The factors affecting the supply chain integration in the fishery industry – research in ben tre province

Nội dung text: The factors affecting the supply chain integration in the fishery industry – research in ben tre province

1. THE FACTORS AFFECTING THE SUPPLY CHAIN INTEGRATION IN THE FISHERY INDUSTRY – RESEARCH IN BEN TRE PROVINCE Assoc. Prof. Dr. Nguyen Thanh Hieu National Economics University Nguyen Ngoc Trung Party Committee of Ho Chi Minh City Abstract The purpose of this study was to examine the relationship between the antecedents and business performance of organizations participating in the supply chain of the fisheries sector in Ben Tre. Although the concept of supply chain has become more popular not only in developed countries but also in Vietnam in recent years. However, not a lot of research focused on how Vietnamese business organizations are integrated, what factors influence this integration, and whether business performance is affected by the degree of integration. Therefore, the research on this issue is necessary to not only help the managers but also enrich the scientific knowledge in this field. Supply chain integration is defined under many different ways. However, the integration used in this area is the process of integrating partners in the chain including upstream and downstream partners to better meet customer needs, which will increases the sustainable competitiveness and revenue of organizations participating in the supply chain. The premise factors that affect the supply chain integration of fisheries in Ben Tre are identified include: risks in the supply chain and business strategy. Some of the basic theories used in this study include the theory of resource – based view, the theory of the relationship between strategy, structure and business performance and the theory of randomness or situation. The structural equation modeling is used to examine the relationship between the antecedents, the supply chain integration of fisher industry in Ben Tre province and the business performance. Most risk factors affect the link with the supplier, while only the market risk affects the integration with the customer. Both cost-oriented, customer-oriented and combined strategies have effect on the supply chain integration which in turn has an impact on business performance. 615
2. INTRODUCTION The importance of supply chain management is paid more attention as organizations realize the benefits of joining and collaborating. As the economy grows, increasing specialization (Lummus and Vokurka, 1999), organizations will tend to increase their cooperation with other members of the chain to utilize resources. Quality at a lower cost of the partner than self-produced but not effective. Consequently, organizations are increasingly seeking to work closely together to effectively manage supply and distribution channels in order to optimize costs and increase customer satisfaction, thereby contributing to improved performance. Competitiveness and profitability of participating organizations (Lee, 2000; Anderson and Narus, 1990). As a result, many researchers agree that competition is taking place between the supply chain and the supply chain, not between the enterprise and the enterprise (Christopher, 1998). Many researchers have tried to seek and identify conditions for organizations involved in supply chain integration. Many scholars argue that supply chain integration are caused by global competitive pressures (Handfield and Nichols, 1999), or the risk of environmental fluctuations including changes in supply, demand and technology (Chen et al. Paulraj, 2004; Mentzer et al., 2000), opportunities from new markets (Frohlich and Westbrook, 2001). However, according to experts in the fishery industry, in addition to global competitive pressure, supply chain risks (including supply, market, information and environment) and business strategy are important factors affecting the integration between supply chain members. The impact of risks on degree of integration are consistent with the theory of the relationship between the environment and the organization (Aldrich and Pleffer, 1976). As the environment changes, the organization should change in order to survive and develop. Organizations tend to strengthen relationships to limit the impact of supply, demand, technology and environmental (David, 1993; Mentzer, 2001; Chen and Paulraj, 2004). However, this relationship is inconsistence in studies. Some authors argue that this is a positive relationship, meaning that the more volatile the environment, the more likely it is that organizations tend to strengthen integration (Afuah, 2001; Lui et al., 2010; Germain et al., 2008). Meanwhile, other studies have shown that this relationship is negative. The higher the risk is, the less organizations tend to associate with each other. In fact, they only develop normal relations with their partnerships (Zhao et al., 2013). As a result, further verification and interpretation of this relationship is necessary. 616
3. The impact of business strategy on supply chain integration is also consistent with the theory of the relationship between strategy, structure and business performance (Chandler, 1962; William, 1992). This theory believes that strategy is the driving force behind the change of structure and business processes (Miles and Snow, 1978) and affects business outcomes (Habib and Victor, 1991). However, what strategy will motivate the organization to change in the direction of supply chain integration, and how the relationship between them affects business outcomes remains a question that needs further clarification. More research on the relationship between supply chain integration and business performance (Droge et al., 2004; Flynn et al., 2010). These studies did not produce consistent results. Therefore, it is necessary to refine the scale and seek for context variables that may influence regulation on the relationship (Fabbe-Costé and Jahre, 2008). This conclusion is also consistent with Woodward's Contemporary Theory (1965). Therefore, this research will broaden