Impact of Strategic Sourcing,

E-Procurement and Integration on Supply

Chain Risk Mitigation and Performance

By

Minkyun Kim

April 23rd, 2010

A Dissertation submitted to the

Faculty of the Graduate School of
The State University of New York at Buffalo
In partial fulfillment of the requirements for the degree of

Doctor of Philosophy

Department of Operations Management & Strategy

School of Management
 UMI Number: 3407912

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Copyright by

Minkyun Kim

2010
This dissertation is dedicated to my loving wife who has always believed in me and
supported me with unconditional love and devotion. Without her, this dissertation could
not be completed.

ii
 Table of Contents
TABLE OF CONTENTS................................................................................................. III
LIST OF TABLES ........................................................................................................... V
LIST OF FIGURES......................................................................................................... VI
ACKNOWLEDGMENT.................................................................................................. VII
ABSTRACT ................................................................................................................. VIII
1. INTRODUCTION ...................................................................................................... 1
1.1. THE PROBLEM ...................................................................................................... 1
1.2. STATEMENT OF PURPOSE...................................................................................... 2
1.3. MOTIVATIONS FOR RESEARCH ............................................................................... 4
1.4. OBJECTIVES ......................................................................................................... 6
1.5. CONTRIBUTIONS OF THE RESEARCH ....................................................................... 6
1.6. ORGANIZATION OF THE DISSERTATION.................................................................... 7
2. LITERATURE REVIEW .......................................................................................... 10
2.1. THEORETICAL BACKGROUND ............................................................................... 10
2.1.1. Dynamic capabilities .................................................................................. 10
2.2. SUPPLY CHAIN RISK ........................................................................................... 13
2.3. SUPPLY CHAIN RISK MANAGEMENT...................................................................... 17
2.4. STRATEGIC SOURCING ........................................................................................ 20
2.5. E-BUSINESS TECHNOLOGIES IN SUPPLY CHAIN ..................................................... 28
2.6. SUPPLY CHAIN INTEGRATION ............................................................................... 33
2.7. ORGANIZATIONAL CULTURE ................................................................................. 37
2.8. BUSINESS ENVIRONMENT AND CHARACTERISTICS ................................................. 40
3. MODEL DEVELOPMENT ...................................................................................... 43
3.1. THE CONCEPTUAL MODEL ................................................................................... 43
3.2. THE RESEARCH MODEL ...................................................................................... 54
4. RESEARCH METHODOLOGY .............................................................................. 67
4.1. THE SURVEY METHODOLOGY .............................................................................. 67
4.2. INSTRUMENT DEVELOPMENT AND MEASUREMENTS ............................................... 69
4.3. THE PILOT STUDY............................................................................................... 84
4.4. THE FULL SCALE STUDY AND SAMPLE .................................................................. 86
4.5. PARTIAL LEAST SQUARES METHODOLOGY ............................................................ 86
5. DATA ANALYSIS AND FINDINGS ........................................................................ 89
5.1. PROFILE OF RESPONDENTS ................................................................................. 89
5.2. EVALUATION OF MEASUREMENT MODELS ............................................................. 92
5.3. EVALUATION OF STRUCTURAL MODELS ................................................................ 97
5.3.1. Full Effects ................................................................................................. 97
5.3.2. Moderating Effects ................................................................................... 101
5.3.3. Analysis of Subgroup Effects ................................................................... 106

iii
6. DISCUSSION OF RESULTS ................................................................................ 113
6.1. THE EFFECT OF STRATEGIC SOURCING ON SUPPLY CHAIN RISK .......................... 113
6.2. THE EFFECT OF E-BUSINESS TECHNOLOGIES ON SUPPLY CHAIN RISK.................. 115
6.3. THE EFFECT OF SUPPLY CHAIN INTEGRATION ON SUPPLY CHAIN RISK ................. 117
6.4. THE EFFECT OF ORGANIZATIONAL CULTURE ON SUPPLY CHAIN RISK ................... 119
6.5. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON STRATEGIC
SOURCING .................................................................................................................... 121
6.6. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON E-BUSINESS
TECHNOLOGIES ............................................................................................................. 123
6.7. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON SUPPLY
CHAIN INTEGRATION ...................................................................................................... 124
6.8. THE DIRECT AND MODERATING EFFECT OF BUSINESS ENVIRONMENTS ON
ORGANIZATIONAL CULTURE ............................................................................................ 126
6.9. THE DIRECT EFFECT OF BUSINESS ENVIRONMENTS ON SUPPLY CHAIN RISK ......... 126
6.10. THE MODERATING EFFECT OF BUSINESS CHARACTERISTICS ON THE RELATIONSHIP
BETWEEN SUPPLY CHAIN PRACTICES AND SUPPLY CHAIN RISK .......................................... 128
6.11. THE EFFECT OF SUPPLY CHAIN RISKS ON PERFORMANCE ................................... 132
7. SIGNIFICANCE & IMPACT OF RESEARCH ......................................................... 136
7.1. CONTRIBUTIONS OF RESEARCH ......................................................................... 136
7.2. LIMITATIONS ..................................................................................................... 142
7.3. FUTURE RESEARCH .......................................................................................... 143
APPENDIX. SURVEY MEASUREMENTS ................................................................. 145
REFERENCES ............................................................................................................ 155

