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As mentioned in the in the first chapter, SCM is an important aspect of business operations as it helps in coordinating different activities conducted in the company. Through SCM, manufacturers, suppliers, retailers and customers are able to interact effectively. This interrelationship is observed clearly in the SCM frameworks and models developed by different companies. Basically, SCM models contain two essential nodes; these are the facility nodes and the customer nodes. The facility nodes pertain to the factors controlled by the supply chain; these nodes also include the sites where raw supplies, components and final goods are taken out, manufactured, stored and distributed. The customer nodes on the other hand, do not exhibit any form of activity. However, in an SCM model, this node represents the demand level for the products produced and distributed by the facility nodes. The nodes of an SCM model are connected through links, representing how products are transported within the chain (Jorgensen, 2004). These nodes clearly explain how SCM is capable of coordinating different parties involved in the production, distribution and purchase of products or services.
A number of companies worldwide had recognized the role of SCM in business operations and had long applied their own systems. 7-Eleven in Japan for example, has integrated information and communication technology so as to improve its SCM processes. By means of information integration, the company was able to acquire basic consumer demographics and point of sale data. This enabled the management to identify its main demand drivers. In addition to the development of more responsive supply chain partners, ICT also allowed 7-Eleven Japan to meet their customers' preferences. Furthermore, the company was able to achieve fifty-five times annual inventory turnovers as well as the highest sales per square foot in the country's convenience store industry (Lee & Whang, 2001).
Business-to-business e-commerce platforms, which promote the improvement of information management, have also been applied by other major companies. Amazon for example, has used ICT for its SCM system in order to track its customers purchased items' delivery location, which were encoded through the company's website. The traditional practice of Wal-Mart to share its sales data with its manufacturers and suppliers in real time is also performed through SCM. In addition, the business success achieved by Wal-Mart is said to be attributable to its EDI system that is applied to its group of suppliers. The success of the worldwide retain company is also explained by its online trading system. With this ICT system, companies like Wal-Mart can acquire greater profit even without the allocation of large investments (Park & Yun, 2004). The system then supports the store's direct selling efforts. Through these examples, it has been made clear how SCM became a critical aspect of several businesses. As discussed, there are numerous variables that affects the supply chain process, however, this research only consider the variables Trust, Cooperation, Relationship, Decision Making Uncertainties, Financial Performance and Customer Service in assessing the buyer-supplier relationship in supply chain.
3.2.1 Framework Variables
Aside from improving the supply and production system of the companies, the implementation of an SCM with respect to the variables Trust, Cooperation, Relationship, Decision Making Uncertainties, Financial Performance, and Customer Service also plays important roles in improving the buyer-supplier relationship in supply chain. Morschett (2006) noted that cheaper price, more functionalities and better reliability are three important characteristics of a good or reasonable purchase, which buyers look for. In other words, providing the products or services that have the features consumers look for is the core of improving buyer service. From the suppliers of raw materials to the manufacturers to the sellers of the final goods, effective supply chain management system could help then help in providing better buyer service and establishing better supplier-buyer relations. There are certain aspects of SCM that contribute to the establishment of better service in the companies that apply it. In accordance to the theoretical framework development, the variables Trust, Cooperation, Relationship, Decision Making Uncertainties, Financial Performance, and Customer Service has been considered.
188.8.131.52 Trust, Cooperation and Relationship
It has been cited in various literatures that SCM helps in developing better trust, cooperation and relationship among the supply chain members, which in turn contributes to the delivery of more efficient services and products. In SCM, supplier-buyer relationships can actually be developed based on the relationship or interaction preference of the company applying it. Cooper & associates (1997) referred to this as the traditional (bow tie) and modern (diamond) approaches. Both are different as the traditional approach is focused on the establishment of the relationship between the company and the customers, whereas the diamond approach promotes effective communication among all functions involved in the supply chain. An account manager is usually employed in order to apply the traditional relationship establishment through SCM; this approach however has a drawback as it does not optimize the communication among other involved parties and firms, resulting to less relationship efficacy (Cooper et al., 1997). As the diamond approach is more holistic in nature, relationships built out of this approach are stronger.
