The Challenges Facing Supply Chain Management Commerce Essay

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The supply chain management (SCM) philosophy stresses supply chain integration that links a firm with its customers, suppliers and other channel members. A supply chain includes a network of connected and interdependent organizations mutually and cooperatively working together to control , manage and improve the flow of materials and information from suppliers to end users (Aitken, 1998). Scholars in the field of SCM have demonstrated that a major source of cost savings and enhanced service performance in the supply chain is through increased collaboration (Sheth &Sharma, 1997) and integration among supply chain participants (Morash & Clinton, 1998). In particular, research in organizational behavior has demonstrated the beneficial effects of organizational norms on organizational performance (O'Leary-Kelly, Martocchio, & Frink, 1994). Literature on relationship marketing and new product development (NPD) has noted the benefits of both interfunctional coordination in NPD activities (e.g., Gupta, Raj, & Welimon, 1986; Webster, 1992), and behavioral norms for the success of cooperation (Morgan & Hunt, 1994; Noordeweir, John, & Nevin, 1990). Cross-functional coordination in SCM involves multiple business functions that span departmental and firm boundaries. Organizational norms as a set of embedded values and beliefs have long been recognized in literature to provide norms that bind individuals into collectivities (Sherif, 1936; Thibaut & Kelley, 1959) and guide behavior in an organization (Deshpande´ & Webster, 1989). There is recognition of the importance of information flow, interaction and integration in coordinating different functions to achieve SCM goals. Cross-functional coordination among interdependent functions reflects today's growing complexity of handling global networks of supply chains and increasingly global SCM (Narasimhan & Mahapatra, 2004), and hypercompetitive business environments (D'Aveni, 1995; Varadarajan & Jayachandran, 1999).

However, little is known about cross-functional coordination particularly as a mediator for the relationship between organizational norms and SCM performance. Conventional supply chains of firms are organized on a functional basis with the emphasis on ownership of individual functions and control of resources. This can be problematic for the implementation of integrated supply chain and logistics management, whereby flows of information and material between source and user need to be coordinated across functions. Also, recent improvements in the Internet and information technology applications have facilitated rapid flow of information for real time coordination to match demand with relatively little lag time (e.g., Eng, 2004).



The aim of this study is to investigate the mediating role of cross-functional coordination on the linkage between organizational norms and supply chain management performance.

The research objectives are to examine (1) to what extent organizational norms influences cross-functional coordination; (2) to what extent cross-functional coordination improves SCM performance; (3) to what extent cross functional coordination provides incremental contributions to SCM performance beyond that of organizational norms?


Cross-functional coordination in SCM can be defined as purposive coordination of supply chain activities and information flows across business functions and between firms. The organization of supply chain requires firms to work together and manage integrated operations both within enterprises and between supply chain partners. Cooperation between supply chain members is influenced by implicit and explicit organizational norms related to particular behavioral guidelines, which give rise to effectiveness of future cooperation (Xie, Song, & Stringfellow, 2003).

Organizational norms can be described as expectations about behavior or behavioral guidelines based on organizational culture that are at least partially shared by a group of decision makers (Gibbs, 1981; Moch & Seashore, 1981; Thibaut & Kelley,1959). Cross-functional coordination in SCM can be complex due to the desire of different functional members and supply chain participants to cultivate norms that facilitate active participation in joint activities, information sharing and synthesis of expertise.

While it is generally believed that increased collaboration among supply chain participants leads to lower total cost and enhanced service performance (Andraski, 1998; Ellinger, Daugherty, & Keller, 2000), the focus on creating enhanced service responsiveness and firm performance requires coordinated effort and shared organizational norms across functions in the supply chain. However, there is not yet published empirical evidence on how cross-functional coordination mediates the effect of organizational norms on service responsiveness and firm performance in a SCM context.


The study draws insights from the resource dependence theory and the relational marketing perspective. The resource dependence theory suggests that the relative influence of one subunit is a function of the resources the subunit contributes (Pfeffer & Salancik, 1978). The presence of cross-functional coordination in the supply chain reflects interdependencies of various functions (Larson & Rogers, 1998), cooperative interactions (Deutsch, 1949) and collaboration to reduce uncertainty and manage dependence (Anderson, 1982). Most of the literature on the relationships between cross-functional coordination and performance addresses interdepartmental integration such as between marketing and logistics (Ellinger et al., 2000), integration of distribution channels (Johnson, 1999) or in NEW PRODUCT DEVELOP (e.g.,Atuahene-Gima & Evangelista, 2000) rather than on the influence of cross-functional coordination in SUPPLY CHAIN MANAGEMENT.

From the relational marketing perspective, relational exchange norms may provide insights for cross-functional coordination in terms of reducing conflict (defined in terms of disagreement over goals, domains and functions) and opportunism (self-interest seeking guile, assumed to be a fundamental problem in exchange). But previous research on organizational norms focuses on governance of individual exchange relationships (Shapiro, 1987; Stinchcomber,1985) and on relationship continuity (Dwyer, Schurr, & Oh,1987; Morgan & Hunt, 1994). Norms have been found to differ significantly in the extent to which they prescribe behaviors directed toward collective as opposed to individual goals (Macneil, 1980; Thibaut & Kelley, 1959). Thus, the present study examines organizational norms that facilitate collective cross-functional coordination for the benefit of the entire supply chain.