iv
 List of Tables
TABLE 1. COMPARISON OF RBV AND DYNAMIC CAPABILITIES ADAPTED FROM (EISENHARDT ET
AL. 2000, P.1111)..................................................................................................... 12
TABLE 2. SUMMARY OF LITERATURE REVIEWS ON STRATEGIC SOURCING .............................. 25
TABLE 3. SUMMARY OF LITERATURE REVIEW ON E-BUSINESS TECHNOLOGIES IN A SUPPLY CHAIN
................................................................................................................................ 32
TABLE 4. SUMMARY OF HYPOTHESES ON FULL EFFECTS .................................................... 63
TABLE 5. SUMMARY OF HYPOTHESES ON MODERATING EFFECTS ........................................ 64
TABLE 6. MEASUREMENTS FOR STRATEGIC SOURCING ....................................................... 70
TABLE 7. MEASUREMENTS FOR EXTENSIVE USE OF E-BUSINESS TECHNOLOGIES ................... 71
TABLE 8. MEASUREMENT FOR INTENSITY OF E-BUSINESS TECHNOLOGIES ADOPTION.............. 72
TABLE 9. MEASUREMENTS FOR E-BUSINESS TECHNOLOGY ADOPTION IN THE SUPPLY CHAIN ... 74
TABLE 10. MEASUREMENTS FOR INTERNAL INTEGRATION.................................................... 75
TABLE 11. MEASUREMENTS FOR INTEGRATION WITH CUSTOMERS ....................................... 76
TABLE 12. MEASUREMENTS FOR INTEGRATION WITH SUPPLIERS ......................................... 77
TABLE 13. MEASUREMENTS FOR ORGANIZATIONAL CULTURE .............................................. 78
TABLE 14. MEASUREMENTS FOR SUPPLY CHAIN RISK ........................................................ 79
TABLE 15. MEASUREMENTS FOR FINANCIAL PERFORMANCE ................................................ 80
TABLE 16. MEASUREMENTS FOR OPERATIONAL PERFORMANCE .......................................... 81
TABLE 17. MEASUREMENTS FOR SUPPLY CHAIN PERFORMANCE ......................................... 82
TABLE 18. MEASUREMENTS FOR DYNAMIC BUSINESS ENVIRONMENT ................................... 83
TABLE 19. MEASUREMENTS FOR COMPETITIVE BUSINESS ENVIRONMENTS ........................... 84
TABLE 20. DELETED SURVEY ITEMS IN THE PILOT STUDY .................................................... 85
TABLE 21. INDUSTRY CODE FOR RESPONDENTS FIRMS...................................................... 90
TABLE 22. BUSINESS CHARACTERISTICS OF RESPONDENT FIRMS ........................................ 91
TABLE 23. RELIABILITY AND CONVERGENT VALIDITY ........................................................... 93
TABLE 24. FACTOR ANALYSIS BY PLS ............................................................................... 95
TABLE 25. DISCRIMINANT VALIDITY ................................................................................... 97
TABLE 26. STATISTICAL COMPARISON OF PATHS IN MANUFACTURING APPROACH ............... 107
TABLE 27. STATISTICAL COMPARISON OF PATHS IN SUPPLIERS LOCATION ........................ 109
TABLE 28. STATISTICAL COMPARISON OF PATHS IN MARKET LOCATION ............................. 110
TABLE 29. SUMMARY OF RESULTS ON FULL EFFECTS RESEARCH HYPOTHESES ................. 111
TABLE 30. SUMMARY OF RESULTS ON MODERATING EFFECTS RESEARCH HYPOTHESES ..... 112
TABLE 31. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF STRATEGIC SOURCING ..... 115
TABLE 32. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF E-BUSINESS TECHNOLOGIES
.............................................................................................................................. 117
TABLE 33. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF SUPPLY CHAIN INTEGRATION
.............................................................................................................................. 119
TABLE 34. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF ORGANIZATIONAL CULTURE
.............................................................................................................................. 121
TABLE 35. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF BUSINESS ENVIRONMENTS127
TABLE 36. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF SUPPLY CHAIN RISK ......... 132
TABLE 37. CROSS LOADINGS FOR MEASUREMENT INDICATORS OF PERFORMANCE ............... 135

v
 List of Figures
FIGURE 1. SOURCES IN RISK IN THE SUPPLY CHAIN ADAPTED FROM (CHRISTOPHER & PECK
2004, P.10) .............................................................................................................. 15
FIGURE 2. A FRAMEWORK FOR SUPPLY CHAIN RISK MANAGEMENT ..................................... 20
FIGURE 3. FOUR DIMENSIONS OF STRATEGIC SOURCING (KOCABASOGLU AND SURESH 2006)
................................................................................................................................ 21
FIGURE 4. E-BUSINESS TECHNOLOGIES IN A SUPPLY CHAIN ADAPTED FROM (VAKHARIA 2002,
P.498)...................................................................................................................... 28
FIGURE 5. INTEGRATION IN THE SUPPLY CHAIN ADAPTED FROM (FROHLICH AND W ESTBROOK
2001, P.186) ............................................................................................................ 34
FIGURE 6. ARCS OF THE INTEGRATION ADAPTED FROM (FROHLICH AND W ESTBROOK 2001,
P.187)...................................................................................................................... 35
FIGURE 7. THE COMPETING VALUES FRAMEWORK OF ORGANIZATIONAL CULTURE ADAPTED
FROM (DENISON AND SPREITZER 1991, P.12) ............................................................. 39
FIGURE 8. A FRAMEWORK OF BUSINESS ENVIRONMENT AND CHARACTERISTICS ................... 42
FIGURE 9. CREATING RISK MITIGATING STRATEGIES IN A SUPPLY CHAIN ADAPTED FROM
(CHRSITOPER AND PECK 2004, P.24) ......................................................................... 46
FIGURE 10. SUPPLY CHAIN RISK MANAGEMENT FRAMEWORK ADAPTED FROM (RITCHIE AND
BRINDLEY 2007A, P 1401) ......................................................................................... 50
FIGURE 11. THE CONCEPTUAL MODEL .............................................................................. 51
FIGURE 12. THE FULL CONCEPTUAL MODEL ...................................................................... 53
FIGURE 13. IMPACT OF BUSINESS ENVIRONMENTS ADAPTED FROM (W ARD ET, AL. 1995, P101)
................................................................................................................................ 58
FIGURE 14. BUSINESS CONDITIONS IN A SUPPLY CHAIN ADAPTED FROM (VAN DER VAART AND
VAN DONK 2006, P. 11) ............................................................................................ 60
FIGURE 15. A RESEARCH MODEL WITH FULL EFFECTS ....................................................... 65
FIGURE 16. A RESEARCH MODEL WITH MODERATING EFFECTS ........................................... 66
FIGURE 17. STEPS FOR DEVELOPING MEASUREMENTS ....................................................... 69
FIGURE 18. RESEARCH RESULTS FOR FULL EFFECTS ....................................................... 100
FIGURE 19. RESEARCH RESULTS FOR MODERATING EFFECTS .......................................... 105

