achieved through different methods including technology-based media, social contacts, and procedural venues. High information visibility in supply chains makes it easier to detect opportunistic partners, thus it discourages such behaviors (Wang and Wei 2007). The exchange of information concerning forecasting, planning, product design, and production scheduling reduces information asymmetry and monitoring costs, and this reduces possible incentives for partners to be opportunistic. Up to date information and increased visibility of inventory are very important for the effective planning, scheduling, and execution in supply chains. The interorganizational visibility significantly improves supply chain efficiency, cycle times and stock outs (Kulp et al. 2004). Lee et al. (2004) suggest that increased flow of information among customers and suppliers can balance demand and supply in organizational networks as it reduces uncertainty and eases the bullwhip effect. Hence, when there is increased visibility and other resources in an organization, decision making and supply chain performance should improve. Resource Management Model and Strategic Implementation According to the resource management model (Sirmon et al. 2007), effectively managing resources is critical to value creation because the way those resources are evaluated, manipulated, and deployed can have different impacts even among similar organizations in similar environments. Sirmon et al. (2007: 273) define resource management is the comprehensive process of structuring the firm s resource portfolio, bundling the resources to build capabilities, and leveraging those capabilities with the purpose of creating and maintaining value for customers and owners. Organizations create resource portfolios by purchasing resources externally, developing them internally, and ridden themselves of those resources that are not highly valuable to them (Barrick et al. 2015). Organizations will then integrate their existing resources and try to develop new or improve current capabilities to improve customer services (Sirmon et al. 2011). To ensure that the value created in the process is optimized and maximum value is achieved; the top management of organizations needs to take actions to make clear the link between the resources and the implementation of organizational strategy, thus introducing the concept of strategic implementation defined as top managements willingness to specify and pursue strategic objectives, and to adopt clearly defined metrics to dynamically monitor progress. (Barrick et al., 2015 p.118). The resource management model posits that organizational top management plays a significant role in organizations leveraging of resources in the effective and efficient development of valuable capabilities (Sirmon et al. 2011). The knowledge and behavior of organizational leaders with regards to strategy contingently impacts the overall organizational attitude based on how well they manage organizational resources (Barrick et al. 2015). To improve our understanding of the importance of managerial actions, we examine the influence of their level of strategic implementation on the overall organizational attitude towards technology implementation. 3

5 Hypotheses Development Information Visibility (DE)Centralization H1 Strategic Implementation escm Adoption Intent Figure 1: Research Model Centralization and Decentralization An important factor to consider when considering both centralization and decentralization is the importance of achieving equilibrium between control and adaptation(alonso et al. 2008). In decentralized organizations, decisions are made by managers with the necessary information. Because these decisions can affect other areas of the organization, it is possible for unintended consequences to arise as a decision made on one functional level can influence other functional areas, thus the rise of such consequences. Therefore, in decentralized organizations, it is important to support decision making with lateral communication so other areas of the organization are aware of it. In centralized organizations, communication is vertical as information moves from the ones with necessary information to the one with the authority to make decisions (Davis-Sramek et al. 2015). The primary concern in centralized organization is that the information might be hoarded or distorted before reaching decision makers. Teece (2000, p.39) suggests that this occurs due to the unwillingness of individuals to share information for fear of making themselves redundant. While decision makers in centralized organizations will have increased control, being able to make local adaptations will be harder and response times will be slower. In this study, we look to explore whether centralized or decentralized organizations are more likely to adopt escm technologies. We also look to see how they impact the level of information visibility with supply chain partners, and the top management s level of strategic implementation. Thus we hypothesize: H1: A higher level of (de)centralization increases organizations intent to adopt escm. H2: A higher level of (de)centralization increases supply chain information visibility. H3: A higher level of (de)centralization increases top management strategic implementation. Information Visibility Organizations hesitate and become unwilling to share information in supply chains as their perception of opportunism increases. They are however, more willing to allocate resources towards information exchange if they believe their partners are trustworthy and exhibit their long term commitment ). The implementation of escm and similar activities is only effective with the cooperation of organizations who mutually strive to achieve compatible objectives and goals. The increasing information sharing and joint problem solving helps in achieving the ideal supply chain configuration and establishes the structure that facilitates the availability, accessibility, and sharing of information. In this study, we look to explore the impact that increased information visibility among supply chain partner will have on the organizations in their intent to adopt escm technologies. Thus we hypothesize: H4: A higher level of information visibility in supply chains increases organizations intent to adopt escm. Strategic Implementation Scholars in the field of strategy have previously identified the effective implementation of strategic choices is critical to an organization developing the capability of value creation. Based on the RMM 4

6 (resource management model), we understand that leaders strategically bring their resources together to develop capabilities that enable them to achieve the maximum value that is potentially hidden in the resources (Sirmon et al. 2007). This means that organizational leaders have an important role to play in the value-creation process by carefully structuring, leveraging, and developing resources into capabilities by synchronizing different elements of the resource management process (Barrick et al. 2015). Recent studies have shown that the resource management actions of organizational leaders affect organizational performance. Furthermore, the organizational leader will have different levels of resource management abilities which impact organizational outcomes (Barrick et al. 2015). In this study we use the concept of strategic implementation and explore the impact it has on organizations adoption intention of escm. We look to see whether organizational leaders have specific strategic implantation objectives, and if they track and monitor the progress of activities. It has been previously argued that for executives to be effective, they must play an important role in ensuring strategies are successfully implemented after developing them. Links between organizational resources and collective organizational engagement are improved by having a clear vision of what the implementation of strategies brings to the organizations. Thus we hypothesize: H5: A higher level of strategic implementation increases organizations intent to adopt escm. Research Methodology Study Participants For the purpose of this study, we contacted the supply chain partners of a large manufacturer in China. This large manufacturer helped us by acting as an intermediary between us and the respondents. We provided a link to an online survey to the large manufacturer who then forwarded it to the potential respondents. The respondents showed signs of high tendencies to invest with the manufacturer, and thus were considered as potential adopters of escm technology. Constructs Development and Measurement We followed the examples of previous studies that have been carried out in the field in developing the survey instrument. A 7-point Likert scale was applied as the measure, ranging from 1 (strongly disagree) to 7 (strongly agree). Before sending out the survey, we created a panel consisting of an IT manager, two IS professors and two IS doctoral students to examine the survey and ensure its validity, translation and wording correctness. The measurement items used in the study are all from existing literatures and have been summarized in the table below: Construct No. of Items Main Source escm Adoption Intention 3 (Liu et al. 2010) Centralization 6 (Liao et al. 2011) Decentralization 4 (Hempel et al. 2012) Information Visibility 3 (Wang and Wei 2007) Strategic Implementation 6 (Barrick et al. 2015) Table 1: Sources of Measurement Items Conclusion and Future Plans Moving forward, we are anticipating over 200 completed responses from our respondents. Before analyzing the data we will examine responses to ensure their completeness and validity. We plan to employ Partial Least Squares Structural Equation Modelling (PLS SEM) to examine our research model and the collected data. PLS-SEM is our preferred tool for analysis as it has been used in various fields including information systems and it is also considered the most fully developed and general system for data analysis (McDonald 1996, p. 240). Acknowledgement The authors acknowledge the financial support from the National Natural Science Foundation of China (NSFC) NSFC No

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