AN EMPIRICAL INVESTIGATION OF ELECTRONIC COMMERCE TECHNOLOGY IN CORPORATE USE

Transcription

1 AN EMPIRICAL INVESTIGATION OF ELECTRONIC COMMERCE TECHNOLOGY IN CORPORATE USE Dr. Suhong Li, Bryant College, ABSTRACT This study investigates the usage of five electronic commerce (EC) technologies, including electronic data exchange (EDI), electronic fund transfer (EFT), Internet, intranet, and extranet in organizations. Moreover, t-tests and ANOVA are used to verify whether the usage of EC technology differs by firm size (measured by the number of employees and annual sales volume) and characteristics of supply chain (supply chain length, supply chain position and type of supply chain channel). The results show that the top three EC technologies used by organizations are Internet, intranet, and EDI. The results also show that there are no significant differences in the usage of five EC technologies in relation to a firm s position in the supply chain and type of supply chain channel that a firm is in. But some differences do exist in the usage of EC technology by the firm size or the length of the supply chain. The larger the size of a firm, the higher the level of the usage of EDI, EFT, and extranet. Moreover, for small firms, the longer the supply chain that a firm is in, the higher the level of usage of EDI and extranet. Keywords: Electronic Commerce (EC), firm size, supply chain position, supply chain length, survey methodology INTRODUCTION Electronic Commerce (EC) is the transaction of business information and data, between businesses and customers in order to more effectively and efficiently complete processes across the spectrum of a business (5). The broad adoption of various EC technologies, such as enterprise resource planning (ERP), electronic data interchange (EDI), Internet, and extranets, has helped many organizations achieve operational excellence and competitive advantage (12). EDI enables large companies to adopt sophisticated technologies such as just-in-time, quick response, and vendor-managed inventory (6). In recent years, companies have been exploring opportunities to use the Internet, intranet, and extranet to exchange information, especially with small and mid-size trading partners that find EDI too complex or expensive to implement (6). The Internet has broadened and facilitated the connectivity among customers and companies and will continue to change the way a company interacts with its customers and suppliers. Companies can use the Internet to share information and knowledge continuously across the whole supply chain, design new products and services to fit special market segment, and develop new supply chain structure to serve customers in a more direct manner (15). Extranets can be used to exchange information between supply chain partners, collaborate with other companies in joint development efforts, provide or access services provided by one company to a group of other companies (16). Information sharing through an extranet lowers the total cost, increases the order fulfillment rate, and shortens the order cycle time (16). Volume V, No 2, Issues in Information Systems

2 The adoption and implementation of various EC technologies have received extensive attention in the literature. Studies have addressed the factors influencing the successful usage/adoption of certain EC technology, such as EDI (1, 14), Internet (17, 7), or intranet (18, 20). But few studies have investigated the usage of multiple EC technologies at the same time. Little research has included the impact of organizational size in the study. On the other hand, as today s competition is shifting from individual companies to the entire supply chain, organizations begin to realize that it is not enough to improve efficiencies within an organization, but their whole supply chain has to be made competitive. The understanding and practicing of supply chain management (SCM) has become an essential prerequisite to staying in the competitive global race and to growing profitably. EC has been considered a great enabler for the implementation of SCM (11, 19). EC now totally changes how a company manages its supply chain, while redefining/eliminating activities in the physical supply chain network (4). The traditional supply chain models and assumptions are becoming obsolete rapidly under the intense pressure of new electronically enabled era (10). Organizations cannot effectively manage cost, provide superior customer service, and be leaders in the management of supply chain without leading-edge EC technologies. The implementation of EC technologies enables an organization to lower its supply chain cost and is a critical factor for improving supply chain performance (8). It is possible that companies may have used the EC technologies differently depending on the characteristic of the supply chains that their firms are in, such as the length of the supply chain, their positions in the supply chain, and the type of supply chain channel. But very few studies have explored this issue empirically until recently. To fill this gap, this study empirically explores the impact of organization size and characteristics of supply chain on the usage of the EC technologies. By reviewing relevant literature (2, 3, 9, 13), the following five EC technologies are included in this study: Electronic Data Interchange (EDI). The transfer of data in an agreed upon electronic format from one organization s computer program to one or more organizations programs. Electronic Fund Transfer (EFT). The transfer of a certain amount of money from one account to another through added networks (VAN) or the Internet. Internet. A public and global communication network that provides direct connectivity to anyone over a local area network (LAN) or Internet service provider (ISP). Intranet. A corporate LAN or wide area network (WAN) that uses Internet technology and is secured behind an organization s firewalls. The intranet supports and promotes more effective internal information sharing and an organization s internal business processes. Extranet. A collaborated network that uses Internet technology to link businesses with their supply chain and provides a degree of security and privacy from competitors. Through a large-scale empirical investigation, the following questions are investigated: 1. What is the usage level of the EC technologies in organizations? 2. Does the usage of the EC technologies differ by firm size (measured by the number of employees and annual sales volume)? 3. Does the usage of the EC technologies differ by the length of the supply chain? 4. Does the usage of the EC technologies differ by the firm s position in the supply chain (supplier, manufacturer, or distributor/wholesaler/retailer(dwr))? 5. Does the usage of the EC technology differ by the type of supply chain channel? Volume V, No 2, Issues in Information Systems