vi
 Acknowledgment
I would like to gratefully and sincerely thank Professor Nallan Suresh for his continuous

guidance, understanding, help, and endless support. He has provided me with such an ample

opportunity to explore the issues that I have always interested meto be exact, purchasing in

supply chain management, and in turn, he has helped me structure the scope of this issue in the

realm of supply chain risk management. I am so blessed to have him as my advisor and mentor.

This work could not have been done without the questions, criticisms, and advice from my

dissertation committee, Professor Natalie Simpson and Professor Charles Wang. They helped me

to shape the dissertation as it is now.

I thank Dr. Sangmi Chai, my wife and the most important colleague throughout my

doctorial study. I know that this dissertation would have never been completed without her

support, help, guidance and endless devotion. I would like to thank her with my heart for her

strong and loving support, her advice and encouragement, her companionship, and the many

interesting and thought-provoking conversations during this journey.

Finally, I would like to express very sincere and deepest thanks to my parents who have

supported me and believed in me. I also would like to show my heartfelt appreciation to my

parents-in-law. They always have been my supporters and helped me to make this work possible.

For this, I remain ever grateful to them.

vii
 Abstract
Supply chain risk management has emerged as an important issue for researchers and

practitioners because mitigating supply chain risk helps to improve firms as well as supply

chains performance. However, managers are not adequately prepared to manage supply chain

risks and most organizations do not have effective supply chain risk management policies. The

main objective of this research is to investigate impact of strategic sourcing, e-business

technologies and supply chain integration on supply chain risk mitigation. More importantly, this

study examines the role of business environment, organizational culture and other business

characteristics in influencing supply chain practices and supply chain risk mitigation.

Based on the theoretical background of dynamic capabilities, this study attempts to fill

the gap in supply chain risk management literature by examining businesses environments. In

addition to business environments, this study reflects business characteristics and organizational

culture. This research establishes a research framework of mitigating supply chain risk based on

the literature review of supply chain risk management. By studying previous literature on the

supply chain risk management, this study found three common themes of risk mitigating

strategies in the supply chain: collaboration and cooperation, information sharing and flexibility.

Thus, this research investigates the impact of three supply chain practices, strategic sourcing, e-

business technologies in supply chain, and supply chain integration which enable firms to have

collaboration, information sharing and flexibility with suppliers.

Supply chain risks are categorized in three ways depending upon the sources of supply

chain risks. The first set of sources is from the internal risk within firms. The second sources

stem from internal risk within the supply chain. The third set of sources is from the external risk

viii
outsides of the supply chain. Because supply chain risks have very broad areas, this research

focuses on inbound perspective of supply chain risks.

The conceptual model of this research is based on mitigating supply chain risks by

implementing supply chain practices such as strategic sourcing, e-business technologies and

supply chain integration. On this main conceptual model, this research reflects organizational

culture as an internal factor of supply chain risk management, and business environments as an

external factor of supply chain risk management. This research framework is composed of

supply chain practices which mitigate supply chain risks, business environments which influence

supply chain practices as well as supply chain risks, organizational culture which affects supply

chain risks, the impact of business characteristics on the relationship between supply chain

practices and supply chain risks, and the relationship between supply chain risks and

performance.

This research applied the survey methodology to empirically validate the research

framework. In order to improve the quality of the survey, this research conducted a three- step

approach. First, the survey measurement items were adapted from prior literatures. Second, by

having interviews with supply chain professionals, the content validity check was conducted.

The feedbacks and comments on the survey were reflected to make a revised version of the

survey. Finally, the pilot study was conducted. Thirty three supply professionals completed the

survey. The statistical testing of examining the reliability on the measurement indicators was

conducted to eliminate low reliability items. The feedbacks and comments were also received to

improve the quality of the survey. Since this research investigated the supply risks, the finalized

surveys were distributed to the members of Institute of Supply Management.

ix
 Collecting 152 surveys from purchasing and supply management executives from the US

manufacturing industry, this research uses partial least squares methodology for data analysis.

This research results empirically confirm that strategic sourcing mitigates the supply chain risk.

Strategic sourcing is engaged in not only emphasizing the purchasing function on aligning firms

strategy but also improving the relationships with suppliers by sharing the information and

developing the suppliers. Thus, supply chain members can reduce the probability of supply

disruptions. Even if disruptions occur in the supply chain, supply chain members can minimize

the magnitude of the supply disruptions. E-business technologies were also found to mitigate

supply chain risks. E-business technologies enable supply chain members to share the

information in the real time and communicate frequently. Therefore, e-business technologies

enable supply chain members to be flexible to react quickly to disruptions in supplies, resulting

in advantages for mitigating the supply chain risks.

The results also support that supply chain integration mitigates supply chain risk. Supply

chain integration has been a widely applied supply chain management practice in order to

improve the performance. It encourages the firms to collaborate together and share information.

Like other supply chain practices such as strategic sourcing and e-business technologies in this

research, supply chain integration is a key element in the risk mitigating strategy of the supply

chain. Thus, supply chain integration plays an important role in mitigating supply chain risks.