Trust, cooperation and relationship building among the supply chain members is mainly attributable to the utilization of appropriate SCM technologies. As indicated by Zimmermann (1997), suppliers, retailers and manufacturers who intend to streamline their logistic systems rely on internet technology as a communication tool. The introduction of the internet to SCM paved the way for major communication upgrades, enabling user companies to communicate effectively not only in the local setting but in the international level as well. Through the use of information systems, the communication among supply chain members improve significantly, particularly in terms of quality and speed; this in turn allows business companies, even small-size enterprises, to relay valuable business information, deliver products effectively, meet consumer needs as well as build stronger relations.
Indeed, one of the resulting effects of enhanced trust, cooperation and relationship from SCM is the formation of stronger relations among the supply chain members. SCM is beneficial as it allows the members to give out feedback to each other; these feedbacks help suppliers, manufacturers and retailers in the apparel industry to improve their products and service deliveries. As SCM generally helps all participating supply chain members, good and stronger business relations are formed. This trust, cooperation and relationship among member on the other hand leads to quality service delivery.
Tan (2001) noted that during the time when the role of SCM in business was being realized for the first time, several businesses are going through major difficulties brought about by competition. However, when the supply chain members decided to integrate their supply chain activities together, production problems were reduced; design flexibility had been achieved; and quality of the products improved considerably. From this point forward, members of the supply chain have fully recognized how SCM supplier-buyer relationships can bring them together to achieve even better business outcomes.
Previous studies have stressed the role of SCM in the establishment and maintenance of strong business relations. Basch (2000) for example, found out that the use of internet for SCM allows collaboration among channel partners. Other researchers (Barua et al., 2001) on the other hand, implied that the use of electronic SCM helps companies to create trust, cooperation and relationship not only with the suppliers but with customers as well. With the increasing competition in the business industry, trust, cooperation and relationship is very essential; the management of relationship is then made easier through SCM (Domke-Damonte & Levsen, 2002).
The support each supply chain member gains from each other is then increased through SCM; this level of dependence is made possible partly by the communication enhancement generated by the system. With greater coordination, all supply chain members are able to play their designated role in the chain; in turn, this benefit enables the supply chain members in various business industries to develop better products and deliver satisfactory services to customers. This effect was explained by Cooper & Ellram (1993). In particular, the authors compared this effect to a well-practiced relay team. When each player is well-coordinated to the team, their individual roles become more defined. By knowing each other's positions, the effort each player exerts becomes more contributory to the team's benefit and common goal.
184.108.40.206 Decision Making Uncertainties
It has been indicated that SCM of supplier-buyer relationships lead to significant developments within the organization applying it. Aside from trust, cooperation and relationship, other abilities of the company are also developed through supplier-buyer relationships, enabling it to provide efficient services. One of these is the just-in-time (JIT) ability that helps in decision making uncertainties. The implementation of the SCM helps in improving the level of organization within the organizations' supply chains particularly in assessing decision making uncertainties, resulting to faster operation. In turn, this made production and service deliveries to the customers faster as well. Aside from improving the level of organization, the communication systems used by the companies made supply stocks and other business information more visible to the supply chain members; the improved visibility of these data, helped in reducing the time necessary for data exchange and updates. Previous literatures on SCM have also noted of this effect. Handfield (1994) for example, has stated that the application of SCM results to the replacement of inventories with more visible information. This improves the decision making uncertainties ability as supplies and products can be restocked immediately. The improvement of the companies' decision making uncertainties ability then lies on the ability of SCM to reduce the need for inventories by redistributing stocks within the supply chain more efficiently (Davis, 1993).
Dillner & Verga (2004) also confirmed the ability of SCM to enhance their decision making uncertainties of the supply chain members. As the activities of the supply chain operations become coordinated through the SCM system, companies are able to make the most of their production and delivery time. To stress their point, the authors cited Esquel Group, an apparel company in Hong Kong, as an example. By means of incorporating various supply chain activities such as weaving, dyeing and sewing procedures, the company is able to achieve an important business aspect called fast time-to-market ability. With this feature, the company can have new fabric prototypes as well as new products within a shorter time span. Through this ability enhancement, the company is able to attract major customers like Polo, Tommy Hilfiger and Nike (Dillner & Verga, 2004). By improving the decision making uncertainties of the apparel companies, their products and services becomes more attractive to buyers, resulting to larger market coverage and higher sales.