our understanding of integration within the supply chain through better research and identification of both internal and external influences on this integration, also the influence of this on business performance. Finally, a number of control variables will be considered as stages in the chain, types of organizations involved and the size of the organization. Aquaculture in general and in particular of Ben Tre province greatly affected by many factors. In addition, the risk is always the first priority when engaging in production and business activities in the fishery industry and significantly influences the integration between chain members in both vertical and horizontal alignment. However, Ben Tre's fishery enterprises are still confused in identifying strategies and combining them, in order to reduce risks so that risks as well as increase integrating partners in the supply chain. As a result, the study “The factors affecting the supply chain integrationin the fishery industry - Research in Ben Tre province” is not only necessary in theory but also contributes to the practical solutions. THEORETICAL BACKGROUND AND LITERATURE REVIEW The research overview will consist of two main sections, the first one deals with concepts of supply chain management and supply chain integration. The next section presents the results and the factors that influence supply chain integration. Supply chain integration 617
4. Supply chain can be understood as a network of organizations that includes upstream links and downstream links through processes and activities that create value for the product and services provided in the market (Lambert and Stock, 1993). Bechtel and Jayaram (1997) divide four different perspectives on supply chain integration: (1) the " functional chain awareness school", which separates supply chain integration into external links (link between enterprises) and internal integration (linkage between departments in organizations); (2) the "lingkage / logistics school", that supply chain integration is the integration of logistics activities; (3) the "information school", which implies linking information flows both inside and outside the enterprise; and (4) the "integration / process school", the concept of linking business processes between enterprises in the supply chain. The relationship between supply chain integration and the organization's business performance The relationship between the business performance of the organization and the supply chain integration analyzed under the theory of resources – based view. The relationship between supply chain integration and business performance of organizations is studied under different ways. In general, integration implies the link between suppliers and customers (Li et al., 2006). This concept may also imply a relationship between buyers and sellers under the logistic hierarchy (Paulraj and Chen, 2007). In fact, most studies suggest that external links have an impact on business performance. For example, managing and integrating supply chains has a direct and long-term impact on the financial performance and marketing of the business (Li et al., 2006). Linking logistics with suppliers and customers will improve the outcomes for all (Paulraj and Chen, 2007). Hypothesis H1: The integration with the supplier has a positive effect on the business performance of the organization. Hypothesis H2: The integration with customers has a positive effect on the business performance of the organization. The relationship between risks and supply chain integration The relationship between risks and supply chain integration will be analyzed under the theoretical framework of the relationship between the environment and the organizations. Aldrich and Pfeffer (1976) argued that organizations can not create all the resources on their own; therefore, they must develop relationships and mobilize some 618
5. resources from outside. The greater the specialization between organizations, the relationship between organizations or between the organization and the external environment becomes more important; because through this relationship, organization will have all the necessary resources. The relationship between instability or risk and the supply chain integration has been tested in several studies. For example, supply risks such as late delivery, failing in meeting quantitative and qualitative requirements might cause supply chain integration inefficiently (Zhao et al., 2013). When supply risks increase, manufacturers are reluctant to invest capital as well as increase long-term commitment to suppliers. Instead of linking and loyalty to one or few suppliers, they will choose the option of dealing with several suppliers to reduce the risk and increase the safety of their business. As a result: Hypothesis H3: The risk from the supplier is negatively correlated with the degree of integration between organisation and suppliers (H3a); and the level of integration between organisation and and customer (H3b). Similarly, the risk of market volatility, demand fluctuations, difficult to forecast also affect the intrgration of the supply chain. When market risk is high, producers often change product, volume and order (Trkman and McCormack, 2009). This will affect the supply of raw materials from the supplier to the manufacturing enterprise. Finally, changing market demand causes difficulties for manufacturers to identify market demand and customer feedback, and linking with customers is becoming more difficult (Calantone et al., 2003). Hypothesis H4: Market risk has a negative relationship with the level of integration between organisation and suppliers (H4a); and the level of integration between organisation and and customer (H4b). Information is an important factor influencing effective coordination between functional departments within the organisation as well as between supply chain actors (Lee et al., 1997). Lack of information is one of the main causes that reduce effectiveness. Sharing information and improving the quality of information sources will reduce risk, improve the accuracy of decisions, and increase integration among supply chain members. As a result, the risk of lack of information, delayed information, information system problems or low confidentiality can affect the performance of operations and the integration between the members in the supply chain (Christopher and Lee, 2004). 619