This research empirically confirms strategic sourcing, e-business technologies and supply chain

integration mitigate supply chain risks. However, the in this research organizational culture is not

found to make a statistically significant impact on mitigating supply chain risks.

Next, this research considers the business environments and characteristics in supply

chain risk management. The business environments reflect competitive and dynamic markets and

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business characteristics indicate manufacturing approach, suppliers and market location and firm

size. Competitive and dynamic business environments have a direct influence on strategic

sourcing, e-business technologies and supply chain integration. If business environments become

competitive and dynamic, firms implement strategic sourcing in order to strengthen their

relationships with suppliers, e-business technologies to share the real time information, and

supply chain integration to collaborate with suppliers. However, competitive and dynamic

business environments are not found to have a significant relationship with organizational culture.

Organizational culture established with beliefs of the managers is not influenced by external

market conditions. The research results also support that considering business environments is a

key factor of implementing supply chain practices to have competitive advantages toward

dynamic and competitive markets.

Business environments have moderating effects between supply chain practices and

supply chain risk. As business environments become competitive and dynamic, the mitigating

effects of strategic sourcing, e-business technologies, supply chain integration becomes stronger.

In other words, the impact of strategic sourcing, e-business technologies and supply chain

integration grow to be very effective on mitigating the supply chain risks. Therefore, if firms

operate in dynamic and competitive markets, strategic sourcing, e-business technologies and

supply chain integration are very useful supply chain practices on setting up risk mitigating

strategy in the supply chain. However, business environments are not found to have a significant

impact on organizational culture and the relationship between organizational culture and supply

chain risks.

Business characteristics also have a moderating effect on the relationship between supply

chain practices and supply chain risks. Depending on the manufacturing approach (push and

xi
pull), in the case of firms with push approach, strategic sourcing, e-business technologies and

supply chain integration become more effective on mitigating supply chain risk comparing with

the pull approach. Depending on the suppliers location, if firms have suppliers outside of the US,

strategic sourcing, e-business technologies and supply chain integration have the larger impact

on mitigating supply chain risk comparing with the suppliers from the US. On the other hand,

firms market location does not have any influence on the relationship between supply chain

practices and supply chain risks.

This research also examines the relationship between supply chain risks and the

performance. Performance is measured on three dimensions: financial, operational and supply

chain performance. The results support the notion that supply chain risks have a negative

relationship with performance. If supply and purchasing managers perceive high risks in the

supply chain, then the performance is found to be low. If they perceive low risks in the supply

chain, the performance is high.

This research contributes to the supply chain management literatures by explicitly raising

issues of supply chain risks for managers, by empirically validating the conceptual framework of

supply chain practices, supply chain risks and the performance; by examining the impact of

organizational culture on supply chain risk and, finally, by filling gaps in the literature on the

relationship between supply chain risk management and business environments.

Although this study has limitations arising from the survey methodology, this research

can be extended in various ways. Because this study focuses on the manufacturing industry, the

research framework can be applied to service industries like the health care industry. Likewise,

future studies can investigate the cultural difference between the US and other Asian countries. It

xii
will be very worthwhile examining the impact of cultural differences on risk mitigating strategies

in supply chains. These are two of many possible extensions of this research.

Key Words: Supply Chain Risk Management, Business Environment and Characteristics,

Performance, Strategic Sourcing, E-business Technology, Supply Chain Integration,

Organizational Culture, Risk Mitigating Strategy

xiii
 1. Introduction
1.1. The Problem

Recently, supply chain management theory and practices are receiving a great deal of attention

as effective tools for dealing with challenges that are generated by competitive and dynamic

markets. Current business trends such as the increased use of outsourcing, the globalization of

supply chains and the reduction in the supply base lead to greater exposure to risks. Other

potential risks include a more integrated process among supply chain members, a reduction in

buffer inventories, an increasing demand for on-time delivery within more limited time frames,

shorter product life cycles and time-to-market, as well as capacity limitation and relatively high

demand in the early stages of the product life cycle (Norrman and Jansson 2004). In recent years,

the structure of supply chains has become more complex due to the growing levels of risk and

uncertainty in the market as well as within the supply chain itself. Managers are not able to

control all aspects of the supply chain, which requires them to take selective actions in dealing

with the risk (Luhmann 1995). According to the McKinsey Global Survey, executives are not

adequately prepared to manage supply chain risks (McKinsey 2006). According to AMR

research, 60% of organizations in the US do not have effective supply chain risk management

policies (Hillman, 2007). High risk generates inefficiency in the supply chain (Christopher and

Lee 2004). More importantly, tangible risks in the supply chain have been confirmed to be one of

the causes for poor performance (Wilding 1998). Therefore, mitigating risk in the supply chain

has emerged as a significant issue in academia as well as in the business world because of the

unknown impact of risk on the supply chain. This research attempts to fill gaps in the literature

by investigating factors to mitigate supply chain risks.

1
 However, the risks in the supply chain come from various sources. The research of

Christopher and Peck (2004) characterizes risk in three ways: 1) internal to the firm, such as

process and control; 2) external to the firm but internal to the supply chain network such as

demand and supply; and, 3) external to the network, such as environmental risks. These risks,

which are interconnected, have been categorized into several other categories, including supply

chain disruption, delay, forecast, procurement, risk, capacity and inventory risks (Chopra and

Sodhi 2004). This study focuses on managing supply risks in the supply chain from the inbound

perspective.

1.2. Statement of Purpose

Supply chain risk mitigation has begun to be intensively discussed in supply chain management

literature. If disruptions occur in the supply chain, financial losses and low customers

satisfaction result, affecting all members in the supply chain. It is very important for firms to

prevent the supply chain disruptions and minimize damages. Thus it is critical for supply chain

professionals to consider various factors in establishing risk mitigating strategies in the supply

chain. These are also important issues for supply chain management researchers to address.