By implementing a standardized and more organized SCM, the company is able to manage their inventory planning needs, warehouse, demand forecasts, transportation as well as inbound and outbound shipping activities. This in turn helps them in predicting the needs of the supply chain members and meeting the satisfaction of the customers. The ability of companies to enhance their supply chain activities is supported further by the utilization of automated systems and real-time information updates.
These additional supports help the companies identify the most appropriate and practical distribution and shipping means within a short time after the order has been placed. This ability enhancement allows companies to maximize freight operations as well as saved on inventory management expenses. Most importantly, the efficient services of the apparel companies brought about by SCM results to higher levels of customer delight as they are able to receive their order before or within their deadline (Dillner & Verga, 2004).
Aside from decision making uncertainties enhancement, the forecasting ability of organizations applying SCM systems are also improved and leads to better customer service delivery. Through SCM, a company can obtain valuable consumer data, which it could use to enhance its ability in meeting specific customer needs. The development of an organization's forecasting ability leads to other more specific and positive business outcomes. For instance, Kiely (1999) noted that effective forecasts results to more efficient distribution of products and reduction of supply chain inventories. In effect, these benefits help in enhancing customer services delivered by the company. Through SCM and the development of the forecasting ability, business companies will be able to serve their customers better without fearing for excess inventories.
220.127.116.11 Financial Performance and Customer Service
One of the important aspects of applying SCM is its ability to reduce cost without sacrificing the quality of its products or services. This aspect then contributes to the enhancement the services delivered to customers. Anderson & Katz (1998) noted that in order to achieve this important SCM features, companies applying the system must consider the technology to utilize. Furthermore, a mathematical model where different costs of the supply chain are weighed in must also be applied. With this, it is implied that companies must also involve the appropriate combination of supply chain members so as to reduce cost and maintain quality.
Scarborough & Spatarella (1998) noted that SCM helps in reducing costs as it optimizes the sale of products, reduces the time necessary to distribute the products and lessens inventory risks. DeCovny (1998) on the other hand stated that quality enhancement is achieved through SCM by means of the increased accessibility of order-entry processes, reduced need for paper handling as well as lessened need for re-keying information.
The integration of technology in SCM systems play an important role in cost reduction and quality enhancement through SCM. Through these technologies, business firms are able to perform mass production of goods with greater quality at a lesser time. Interacting with external partners has also improved significantly due to intranet systems and e-commerce platforms. Aside from these, handling valuable data becomes less tedious and costly as ICT systems allow automatic information gathering and processing (Schoder & Eymann, 2000). The performance of autonomous actions through ICT machineries helps in reducing human work load and effort.
Moreover, the use of ICT in supply chain management has been critical due to other important benefits such as increased responsiveness to customer demands, lower order cycle times as well as higher business profitability (Gavirneni, 2002 and Kulp et al., 2004). Recent research concluded that the use of ICT for supplier chain management is beneficial for businesses who intend to find larger supplier bases at a lower cost (Williams et al., 2002). Levary (2000) on the other hand, concluded that ICT is beneficial to SCM as it enables the reduction of inventories and cycle time. The efficacy of the distribution channels is also improved through ICT application.
Leading domestic and global companies have been able to streamline their logistics operations mainly through the adoption of appropriate technologies. This then encouraged program developers to come up with systems that would support easy and more effective SCM system application. Microsoft for instance, had worked with several logistics, hardware, software and transportation companies in order to create international standards that would allow suppliers, manufacturers and retailers to share information with each other; this project was named as the Value Chain Initiative (VCI) (Zimmermann, 1997).
Inventory control, import and export transportation, distribution management, warehouse management, electronic data interchange and other logistics-related activities are all incorporated in the VCI project. This and many other technologies that followed had been useful in improving the communication and information exchange among the supply chain members; ultimately, this development allowed major companies to reach out to foreign markets and operate internationally (Zimmermann, 1997).