6. Hypothesis H5: The risk from information sources has a negative relationship with the degree of integration between organisation and suppliers (H5a); and the level of integration between organisation and and customer (H5b). Risks in the supply chain may be increased due to the impact of the political, economic, social and natural environment. These risks will be increased if the supply chain becomes more and more complex (Khan and Burnes, 2007). These risks are usually objective and beyond the control of each member in the supply chain. As a result, members tend to diversify their relationships to minimize these risks, rather than strengthening cooperation and interaction with other partners. Hypothesis H6: The risk from the environment is negatively correlated with the level of integration between organisation and suppliers (H6a); and the level of integration between organisation and and customer (H6b). The relationship between company strategic decision and supply chain integration This research will apply a combination of two theories: (1) the theory of the relationship between strategy, structure and performance and (2) the theory of resource-based view (RBV) to analyze the impact of strategy on supply chain integration. Strategy is the master plan to reach to the organization's long-term goals (Higgins and Vincze, 1989). In other words, the strategy will affect the performance of the organization's activities (Porter, 1996). Strategic orientation is the specific approach that organization chooses to implement strategies to create competitive advantages and improve business efficiency (Gatignon and Xuereb, 1997). Strategic orientation defines the strategic objectives and direction of all organizational activities, including activities related to supply chain integration. From an overview of supply chain management, there are two basic strategic decision related to supply chain integration: low cost orientation and high cost orientation (Porter, 1996). In addition, organisations must have a combination of low cost orientation and customer orientation because efficient supply chain management requires a balance between cost and customer service (Cooper and Ellram, 1993). Hypothesis H7: Low cost strategic orientation has a positive relationship with the level of integration between organization and supplier (7a) and the level of integration between organization and customer (7b). 620
7. Hypothesis H8: Customer strategy orientation has a positive relationship with the level of integration between organization and supplier (8a) and the level of integration between organization and customer (8b). Hypothesis H9: The effective combination of low cost strategy orientation and customer orientation has a positive relationship with the level of integration between organization and supplier (9a) and the level of integration between organization and customer (9b). Supply chain risks Supply chain Business integration performance Strategic business decision Reserch framework: The relationship between Supply chain risks, Strategic busines decision, Supply Chain Integration and Business performance RESEARCH METHOD Design questionnaire Scales were synthesized from the study review. After this, they analyzed and compared to select the scale that suits the target and context of the study. The questionnaire consisted of 46 scales including the scales of the performance and the antecedents of supply chain integration (Risks and strategic orientations) and the other information. Pilot studies Pilot study is an important step in order to check the questionnaire to detect issues that need to edit the draft (Cooper & Schindler, 1998; Fink , 2003) as well as to ensure that there are no difficulties to answer the questionnaire and recording data (Saunders, Lewis and Thornhill, 2000). SPSS was used to test data, test the reliability of the scale and the correlation between the factors studied. Based on this pilot study, there may be some changes to the questionnaire. Identify samples and collect data The list of organizations surveyed was randomized from the list of participating organizations in the supply chain from the Department of Planning and Investment in collaboration with the 621
8. Department of Agriculture and Rural Development of Ben Tre. These organizations are grouped by stages in the supply chain from farming, processing and exporting. These organizations continue to be classified into different groups based on their ownership and size. Questionnaires will be sent directly, by post or by email to these organizations. Minimum number of samples is 156 and must return at least 120 samples. To ensure safety, the number of samples is expected to be around 200 and the expected return of about 150 samples. Time of investigation was about 8 weeks. Method of data analysis Data analysis is done through some basic steps (Neuman, 2000). The first step is to review, test and evaluate data to understand general data such as descriptive statistics, incomplete or missing data and the distribution of the data. The next step is to check the reliability and validity of the scales. Finally, regression is used to tests the hypotheses and models of research proposed. RESULTS ANALYSE The procedure for analyzing follows steps: The first step will be to evaluate the characteristics of the sample and the distribution of the observation variables based on the sample. Follow-up is the verification of the validity and reliability performed. Hypotheses will be tested by SEM method. Test the distribution format of the data The variable value of the scale from the lowest value (Min) to the highest value (Max) in the range from 1 to 7 . The average values rotate around 3.5. The absolute values of the two Skewness and Kutosis statistics are respectively less than 3 and 5. Thus, it can be concluded that the distribution of scales is close to the standard distribution, satisfying the requirement for the next analysis. Exploratorial factor analysis This section focuses on factor analysis including factors that directly affect the integration between organizations in the supply chain, the degree of integration and business performance. The results show that most observational variables converge on theoretical factors. The KMO and Barlett statistics are between 0.5 and 1. The factor loading of most observation variables are 0.5. Therefore, all the observable variables of the factors are guaranteed in terms of validity and convergence on factors such as the initial definition 622
