Dr. Dong Qian Li
Syed Abdul Rehman Khan, CSCP, CISCOM
Department of Logistics and Supply Chain
School of Economics and Management
Chang’an University, Xi’an, China.
E-Mail:
The Effect of Information Sharing On Improving Organizational Performance
Abstract
Today’s world, information sharing plays a vital role in successful operations of supply chain; and boost to the profitability of the organizations (end-to-end supply chains). Many researches have been completed over the role of information sharing in supply chain. In this research article, we will investigate the “how information sharing can boost profitability & productivity of the organization; for this purpose, we have developed one conceptual model and check to that model through collected data from companies. We sent questionnaire to 369 companies; and will filled form received from 172 firms and the response rate was almost 47%. For the data analysis, we have used Regression in (SPSS software) In the research findings, our all hypothesis has been accepted significantly and due to the information sharing between suppliers and manufacturers “quality of material and timely delivery” increase and also “collaboration & trust” will become more stronger and these all factors will lead to the company’s profitability directly and in-directly. But unfortunately, companies could not avail the all fruitful benefits of information sharing due to the fear of “compromise confidentiality or leakage of information”.
Keywords—Collaboration, Information Sharing, Risk factor, Timely Delivery,
Introduction
In modern world’s, Supply chain management is a complete system, which contains multiple echelon, processes from Tier 1 supplier to final or end customers. The fundamental concept of supply chain is how the material, components, products, and information flow from upstream to downstream (manufacturer), and then final distributions to customers as a form of finished products. In-fact, functional units and areas within the company also required information that flows by the supply chain management system in the form for them to make a production plans and make all operations smooth. The information sharing in the supply chain can improve their performance. According to the Lambert et al., (1998) main business processes from end user through original supplier that gives products, information and service that add value for customers as well also for other stakeholders. In the light of APCIS’s book of CSCP- Module, (2013) the information sharing in the supply chain is playing a role of cornerstone. As per the Gattorna and Walters, (1996) a loop that begin and finish with the customer, where through the loop flow all finished products, materials as well information.
In this decade, companies have a lot of pressure, and only cost cutting or minimization of cost is not the only factor, which can help companies to gain and grab big profits and competitive edge in the market. Other factors are as more important as cost including; responsive delivery, customer satisfaction, quality and after sale service etc. these all factors plays a vital role to gain and build competitive edge in the market. To achieve these objectives, companies are not more willing to share information and collaboration with their supply chain partners, and some logical boundaries between supply chain partners may be eliminated in term to achieve some objects as a win-win situation. And information sharing and collaboration can be possible by usage of uniform and latest technology, continuous improvement in the processes and human resources.
According to the Barratt and Oliveira, (2011) information sharing and collaboration in the supply is a new strategy that has developed in the year of 1990s. This approach has been encouraged by other approaches such as JIT; EDI and QR. Supply chain involves the flow of in-tangible and tangible resources such as material, goods, components and information. Information sharing is more emphasize over flow of information. And supply chain practice more focused specifically over movement of material, components, and goods. As per the many researchers, high performing companies have a higher percentage of information exchanged system via EDI with upstream and downstream. Their results show that only information technology is not enough. Management also should know that, which information technology will be suitable for company for information sharing, as well provide training to employees. One more important is employees should be well-trained and should know, which information can be share with partners and how they can utilize information and perceive information as a knowledge to make organizational performance more better.