3.3 The IPO Model
In accordance to the theoretical framework and from the discussed variables, the basic framework that will be used in the study is the Input-Process-Output Model. In the IPO model, a process is viewed as a series of boxes (processing elements) connected by inputs and outputs. Information or material objects flow through a series of tasks or activities based on a set of rules or decision points (Harris & Taylor, 1997). Flow charts and process diagrams are often used to represent the process (Harris & Taylor, 1997). What goes in is the input; what causes the change is the process; what comes out is the output (Armstrong, 2001). Figure 4.1 illustrates the basic Input-Process-Output model:
Figure 3.1 Input - Process - Output Model
Source: Harris & Taylor, 1997
The Input-Process-Output model will provide the general structure and guide for the direction of the study. Substituting the variables of this study on the Input-Process-Output model, the researcher came up with the following in Figure 3.2
Figure 3.2 Conceptual Framework
This study discusses the perception of both buyer and supplier towards their relationship in supply chain. The discussion shall outline the different factors affecting the success or failure of the established business. The study intends to investigate the effects of supplier and buyer collaboration in enhancing their business partnership. For this study, primary research and secondary research will be used. Primary research will be conducted using anonymous questionnaires that will be sent to randomly selected buyers and suppliers of businesses. The questionnaires will be used to collect quantitative data. The data will be analysed and compiled for the correlation of the hypothesis. The data will then be presented by means of graphical representations and illustration and the difference would be highlighted. On the other hand, secondary data/resources pertaining to the current status of the performance of the businesses in accordance to supply chain management will consider.
It is important to take note that data collection instruments, including questionnaire schedules are all designed in order to cater a sample or units that have been selected. The empirical generalization will be compared with the hypotheses, which are consequently accepted, affirming the theory or even rejecting or disconfirming it. The researcher is aware that the process of data construction is vital, because if the wrong data is obtained or if the data is invalid, there will be no amount of subsequent analysis which can be rescued for the project (Anastas, 1999). This is the reason why the researcher focuses on the fact that using one data collection method and instrument will not be enough in order to come up with the research. In the process of gathering data, triangulation was used. Triangulation a keyword that is used in order to pertain on the amalgamation of the different methods, study groups, local and temporal settings, together with the different hypothetical viewpoints in the process of studying and analyzing a scenario or phenomenon (Cohen, Manion, & Morrison, 2000). With the use of this triangulation method, validity can be claimed due to the replication of the findings offers by the different methods which help to lessen and minimize the possibility that the findings may be the result of a given bias from measurement (Fairclough, 2003). With this, the researcher has been able to focus on the different information and data which will not be gathered by using survey questionnaire or interview alone.
Survey was implemented as a means of collecting primary data because it can offer different advantages. Particularly, it can help in order to understand the respondents, at the same time, define and identify the existence and magnitude of the problem or the subject. In addition, the data gathered in this method can be used in order to know the different issues that are related with the perceptions of the respondents towards the Buyer-Supplier Relationships for Performance in the Supply Chain. Aside from that, the application of survey questionnaire enables to gather information in inexpensive manner which focuses on the attitudes, beliefs as well as behaviours. Based on this, it can help in order gather and collection information or data on a large sample in a short period of time. Questionnaire survey enables the participants to read the questions and answer it according to their individual experience and preference (Fico, Lacy, & Riffe, 1998).
On the other hand, the researcher is inform and aware that questionnaires offer different limitations, particularly because the questionnaire used was closed-type. Therefore, there will be some issues and subjects that cannot be tackled, because the questions and statements are all given or supplied to the respondents. Based on this, there will be some hidden issues and topics, which the researchers are not aware of. Therefore, with the use of the secondary researches, the respondents will be able to supply some important information and data which can be used in order to strengthen the result of the study. Therefore, survey questionnaire and secondary researches will complement each other. The survey questionnaire helped the researcher to present numeric data that are easy to interpret and present. It can also help in order to explain the relationship of the different variables included in the study. On the other hand, with the use of the secondary researches, the researcher had been able to focus on the information that can be presented in textual form. Therefore, it can also help in order to support the result of the survey questionnaire.
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