In terms of mitigating supply chain risks, previous literature introduces various supply

chain strategies. First of all, it is very important for researchers to identify and understand supply

chain risk while minimizing the impact of the risk (Norrman and Jansson 2004). In order to

mitigate risk, prior studies present one common strategy, namely the significance of internal and

external integrations in a supply chain for mitigating supply chain risks (Kleindorfer and Saad

2005). Information sharing and collaborative relationships in supply chain networks also lessen

supply chain risks (Faisal, Banwet, and Shankar 2006). In supply chain risk management, the

significance of information sharing and the development of relationships has been emphasized.

2
In addition, cultural factors can also make a significant impact on supply chain risk mitigation

(Ritchie and Brindley 2007a). This research investigates supply chain management practices

such as strategic sourcing, e-business technologies, supply chain integrations as well as

organizational culture to mitigate supply chain risks.

Supply chain management practices are recognized to enable supply chain networks to

limit their risks. However, they may not be capable of controlling environmental risk, which is

considered to be one of the important sources of supply chain risks. Environmental risk can

influence organizations supply chains directly or indirectly (Christopher and Peck 2004). Since

there is a lack of research regarding the business environment, organizational culture and other

business characteristics, this research attempts to fill that need. Although any business

uncertainty is not well controlled by organizations, managers awareness of, and their quick

reactions to, dynamic and competitive business environments is critical. Environmental

uncertainty is considered a critical antecedent for supply chain management practices because

perceptions toward unpredictability in the external business climate are the foundations on which

managers make decisions affecting the supply chain (Chen and Paulraj 2004; Kocabasoglu,

Prahinski, and Klassen 2007).

The purpose of supply chain risk management is to mitigate supply chain risks, resulting

in effective and efficient supply chain performance. Cohen and Kunreuther (2007)

conceptualized supply chain risk management as supply chain hierarchies, customer supplier

relationships and market mechanisms in a real options framework. This option framework helps

allocate optimal resources, which leads to efficient supply chain performance (Cohen and

Kunreuther 2007). Failure to mitigate supply chain risks like supply chain glitches tends to

generate loss of shareholders value due to the economic impact of poor supply chain

3
performance (Hendricks and Singhal 2003). In other words, high perceived risk generates low

performance outcome and low perceived risk generates high performance outcome (Ritchie and

Brindley 2007b). While supply chain management practices are applied for mitigating risk, they

may also positively affect performance. Previous literature indicated that supply chain

management practices such as strategic sourcing, e-business technologies and supply chain

integration, make a positive impact on performance (Carr and Pearson 1999; Chen, Paulraj, and

Lado 2004; Wu, Mahajan, and Balasubramanian 2003; Narasimhan and Kim 2002). This

research examines the role of supply chain management practices that not only mitigate supply

chain risks but also improve performance.

1.3. Motivations for Research

The motivations for this research are divided into three categories: major gaps in the supply

chain risk management literature, the application of supply chain management practices in

supply chain risk management and the lack of recognition of the significance of supply chain risk

management.

Firstly, the area of supply chain risk management is emerging as a new issue because the

supply chain network is becoming increasingly complex and vulnerable. It is difficult for

managers of supply chains to manage these risks in order to improve their organizations

performance as well as supply chain performance. In spite of the newly found demand for

research in the field, supply chain risk management is a fairly new area for investigation,

especially in terms of empirical studies. More importantly, managing supply chain risks provides

benefits to the firms, and the failure to mitigate risk produces greater losses. However, while the

importance of supply chain risk management is recognized, there is a lack of empirical studies in

supply chain risk management, thus making such empirically grounded research necessary

4
(Juttner, Peck, and Christopher 2003). This research aims to fill that gap by empirically

examining both the mitigation of supply chain risk through adoption of supply chain

management practices as well as the role of business environments, organizational culture and

other business characteristics in the relationship between supply chain risk and supply chain

management.

Secondly, supply chain risk management introduces various approaches to handling of

the risks. The literature agrees that supply chain management practices play an important role in

supply chain risk management and performance. However, it is very important for managers to

investigate whether supply chain management practices work effectively in the real business

world. Adding the business environment and other characteristics for consideration would help

managers understand the role of supply chain management practices in specific real business

environments. This research intends to confirm the specific supply chain management practices

which need to be implemented to mitigate the risk and improve the performance of member

firms in the supply chain.

It is believed that this research concerning supply chain will make meaningful

contributions to both academia and practitioners. This motivation also has an influence on the

methodological approaches used in this research. The empirical approach became popular

because it recognizes the importance of field-based research, and reflecting the business context

in which practice happens (Malhotra and Grover 1998). Therefore, this research adopts the

survey research methodology in order to examine managerial implications for real-world

business contexts.

Finally, managers are not familiar with how to deal with supply chain risks and do not

necessarily recognize the importance of supply chain risk management. According to the

5
McKinsey Global Survey, executives are not prepared to adequately manage supply chain risks

(McKinsey 2006). Also, Mark Hillman in AMR research stated that 60% of organizations in the

US do not have an effective supply chain risk management policy (Hillman 2007). Most

organizations are not prepared to implement supply chain risk management since managers are

not familiar with the issues. This research is meant to inform managers about the significance of

supply chain risk management.

1.4. Objectives

The major objective of this research is to investigate the impacts of strategic sourcing, e-business

technologies and supply chain integration in the context of supply chain risk mitigation. In

addition, this study examines the role of the business environment, organizational culture and

other business characteristics in supply chain management practices and supply chain risks.

Specifically, the following research questions are addressed:

What impacts do strategic sourcing, e-business technologies and supply chain integration

have on mitigating supply chain risk?

What impact does organizational culture have on supply chain risk?