3 RESEARCH METHODOLOGY AND DATA COLLECTION This research is part of a large-scale study on the practices of SCM and EC and uses the data collected in USA. Questionnaire methodology was used for this study. In the questionnaire, the respondents were asked to indicate the level of usage of each of the five EC technologies in their organization based on a scale of 1-5. A survey was mailed to 3137 firms in the United States. To ensure a reasonable response rate, the survey was conducted three times. There were 196 complete and usable responses, representing a response rate of approximately 6.3%. Among the respondents, 38 percent of the firms have between 100 and 250 employees, and another 38 percent of firms have over 1000 employees. Almost half of the firms have sales volume exceeding 100 million dollars. The majority of the respondents stated their position as manager (63%), while 25% stated their position as director, vice president or president. When asked about the years employed by the organization, over half of the respondents (61%) indicated they have been with the firm over 10 years, while 31% indicated their employment between 2-10 years. The respondents with employment of less than 2 years accounted for only 8% of the sample. From the above statistics, it can be seen that the majority of respondents belong to large firms, have been employed in the organization for a very long time (over 10 years), and are categorized as the managers in the organization. A concern that is typical of such surveys is that information collected from respondents might have a non-response bias. While this research did not investigate non-response bias directly, a comparison was made between those who responded after the initial mailing and those who responded to the second/third wave. Using the χ 2 statistic and P< 0.05, it was found that there were no significant differences between the two groups in employment size, sales volume, and respondent s job title. An absence of non-response bias is therefore inferred. The Usage Level of Each EC Technology ANALYSIS The top three EC technologies used by organizations are Internet, intranet, and EDI, with a mean of 3.24, 3.18, 2.86 respectively, while the usage of EFT and extranet receives less attention in the organizations, indicated by their low means scores of 1.94 and 1.88 respectively. EC Technologies and Firm Size (measured by the number of employees) We classified a firm as large if it has more than 1000 employees, medium if it has between 250 and 1000 employees, and small if it has less than 250 employees. ANOVA was then used to see if there was any difference in the usage of each EC technology among these three groups. The results are shown in Table 1. It can be seen that p-s for EDI, EFT, Intranet and Extranet are significant at 0.01 level. Table 1 also shows the mean score of each EC technology in each group. It can be seen that the larger the firm size, the higher the level of usage of EDI, EFT, Intranet and Extranet. No significant difference was found in the usage of Internet by firm size. Volume V, No 2, Issues in Information Systems

4 EC Technology and Firm Size (measured by annual sales volume) We classified a firm as large if its annual sales exceed $100 million, medium if its annual sales between $25 millions and $100 millions, and small if its annual sales less than $25 million. Again, ANOVA were used to test the difference of each EC technology among these three groups. Table 2 shows that the usage of EDI, EFT, and Extranet is significant at 0.05 level. It appears that firms with higher annual sales have higher levels of usage of EDI, EFT, and Extranet. No significant differences were found in the usage of intranet and Internet by firm size, if measured by annual sales volume. In summary, large firms, either measured by the number of employees or sales volume, have higher levels of the usage of EDI, EFT, and Extranet. This can be true since large firms may have the expertise and knowledge necessary for the implementation of such technologies and can better afford necessary investments and carry out necessary structural changes of business practices. Moreover, larger firms have more trading partners and higher transaction volumes than smaller companies, and thus will benefit more from such implementation. Moreover, the Internet has received the same level of the usage in organizations by all sizes, which may be explained by the low cost of the usage of the Internet, making it affordable even for small or medium organizations. Table 1. EC Technologies and Firm Size (measured by the number of employees) EC Firm Size Mean F P- EDI Small (74) Medium(46) 3.02 Large(74) 3.43 EFT Small (74) Medium(46) 2.02 Large(74) 2.27 Internet Small (74) Medium(46) 3.35 Large(74) 3.32 Intranet Small (74) Medium(46) 3.28 Large(74) 3.57 Extranet Small (74) Medium(46) 1.78 Large(74) 2.35 Table 2. EC Technologies and Firm Size (measured by annual sales) EC Firm Size Mean F P- EDI Small (42) Medium(54) 2.63 Large(94) 3.40 EFT Small (42) Medium(54) 1.74 Large(94) 2.28 Internet Small (42) Medium(54) 3.26 Large(94) 3.28 Intranet Small (42) Medium(54) 3.11 Large(94) 3.44 Extranet Small (42) Medium(54) 1.59 Large(94) 2.27 EC Technologies and Supply Chain Length In the survey, respondents were also asked to identify the number of tiers across the supply chain that their firms are in. The number of tiers across the supply chain is used as the measure of the length of the supply chain and firms are then classified into the short supply chain group if the number of tiers across the supply chain is less than or equal to 3, the medium-length supply chain group if the number of tiers is 4 or 5, and the long supply chain group if the number of tiers is Volume V, No 2, Issues in Information Systems