In this research study, we will show the effect of information sharing over the whole company performance and how information sharing can lead to the organizational performance. The main objectives of this study are to investigate and explain the effect of information sharing & knowledge sharing effect over the supply chain and organizational performance and also illustrate and find out to the information sharing’s fruitful benefits. Expected outcome of this research is the resolve of linkage among info sharing & knowledge sharing with companies’ relationship and evaluation the effect of this relationship over supply chain and organizational performance of manufacturer companies
Literature Review
According to the Xu et al., (2001) and Lee et al., (1997) this is very important for all supply chain partners to avoid from Bullwhip effect, and information sharing can solve this problem more effectively and efficiently. Burt et al., (2003) communication is the first initiative to developing and improving information sharing among partners. To push information sharing; organizations should increase an open communication environment. Zineldin and Jonsson, (2000) information sharing, second important element is trust development, due to the trust deficit information sharing is facing several barriers; trust development is the cornerstone of information sharing after communication. Many organizations use cross-functional team for developing of trust and communication (Dyer, 1996). According to the Burt et al., (2003) focus that understanding between supply chain partners, trust building, good communication and information sharing can be improve only by training. These all are the elements, which can make organizations to be more focused towards their objectives and ready to solve all supply chain problems. Baliga, (2001) if the companies’ internal functions are closely associated and integrated so it’s become more easy and suitable to extend integration and cooperation with supply chain partners.
Many researchers have identified various important characteristic of information sharing. Neumann and Segev, (1979), find that information sharing is important for the organizations, but quality of information should be reliable. McCormack, (1998) he measured information by credibility, availability of forecast, accuracy and frequency. And the research of Petersen, (1999) measured quality information by accuracy, completeness, currency. The other research over information quality is completed by Vijayasarathy and Robey, (1997) as per these reearchers, information intensity and quality is an important determinant of the usefulness of a information system. On the other side, data accuracy is very crucial in affecting customer service and operating efficiency (Sum et al., 1995). McGowan, (1998) information sharing is useful and reliable, whenever it has high quality, accurate, and relevant.
There are researchers (academics and practitioners), explain and examine, that’s the information sharing improved the supply chain performance. But on the other side the research of Kaipia R. Hartiala H, (2006) shows that if the producer uses its available information regarding historical demand so there is no need to invest money over information sharing systems.
Companies, to respond productively and actively to change, must need to invest over systems, practices and make decision making process more reliable and faster (Mendelson, H. 2000). Due to these all reasons companies investing heavily over information technologies and processes to manage information across the supply chain and make them effective (Ofek and Sarvary, 2001), in the research of Graeml et al., (2009) several managers wrongly focus their information sharing only the software and hardware ignoring the decision making in the information sharing process. Kaipia R. and Hartiala, (2006) the main thing is “how to make information useful”. Information sharing and knowledge is the major element of the successful supply chain as it affects decisions (Wadhwa, and Saxena, 2005). Many scholars categorize knowledge into two major types: 1. explicit knowledge 2. Tacit knowledge. (Nonaka, 1994) Information includes axiomatic propositions, facts, and symbols and through comparison tacit knowledge includes more knowledge that is tacit and complex to codify (Nonaka, 1994). In the light of Hart, (2004) the knowledge of tacit flows from the side of people in the company to be made explicit in its processes, policies and practices.
Business relationships, in the literature, and published researcher papers, have been defined very differently, “a good business relationships are those relationships, which customized to fit the appropriate position over a continuum of possible relationship styles” (Cooper & Gardner, 1993) to inter-company relationships are relatively enduring flows, transactions, linkages that occur between an company and one or more companies in its environment” (Oliver, 1990). As per the researcher (Gummesson, 1997) explained almost 30 different forms of relationships alone and show the diversity of views over the concept of relationships. A vital and crucial relationship (business) is in two parties; usually it is called buyer and seller (Szwejczewski et al., 2005). From last few decades companies are not only focused in price negotiations, but also emphasize a wider range of issues and problems. Now the objective of companies is to share information (high quality), value for money, components, parts and materials (Goffin, et al., 1997). In this scenario, the latest role of the purchasing manager has been explained as an information exchange broker. The whole process of SRM (supplier relationship management) from a perspective of supply is to bring both sides into an more effective working relationships (Leenders and Fearon, 1997).