9. Reliability Analysis of Factors The reliability of the scales is determined by Cronbach's Alpha. Results from the study indicate that all variables have values of Cronbach's Alpha coefficient greater than 0.7 and Corrected Item-Total Correlation greater than 0.3. Thus, it can be concluded that the scales of these factors are highly reliable. Hypothesis testing Analyze the relationship between risk, supply chain integration and business performance The first step would be to assess the suitability of the model. Table 1 shows that most of the metrics are met. Only GFI (Goodness of fix index) is near the benchmark. Thus, the audit model is generally meaningful and relevant. Table 1: The indicators of the relationship model between risk, supply chain integration and business performance χ2 P GFI ≥.90 TLI ≥.90 CFI ≥.95 RMSEA ≤.08 662.331 .000 .816 .963 .966 .038 Although the model was relatively consistent with the database, many relationships were not statistically significant (see Table 2) Table 2: Estimates of the relationship between risk, supply chain linkage and business performance STT Correlations between factors β P 1 SI < SR -.494 2 CI < SR -.041 .580 3 CI < MR -.893 4 SI < MR -.177 .027 5 SI < IR -.206 .031 6 CI < IR .067 .442 7 SI < ER .089 .244 8 CI < ER .085 .229 9 BP < SI .704 10 BP < CI .362 After eliminating the statistically insignificant relationships and rerun the model, the results show that the remaining relationships are statistically significant (see Table 3 and Table 4). 623
10. Table 3: The indicators of the relationship model between risk, supply chain integration and business performance (Revised model) χ2 P GFI ≥.90 TLI ≥.90 CFI ≥.95 RMSEA ≤.08 428.353 .000 .845 .977 .979 .033 Table 4: Estimates of the relationship between risk, supply chain linkage and business performance (Revised model) STT Correlations between factors β P 1 SI < SR -.469 2 SI < MR -.155 .041 3 SI < IR -.180 .045 4 CI < MR -.826 5 BP < SI .704 6 BP < CI .363 Therefore, hypotheses consisting of H1, H2, H3a, H4a, H4b, H5a are supported. However, H3b, H5b, H6a và H6b are rejected. Analyze the relationship between strategy, supply chain integration and business performance This section will test two models. The first model only includes the impact of two types of business strategic orientations: low cost strategy and customer strategy. Then, the combined variables of the two strategies will be included in the model for validation. The first step will be to assess the suitability of the model. Table 5: Estimates of the relationship between strategy, supply chain integration and business performance STT Correlations between factors β P 1 SI < CBS .851 2 SI < DBS .081 .307 3 CI < DBS .623 4 CI < CBS .222 .022 5 BP < SI .604 6 BP < CI .471 624
11. Most relationships are statistically significant, with the exception of the relationship between the customer strategy and the association with the supplier (see Table 5). Thus, the Hypotheses H7a, H7b and H8b are accepted. Hypotheses H1 and H2 continue to be supported. However, the H8a hypothesis is not accepted. The next step is to incorporate the variable into the model for testing. Most relationships are not statistically significant when introducing a customer and low cost strategic orientations (see Table 6). Table 6: Estimates of the relationship between business strategy, mix strategy, supply chain integration, and business performance STT Correlations between factors β P 1 SI < CBS -.034 .873 2 SI < DBS -1.135 3 CI < DBS .229 .207 4 SI < CBS.DBS .205 5 CI < CBS.DBS .056 .071 6 CI < CBS -.044 .775 7 BP < SI .624 8 BP < CI .460 CONCLUSIONS AND RECOMENDATIONS This section will focus on evaluating and analyzing the results of this study compared with the past studies. The next section will focus on solutions and recommendations to promote the integration among members in the fishery supply chain in Ben Tre. The relationship between risks, supply chain integration and business performance The study results showed that the variables of risk in the supply chain that affect the supply chain integration, including supply risks and market risks, risks from information sources. Particularly, the risks from supply related inversely to link with suppliers. This was proved by past studies in this field (Frohlich, 2002; Zsidisin, 2003; Zhao et al., 2013); however, it is contrary 625
12. to the theory of the relationship between the environment and the organization. While this theory suggests that the more unstable the environment, the more demanding the business is in order to limit that instability. The results of this study also indicate that the risk from the supply does not have an impact on customer integration. This is in contrast to previous studies (Frohlich, 2002; Zsidisin, 2003; Zhao et al., 2013). Market risk impacts the forms of association with both the customer and the supplier. This is in line with the research done by Jaffee et al. (2010). Risk from information sources only affects the degree of linkage between firms and suppliers (Christopher and Lee, 2004). However, this risk does not affect the association with customers, as opposed to the results of studies by Lee et al. (1997). In addition, the risk from the environment is quite surprising when there is no impact on supply chain integration. This is absolutely contrast to previous studies (Khan and Burnes, 