What impact does the business environment and characteristics have on supply chain

management practices as well as supply chain risk?

What impact does supply chain risk management have on performance?

1.5. Contributions of the Research

This research makes significant contributions in terms of academia as well as practice. First, this

study raises some of the issues of supply chain risks that have been overlooked by managers.

Second, this research empirically validates the conceptual framework of the relationships among

supply chain practices, supply chain risks and performance. Third, the impact of organizational

6
culture is examined in the area of supply chain risks. Finally, this research fills the gap in the

research regarding the relationships between supply chain risk management, the business

environment, and business characteristics.

1.6. Organization of the Dissertation

This sub-section describes the organization of this dissertation. Section 2 provides an explanation

of the theoretical background and a review of relevant literature that examines supply chain risks,

supply chain risk management, performance, supply chain management practices, organizational

culture and business environment and characteristics. The theoretical underpinning of this

dissertation is represented by the concept of dynamic capabilities. The discussion on supply

chain risk management covers various strategies for lessening risks. The performance section

considers three dimensions performance: financial, operational and supply chain performance.

The elements of supply chain management practices are identified as strategic sourcing, e-

business technologies in supply chain and supply chain integration. The organizational culture

section is approached from a customer-orientated standpoint. The topic of business environment

and characteristics is considered and discussed from an environmental uncertainty perspective.

Section 3 establishes a conceptual model relating to supply chain risk management and

performance as they are linked to the business environment and characteristics. The various

constructs and hypothesis are developed for designing the research model. This section develops

a basic conceptual model and a research model. In the first sub-section, the conceptual model is

based on the analysis of the literature and a consideration of gaps in prior research. This model

answers questions regarding the relationships between supply chain management practices and

supply chain risk as well as between supply chain risk and performance. In the second sub-

section, a research framework is developed with full effects and moderating effects. A research

7
model with full effects describes a framework of supply chain risk management which deals with

supply chain practices, organizational culture, supply chain risk and performance. A research

model with moderating effects describes a framework of supply chain risk management with an

indirect impact from business environment and characteristics.

Section 4 presents a discussion of the proposed research methodology. The methodology

includes developing the measurement instrument, a pilot study and sample and population issues.

This section describes the research methodology to be utilized in this study. This section

discusses in detail the processes of developing the survey and measurements. This section begins

with the survey methodology, instrument development and measurements, the pilot study, the

full scale study and sample and partial least squares.

Section 5 explains data analysis and findings. This section provides the results of the data

analyses. Section 5.1 provides a profile of the survey participants in this research. Section 5.2

contains the assessment of the measurement scales, which establishes the reliability and validity

of the survey instruments in this research. Section 5.3 provides analysis of the structural model

for generating the results for full and moderating effects.

Section 6 discusses data analysis results. The main objective of this research is to

investigate the relationship between supply chain practices such as strategic sourcing, e-business

technologies and supply chain integration with supply chain risks. From the buyers perspective,

this research framework empirically validates that implementation of supply chain practices

mitigate supply chain risks. Since industry has become global and highly competitive,

performance emerges as a key objective for all supply chain members in order to survive in the

global marketplace. Therefore, mitigating supply chain risks to improve performance and

determining the role of supply chain practices in supply chain risk management are important

8
topics of discussion, particularly in light of the results of this study. In addition, this study

considers the internal factor of organizational culture and the external factors of business

environments and characteristics within the main research framework of supply chain risks

management. Therefore, this research shows that firms have to deal with these factors in supply

chain risks management in order to have competitive advantages and that they also need to

allocate their resources, based on dynamic capability, effectively in order to improve

performance.

Section 7 presents contributions, limitations and future research. The purpose of this

study is to establish a research framework for supply chain risk management and to empirically

investigate how supply chain practices and organizational culture influence supply chain risks

from the business environment perspective. In addition, this research also examines whether

successful supply chain risk management will improve the performance. Since this research

serves to close a gap in the literature of supply chain risk management, this research will,

hopefully, make a significant contribution to the academic and business world.

9
 2. Literature Review

The following section covers a review of the theoretical background and relevant literature. This

section begins with theoretical background, which includes dynamic capabilities, and discusses

in detail, the literature pertaining to supply chain risk, supply chain risk management, strategic

sourcing, e-business supply chain technologies, supply chain integration, organizational culture

and business environment and characteristics, in that order.

2.1. Theoretical Background

2.1.1. Dynamic capabilities

In recent years, the theory of resource-based view (RBV) of the firm has been applied

extensively to investigate how firms can acquire competitive advantages through managing their

routine operations successfully. The role of the operations management component has been

explored and it has been found that a firm can compete effectively in the market by adopting a

more strategic, operations management approach (Lewis 2000). According to the results, a firm

can gain a competitive advantage in the market by using a strategic operations management

approach (Lewis 2000). The relationship between strategic purchasing and a firms performance

based on RBV has been investigated and it has been found that strategic purchasing has a

positive impact on the firms performance (Carr and Pearson 2002). RBV considers a firms

possession of heterogeneous resources, such as financial, physical and human resources, as a

source of core competence within the firm (Halldorsson et al. 2007).

Based on the resource based view, dynamic capabilities are introduced as a more

developed theory (Teece, Pisano, and Shuen 1997) (Panda et al. 2003). In other words, dynamic

capabilities extended the view of RBV into a competitive value corresponding to environmental

10
changes (Miller 2003). Compared to a resource-based view, a dynamic capabilities approach

focuses more on market speed and unpredictable changes in the business environment. The

dynamic capabilities approach also focuses on the dynamic process of developing capabilities

while the RBV identifies resources and capabilities as static (Panda et al. 2003 ). The main idea

presented by dynamic capabilities is how a firm can acquire or develop firm-specific resources or

capabilities to achieve a competitive position in the dynamic business environment (Eisenhardt

and Martin 2000; Winter 2003). For this reason, a firms ability to configure and relocate

resources and its competence is regarded as a source of significant advantage in rapidly evolving

business conditions. Dynamic capabilities are defined as the firms capability to integrate, build

and reconfigure internal and external competences to achieve a competitive advantage in the

rapidly changing environments (Teece, Pisano, and Shuen 1997). The RBV has been criticized

because it cannot sufficiently explain how firms can have a competitive advantage in an

unpredictable and dynamic market environment (Eisenhardt and Martin 2000).