Zhenxin et al., (2001) research shows the advantages of supply chain partnerships based over the information sharing. A close relationship among supply chain partners; includes sharing rewards and risks and they also want to keep this relationship for a long-term period. In the research of Hahn et al., (1983) companies will grab advantages by placing bigger orders of business with fewer suppliers using long-term contracts. As well, due to the long-term relationships, suppliers also become more reliable in terms of quality, service etc. This will impact over the competitiveness of the whole supply chain in a long term (Choi, 1996). In the light of De Toni and Nassimbeni, (1999) long-term relationships among suppliers and buyer will increase the intensity of coordination. Carr and Pearson, (1999) the impact of strategic purchasing on buyer and supplier relationships as well the impact of these relationships will have positive affect over the financial performance of both companies.
In the light of Dwyer et al., (1987) explained different types of relationships (buyer-supplier). The Japanese automotive companies cultivate their suppliers by sharing of knowledge and joint problems solving as well investments. Noordewier et al., (1990), the performance of purchasing is a crucial element of a company’s competitiveness. As well the results said, long-term relationships will lead towards profitability (Han, 1993). According to Larson, (1994), purchasing coordination of the company’s activities with key suppliers can impact total costs. Ford Company’s success demonstrates that businesses may increase their competitiveness through executing cooperative relationships with suppliers (Zeller and Gillis, 1995). Filho et al., (2008) the extent of strategic alignment in the automotive supply chain of Brazilian companies through examining the strategies adopted from the purchasing function in the first tier suppliers for managing relationships with their suppliers. In the research of (Freires et al., 2008) analysed the power influencing factor and trust between players on performance of reverse logistics systems. Mostly published research articles were highlighted to the buyer-supplier relationships affect only over performance of supply chain. In our research, we will going to use conceptual model and will identify and investigate the insights of information sharing’s benefits in the perspective of manufacturer and how information sharing can improve the whole organizational performance.
Conceptual Framework
In recent years, many articles have been published over information sharing and collaboration in the field of supply chain management. However, success depends over managers’ ability to identify changes in the competitive environment and after this to structure supply chain resources to support & help the firm compete effectively.
In the Figure 1 illustrates the effect of information sharing over performance and on supplier relationships. It depicts the connection among information sharing and knowledge sharing and after this the impact of knowledge based info over supplier & buyer relationships and these links going towards supply chain performance and whole organizational performance improvement.
Model and Hypothesis
Hypothesis is only a tentative assumption about the relationships among two or more things, variables, which need to be investigate and examined (Freires at al., 2008). In the model, the path are denoting to hypothesis.
Figure 1: The Conceptual Model
Hypothesis: 1
To respond actively to quick changes, a firm need be well aware of latest information in its environment and adopt structures, which can make faster decision making and betterment in practices and manage to the information (Mendelson, 2000) for this purpose, organizations are willing to invest in the IT to increase their ability to acquire latest info (Ofek and Sarvary, 2001).
Information technology plays a vital role in the performance of SC and as a whole organization improvement. IT makes companies to respond quickly and disseminate info between members of the channels. Technology connectivity establishes the capability to share information. While, managers make the decisions about what should be shared and when? A firms’ willingness to sharing info, its openness to sharing relevant info on regular basis and it should be right info on time (Mendelson, 2000). To justify huge investment in technology for information sharing, it is crucial to knows and identify, whether a verifiable relationship exists among info sharing and performance. To know the this relationship lead to our 1st hypothesis
H1: info sharing is positively associated to SCM Performance.
Hypothesis: 2
In the latest researches, info sharing and supply chain partners, Iyer & Bergen (Welman & Kruger, 2001) investigate the impact of QR over fashion industry. In the research of Baganha and Cohen, (Iyer and Bergen, 1997) shows a hierarchical model as an analytical framework to knows the stabilizing effect of inventories in SC. EDI execution also increase the information flow among partners, which will lead positive relationships among partners (Baganha & Cohen, 1998). While, several literature over the concept of supply chain partnerships projecting very optimistic point-of-views regarding their promise as win-win partnerships without any rigorous analysis to help and support the cause of optimism.