2007). Finally, supply chain integration in turn has a positive impact on business performance. The results in this case study are consistent with previous studies, which suggest that the relationships with suppliers and customers affect business outcomes ( Rosenzweig et al., 2003; Paulraj and Chen, 2007; Li et al., 2006). The above results show that managers need to pay more attention to risk management in the supply chain, especially the risks from supply, market risk and risk from the information. Effective risk management improves the relationships between actors in the supply chain and hence improves sustainable competition and business efficiency. The relationship between strategy, supply chain integration and business performance The relationship between strategic orientations and form of integration will influence the business performance supported in this study. This result reinforces the relevance of the theory of the relationship between strategy, organizational structure and business performance (SSP). The low cost strategy affects the degree of integration among business organizations, suppliers and customers. This has also been confirmed in previous studies (Grant, 1991). However, customer-oriented strategies only affect customer integration, in line with Lambert's (2004) and Lee (2004) studies. This is also understandable because customer- oriented strategies also mean doing more to satisfy customers. One of the important activities is to understand and stick with the customer, so that the strategy and action is appropriate through the production and delivery of the right products and services that customers need. The results are not only true for organizations that follow by a single business strategy but also for enterprises which use the combined strategy have impact on supply chain integration which in turn affect business performance. 626
13. Contribution and limitations of the study Theoretical contribution This study validated and clarified the impact of supply chain integration on business outcome. Although there is quite a lot of research on this relationship, validating a relationship that has not yet yielded consistent results is still necessary to clarify the nature and the theoretical system (Fabbe-Costes and Jahre, 2008). Further evidence from a particular industry in a developing country would provide a meaningful comparison to previous studies primarily conducted in developed countries. Testing the relationship between risk, supply chain integration and business performance confirms the theory of the relationship between the environment and organizational structure in supply chain management (Aldrich and Pfefer, 1976). This also confirms that the environment has an impact on organizations and organizations need to change in organizational structure in order to adapt new environment. At the root of the supply chain, organizations need to change in the direction of supply chain integration to match changing trends in the current environment. In particular, due to competitive pressure and high global specialization, businesses have to change their structure in the direction of linking and developing their relationship in order to increase efficiency and sustainable competitiveness. Clarifying the relationship between strategy, supply chain integration and business performance also contributes to determine the correctness of the theory of strategic relationships, organizational structure and business outcomes (Chandler, 1962). William, 1975) in the supply chain. Thus, organizational change is not only due to environmental change, external volatility and risk but also to internal demand. Business strategy is one of the most important thing. This research has contributed to explaining the impact of combined strategies on the level of integration as well as the improvement of business performance of organizations. Practical contribution This research provides managers insight view about the impact of supply chain integration on business outcomes. To improve business performance, organizations need to strengthen the integration not only with suppliers but also with customers; as both types of integration have a positive impact on business performance. This research also helps managers understand the important role of identifying and mitigating the impact of risk on supply chain integration. Measures must be taken to identify 627
14. the types of risks that occur from the supplier, market, information and environment. The next step is measuring the magnitude of the impact on supply chain integration. Finally, possible solutions will be introduced to limit the impact of these risks. Lastly, the thesis also shows the influence of business strategy on supply chain integration. Managers need to identify the organization's business strategy in line with the current supply chain context in order to determine the form and degree of integration that can deliver optimum business performance. Some limitations of the study The first limitation of the study is to conduct data surveys in short-term. While the impact of supply chain integration on business performance generally takes place over a period of time. Therefore, future studies should test this relationship over a period of time large enough to produce more accurate results. The second limitation of the study is to measure the performance of the enterprise by qualitative indicators. In addition, the scales depend heavily on the perception of the respondents to fill in the questionnaire. Therefore, future research should use quantitative and objective data that will give better results. Finally, this study was conducted in Ben Tre province and the results of the research can only be applied to some provinces in the Mekong Delta, where the context is similar to Ben Tre province. This study is difficult to apply to provinces in other parts of Vietnam. Therefore, further studies should be conducted in other regions to provide a more comprehensive overview of the study of the fishery sector in Vietnam. 628
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