How Does Complexity Affect the Relationship Between Supply Chain Integration and Firm Performance?: A Conceptual Framework

How Does Complexity Affect the Relationship Between Supply Chain Integration and Firm Performance?: A Conceptual Framework

Errassafi Mohamed (ENCG Settat-Hassan 1 University, Settat, Morocco) and Abbar Hassan (ENCG Settat-Hassan 1 University, Settat, Morocco)
DOI: 10.4018/IJSSMET.2019040102

Abstract

Supply chain integration has become a major challenge for companies in the current context. Information sharing, and collaboration improve supply chain flexibility, tractability, and efficiency. Several studies have demonstrated, the positive and the significant relationship between supply chain integration and firm performance. Other studies have focused on the factors that affect this relationship. Supply chain complexity is a contingency factor that affects this relationship. Based on the literature review and through a confrontational approach, the authors propose a conceptual model to show how the complexity of supply chain affects the benefit of integration. Propositions are posited with suggestions for further research. Authors suggest that there are three dimensions of supply chain complexity which moderate the effect of supply chain integration on the firm performance: upstream, internal and downstream complexity; that there is a taxonomy of firm's group based on their level of each dimension of complexity and the effect of integration differs from one group to another.
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1. Introduction

It is widely acknowledged in the literature that firms do not develop their competitiveness as a single entity but do so within a chain by developing business relationships with their customers and suppliers (Min et al., 2005; Wang and Chan, 2009). Competition will not be between companies but rather between supply chains (Lambert and Cooper, 2000).

This shows the interest that the literature has given these recent years to the study of inter-organizational relations between firms (Cousins, 2005; Flynn et al., 2010; Zhao et al., 2011; Barratt and Barratt, 2012; Liu, 2009; Williams et al., 2013; Le Dinh and Thi, 2012; Ryan et al., 2014).). In addition, inter-organizational relationships include different levels of interaction between firms within the same supply chain. As part of this relationship, firms exchange and share information upstream and downstream of the chain in order to be more performants (Towers and Burnes, 2008). The logistic integration is also a key success factor of some specific business relationship like franchising (Thierry et al., 2018).

The integration of the supply chain leads to a synchronization of the flows as well as information sharing and collaboration between the company and its partners in the decision-making process. Consequently, logistics costs decrease, the products’ quality increases and the delivery time shortens, leading, thus, to an improvement of the operational and financial performance of the company.

Furthermore, to be more competitive, the supply chains must be more integrated. Through a dyadic perspective (Mentzer, 2001), the supply chain of the focal firm must be more integrated both internally and externally (with their suppliers and customers). This needs more integration of information system, more collaboration and more information sharing.

Several empirical researches had shown that there is a significant and positive relationship between the level of integration of the supply chain and the firm performance (Rosenzweig and al., 2003; Menzer, 2004; Gimenez and Ventura, 2005; Sahin and Robinson, 2005; Fabbe-Costes et al., 2008; Huo et al., 2012; Alfalla-Luquea et al., 2013; Yu et al. 2013; Irani et al., 2014; Veera et al., 2014; Huo et al., 2015; Zhao et al., 2015).

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