Bb Organizational Norms

Cooperative norms


Information sharing


Knowledge sharing

Mutual trust

Participative culture



Supply Chain responsiveness

Firm performance









Fig. 1. Model constructs linking organizational norms of cross-functional coordination to supply chain responsiveness and firm performance

As shown in Fig. 1, five organizational norms have been specified for the study: cooperative norms, cross-functional information sharing, intraorganizational knowledge sharing, participative culture and mutual trust. They are learned behavior of coordination resulting from expectations and shared values and, therefore, may serve as proxies for coordinative behaviors that influence the willingness of functional areas and supply chain members to work together. Organizational norms are to a large extent observable action that can be verified internally for the purpose of ensuring the reliability of self-reported data. Inevitably, other factors that may influence cross-functional coordination such as company reputation in the industry and past experience with channel members that need to be verified externally or by outsiders have been excluded from the model. Cooperative norms in SCM reflect expectations of supply chain members have in undertaking voluntary coordinated action and working together to achieve mutual and individual goals (Cannon & Perreault, 1999). Voluntary action is influenced by values and beliefs that cannot be mandated, programmed or formalized (Mintzberg, Dougherty, Jorgensen, & Westley, 1997), for example, supply chain members understand that they must work together to be successful (cf. Anderson & Narus, 1990). Cooperative norms can be identified across Macneil's (1980) relational norms, Heide and John's (1992) work on flexibility in response to changing conditions, Kaufmann and Stern's (1988) solidarity as the preservation of the relationship, and Bradach and Eccles's (1989) trust in commercial exchange. They encapsulate the notion of coordination (Argote, 1982; Van de Ven, 1976), collaboration (Trist, 1977), cooperation (Schermerhorn, 1975; Sherif & Sherif, 1969) and integration (Gupta et al., 1986; Lawrence & Lorsch, 1967) but with an overlapping idea of joint behavior towards some goal of common interest. Cooperative norms are compatible with the interfunctional view of SCM (Lancioni, 2000), where cooperation is emphasized for the benefit of the entire supply chain, and to restrain from the use of power, share information and jointly solve problems (Heide & Miner, 1992). However, the extent to which cooperative norms improve cross-functional coordination in SCM has not yet been examined. Thus, there is theoretical support to hypothesize:

H1. Cooperative norms are associated with increased cross-functional coordination in a SCM context.

H2. Cross-functional information sharing is associated with increased cross-functional coordination in a SCM context.

H3. Intra-organizational knowledge sharing is associated with increased cross-functional coordination in a SCM context.

H4. Participative culture is associated with increased cross-functional coordination in a SCM context.

H5. Mutual trust is associated with increased cross-functional coordination in a SCM context

H6. Cross-functional coordination in the supply chain is associated with increased supply chain responsiveness.

H7. Cross-functional coordination in the supply chain is associated with increased firm performance.

H8. Supply chain responsiveness is associated with increased firm performance.



The sampling frame will comprise of high-technology firms in Saudi Arabia, which represents the largest clusters of high-tech firms. High-tech firms can be defined based on common characteristics that they share market uncertainty, technology uncertainty and competitive volatility. They engaged in the design, development and introduction of new products and/or innovative manufacturing processes through the systematic application of scientific and technical knowledge. Several criteria will be used to develop a relatively homogeneous sample. First, all firms share similar standard industry classification codes for their principal high-tech business activities. Second, only small and medium-sized firms will be included in the sample. The sample consists of software, computer sales and services, biotechnology, information technology networks, electronics and telecommunications firms. Finally, high-tech firms operate in competitive business environments, which fit the need for efficient coordination systems and responsive supply chains. The sampling criteria yield a starting sample of 100 firms randomly selected on a uniform basis of probability distribution over all sample firms from a total firm population of 500.

Data collection

The research collected data from the supplier's perspective.

This perspective provided a relevant context for

assessing supply chain responsiveness, and for examining

coordination across different functional areas to meet

customer demand. Data were collected following the

guideline for single key informant technique using a mail

survey questionnaire (Phillips, 1981). The key informants

of this study were senior managers carrying titles of

Supply Chain Director, Vice President, President or Chief

Executive Officer (CEO). This single key informant

approach was deemed sufficient for a number of reasons.

High-tech firms tend to have a flat hierarchy where

functions could be organized around processes rather than

based on departments. For example, project teams working

across functions are established to champion new projects

but dissolved when projects come to an end. Also,

business activities of high-tech firms are often carried

out by a small number of personnel working across

different functions as the nature of work depends on

specialist knowledge and technology particularly for small

firms. The focus of the study on organizational norms of

cross-functional coordination requires top management

support favouring cross-functional coordination (e.g.,

Gupta et al., 1986; Song & Parry, 1993). Thus, senior

management had the vantage point from which to provide

information on activities across functions in the supply

chain and between firms.