In very competitive as well as rapidly changing business environments, firms need to

have the ability to integrate, build and reconfigure internal and external competencies (Teece,

Pisano, and Shuen 1997) for addressing uncertainties in the business environment. In the

dynamic capabilities model, this ability offers a competitive advantage to firms (Eisenhardt and

Martin 2000). Dynamic capabilities are a firms processes that use resources in their processes

to integrate, reconfigure, gain and release resourcesto match and even create a favorable

market change. Dynamic capabilities are the organizational and strategic routines by which firms

achieve new resource configurations as markets emerge, collide, split, evolve, and die

(Eisenhardt and Martin 2000). Dynamic capabilities enable firms to change routine operating

11
processes in response to market changes (Anand et al. 2009). Table 1 shows comparisons

between RBV and dynamic capabilities.

Table 1. Comparison of RBV and Dynamic Capabilities adapted from (Eisenhardt et al.
2000, p.1111)

RBV Dynamic Capabilities

Definition Routines to learn routines Specific organizational and
strategic processes (e.g., product
innovation, strategic decision
making, alliancing) by which
managers alter their resource base
Heterogeneity Idiosyncratic (i.e., firm Commonalities (i.e., best practice)
specific) with some idiosyncratic details

Pattern Detailed, analytic routines Depending on market dynamism,

ranging from detailed, analytic
routines to simple, experiential
ones
Outcome Predictable Depending on market dynamism,
predictable or unpredictable
Competitive Sustained competitive Competitive advantage from
Advantage advantage from valuable, somewhat rare,
Valuable, rare, imperfectly equifinal, substitutable, and
limitable and ono- fungible dynamic capabilities
substitutable dynamic
capabilities

Evolution Unique path Unique path shaped by learning

mechanisms such as practice,
codification, mistakes, and pacing

Two main characterizations of dynamic capabilities are extracted from the term dynamic

and capabilities. Dynamic indicates the capacity to renew competences so as to achieve

congruence with the changing business environment. The term capabilities refers to strategic

management of a firms resources including internal and external skills as well as functional

competences that respond to a rapidly changing business environment (Teece, Pisano, and

Shuen 1997). Therefore, the term dynamic capabilities entails creating higher order skills as well

12
as innovative and agile resources toward a dynamic environment that are beyond operational

functional skills, resources that are required for every-day operations (Agarwal and Selen 2009).

Due to the effectiveness of utilizing resources, dynamic capabilities affect a firms profitability

by improving productivity (Makadok 2001).

This research adopts dynamic capabilities as a theoretical background to explore various

factors that mitigate risks stemming from an unpredictable business environment. Dynamic

capabilities enable firms to leverage resources for establishing and maintaining relationships

with suppliers as well as customers (Perez Perez and Sanchez 2002). In the dynamic business

environment, a firm can face a variety of risks while maintaining its supply chain. Since a

strategic approach to supply chain management can be a component of a firms core competence,

that firms ability to configure and relocate resources to avoid or reduce various risks in the

supply chain will contribute to a firms performance. This study investigates how a firm can

utilize its capabilities to reduce risks in the supply chain by identifying risk mitigating factors.

2.2. Supply Chain Risk

Risk has been defined in many different ways depending on the nature and perspective of various

disciplines. In the field of business management, risk is generally defined as the probability of

variation in potential results in both objective and subjective ways (Spekman and Davis 2004). In

the context of supply chain management, supply chain risks are defined as any risks for the

information, material and product flows from original supplier to the delivery of the final product

for the end user and the possibility and effect of a mismatch between supply and demand in

simple terms (Juttner, Peck, and Christopher 2003). Supply Chain risks are arguably divided in

two different aspects: risk and uncertainty sources and risk consequences which mean risk

impacts on business (Juttner, Peck, and Christopher 2002). The risks considered in this study are

13
risk and uncertainty sources since the consequences of risk are regarded as impacts on

performance.

Previous literature established categories of sources of supply chain risks. Sources of

supply chain risks are explained by using the risk spiral which includes four components: lack of

confidence, lack of visibility, build-up of buffers and long pipelines (Christopher and Lee 2004).

Limited visibility in supply chain flows reduces confidence, which leads to delays in decision

making and results in the building-up of buffers, which then creates long supply chain pipelines

(Christopher and Lee 2004). Six dimensions of risks are found in the supply chain, which are

physical movements of goods, the flow of information, the flow of money, the security of

internal information systems, the relationships among supply chain members, and social

responsibilities of supply chain members (Spekman and Davis 2004). Supply chain risks are

divided into five categories: physical aspects of the actual supply chain movement, flow of

money, informational flow, relational links in supply chain networks and innovational

opportunities for supply chain members (Cavinato 2004).

Three categories of supply chain risk sources have been suggested: environmental risk

stemming from uncertainty in the business environment, such as disasters; organizational risks

stemming from supply chain members, such as machine failures; and labor strikes and network

related risks stemming from interactions within the supply chain network, such as a lack of

interaction (Juttner, Peck, and Christopher 2003). Three categories of supply chain risk have also

been presented. First, the internal risk to the firm, which includes process risk and control risk

(Christopher and Peck 2004; Juttner, Peck, and Christopher 2003). Process risk relates to

disruptions in value-adding activities. The control risk is the risk that arises from the application

or misapplication of policies in governing the process. Second, the external risk to the firm, but

14
internal risk to the supply chain network, which includes demand and supply. Demand risk

relates to potential or actual disturbance in the downstream flow of the focal firm. Supply
Supp risk

relates to potential or actual disturbance in the upstream flow of the focal firm. Third, the

external risk to supply chain network includes environmental risk. Environmental risk relates to

all risk, which includes socio-political,

political, economical and technological events as well as industry

that affects the whole supply chain directly and indirectly. Figure 1 shows the five main sources

of risk in the supply chain.