5 greater than or equal to 6. ANOVA tests were then conducted to test the mean difference of each EC technology among these three groups. From Table 3, it can be seen that the usage of EDI and extranet is significant at 0.05 level. Table 3 also shows that the longer the supply chain that a firm is in, the higher the level of usage of EDI and extranet. No significant differences are found in the usage of EFT, internet, and Intranet by the length of the supply chain. Further analysis reveals that there are significant positive correlations between firm size (measured by the number of employees or annual sales) and supply chain length. This means that the larger firms belong to the longer supply chain. To take out the influence of firm size, an ANOVA was conducted respectively for the organizations with small, medium, or large size. For medium and large firms (measured by the number of employees or annual sales), no significant difference was found in the usage of each EC technology. For small firms, the significant differences exist in the usage of EDI and extranet. It appears that the longer the supply chain that a small firm is in, the higher the level of the usage of EDI and extranet. Medium and large firms have the same level of the usage of EC technologies regardless of supply chain length. EC Technologies and Supply Chain Position The respondents were asked to identify their firm s positions in the supply chain. Based on their responses, the firms were then classified into three groups (suppliers, manufactures, and DWR). Since a firm may occupy multiple-positions in the supply chain, it may belong to more than one group. ANOVA was then used to test if there exists difference in the level of usage of each EC technology among these three groups. The results are shown in Table 4. No significant difference was found between the groups in relation to the usage of each EC technology. It can be concluded that EC has become a very popular and important technology, therefore, all the firms in the supply chain, regardless of whether they are suppliers, manufactures, or DWR, have put almost the same efforts at implementing various EC technologies. Table 3. EC Technologies and Supply Chain Length Table 4. EC Technology and Supply Chain Position EC EDI EFT Internet Intranet Extranet Supply Chain Length Mean F P- Short (78) Medium (69) 2.99 Long (30) 3.57 Short (78) Medium (69) 2.04 Long (30) 2.10 Short (78) Medium (69) 3.26 Long (30) 3.27 Short (78) Medium (69) 3.29 Long (30) 3.47 Short (78) Medium (69) 1.97 Long (30) 2.50 EC EDI EFT Internet Intranet Extranet Supply Chain Position Mean F P- Suppliers (89) Manufactures (268) 2.87 DWR (52) 3.15 Suppliers (89) Manufactures (268) 2.06 DWR (52) 2.02 Suppliers (89) Manufactures (268) 3.32 DWR (52) 3.31 Suppliers (89) Manufactures (268) 3.34 DWR (52) 3.33 Suppliers (89) Manufactures (268) 1.93 DWR (52) 2.00 Volume V, No 2, Issues in Information Systems

6 EC Technologies and Supply Chain Channel Supply chain channel includes indirect and direct channels. Indirect Channel refers to the channel in which finished goods from the factory flow to the end customers through distribution center and wholesaler and retailer trading partners; each of these pairs is connected by a logistics service provider. Direct Channel refers to the channel in which a factory produces part of the product and outsources part of the product to the contract manufacturers. Then the factory connects directly with the end customer through a logistics service provider. The respondents were asked to indicate the main supply chain channel their firms are in. A t-test was then used to see if the level of usage of each EC technology differed by the type of supply chain channel. The results are shown in Table 5. No significant differences were found for any of the five EC technologies in terms of the type of supply chain channel. Firms, either in a direct or an indirect channel, have the same level of the usage of the EC technologies. Table 5. EC Technologies and Supply Chain Channel EC Supply Chain Channel Mean Mean Difference P- EDI Direct Channel (112) Indirect Channel (66) 2.98 EFT Direct Channel (112) Indirect Channel (66) 1.89 Internet Intranet Extranet Direct Channel (112) 3.23 Indirect Channel (66) 3.29 Direct Channel (112) 3.21 Indirect Channel (66) 3.20 Direct Channel (112) 1.88 Indirect Channel (66) CONCLUSION This study investigated the usage of five electronic commerce (EC) technologies, including electronic data exchange (EDI), electronic fund transfer (EFT), Internet, intranet, and extranet in organizations. The results show that the top three EC technologies used by organizations are Internet, intranet, and EDI, while the usage of EFT and extranet receives the less attention in organizations. The results show that there are no significant differences in the usage of five EC technologies in relation to a firm s position in the supply chain and the type of supply chain channel that a firm is in. However, some differences do exist in the usage of EC technology by the firm size and the length of the supply chain. The larger the size of a firm, the higher the level of the usage of EDI, EFT, and extranet. Moreover, for small firms, the longer the supply chain, the higher the level of usage of EDI and extranet in that firm. Generally speaking, firm size, not the characteristics of supply chain, is the dominant factor in explaining the level of the usage of the EC technologies in organizations. Small firms still have not had the required financial and technical capabilities to implement complex and expensive EC technologies, such as EDI and Extranet. Volume V, No 2, Issues in Information Systems

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