Figure 1. Sources
es in Risk in the Supply Chain aadapted from (Christopher
Christopher & Peck
2004, p.10)

In Johnson (2001), two categories of supply chain risk are identified: Demand risk, which

includes seasonality, volatility, new product adoption and short product life cycle, and supply

15
risk, which includes disruptions in supply, production capacity and logistics as well as long lead

time between supply and demand. This research adopts an inbound perspective of supply chain

risk.

Prior studies introduced some definitions of supply risk. Supply risk is defined as

transpiration of significant and disappointing failures with inbound goods and services

(Zsidisin, Panelli, and Upton 2000, p. 187). It is also defined as that which adversely affects

inward flow of any type of resource to enable operations to take place; also termed input risk

(Harland, Brenchley, and Walker 2003, p. 53). However, these definitions reflect a traditional

view of supply because it neglects to consider multiple dimensions of the construct. Therefore, a

new definition of supply risk is presented as the probability of an incident associated with

inbound supply from individual supplier failures or the supply market occurring, in which its

outcomes result in the inability of the purchasing firm to meet customer demand or cause threats

to customer life and safety (Zsidisin 2003a, p. 222). Zsidisin (2003a) also includes the supply

disruptions into the concept of supply risks. Supply disruption risk is defined as managers

perception of the total potential loss generated from disruptions on the supply from suppliers to

buyers (Ellis, Henry, and Shockley 2010). Incorporating supply disruption risk, this study

follows the definition of Zsidisin (2003a) for supply risk.

Supply risk has two main sources: individual supplier failures, which include new

product development problems, delivery failures, relationship issues, supplier obligations to

other customers, quality problems, price/cost increases, inability to meet quantity demand,

technologically out-of-date and discontinued supply and market characteristics that include a

sole source or limitedly qualified sources, market shortages, commodity price increases,

geographic concentration of suppliers and supplier patents (Zsidisin 2003a).

16
 Managers perceive supply risk characteristics in three categories: item, market and supply

(Zsidisin 2003b). Item characteristics have an impact on profitability and the nature of product

application. Market characteristics entail global sourcing, market capacity constraints, market

price increases and number of qualified suppliers (Zsidisin 2003b). Supplier characteristics

include capacity constraints, inability to reduce cost, incompatible information systems, quality

problems, unpredictable cycle times, and changes in volume and mix requirements. Due to the

uncertain supply chain environment, supply chain risk becomes broader than ever before (Barry

2005) so that this research is dealing with supply chain risk in three ways: internal risk of supply

chain members, external risk of supply chain members but internal risk within supply chain

network and the environmental risk.

2.3. Supply Chain Risk Management

Supply chain risk management can be defined in two ways. One way is to define it as

collaborating with partners in a supply chain and apply risk management process tools to deal

with risks and uncertainties caused by, or impacting on, logistics related activities or resources

(Norrman and Jansson 2004, p. 436). It is also defined in simple terms as the identification and

management of risks for the supply chain, through a coordinated approach amongst supply chain

members, to reduce supply chain vulnerability as a whole (Juttner, Peck, and Christopher 2003,

p. 201). In these definitions, supply chain risk management has to distinguish between supply

chain risk sources, risk consequences, risk drivers and risk mitigating strategies. This research

will focus on risk mitigating strategies in order to minimize risk consequences and improve

supply chain performance.

The research of Christopher and Lee (2004) suggests three strategies to remove the

supply chain risk spiral. First, supply chain members need to make information accurate, visible

17
and accessible. Up-to-date information is very useful for planning purposes. Second, they need to

be alerted for out-of-control conditions. Statistical process control can be conducted to reduce the

variations of a supply chain plan. Third, they need to perform responsive corrective actions. With

contingency plans, they are able to make corrective actions when some disruptions occur

(Christopher and Lee 2004).

The research of Christopher and Peck (2004) points out the importance of risk assessment

before setting up mitigating risk strategies. Before designing mitigating strategies, managers

need to understand the nature of the supply chain network and supply base strategy for their

firms. Then they emphasize the importance of supply chain collaboration, which encourages

information exchange in supply chain networks and supply chain agility, which includes supply

chain visibility, a clear view of the up- and downstream flow of the supply chain and supply

chain velocity, and the relation of end-to-end distance to time in the supply chain. They also

point out the importance of cultivating an organizational culture where people become aware of

supply chain risk and supply chain risk management so that all workers in the organization

recognize supply chain risk in their activities (Christopher and Peck 2004).

The research of Juttner et al. (2003) present four points for mitigating strategies. First,

avoidance is associated with products geographic markets and supplier and market

organizations. A company can drop specific products, suppliers and geographical markets due to

unreliable supply. Second, companies control contingencies from various risk sources. It

includes vertical integration, increasing inventory and maintaining excessive capacity in

production, handling, storage and transportations. Third, cooperation involves joint agreement,

which can reduce uncertainty in production. This includes joint agreement between supply chain

members to share information and prepare joint plans. Fourth, flexibility increases supply chain

18
responsiveness to unexpected events. Examples are postponement and multiple sourcing (Juttner,

Peck, and Christopher 2003).

Supply risk management uses approaches very similar to supply chain risk management.

It is confirmed that reduced supply risk can be achieved by forming alliance relationships,

making suppliers responsible for developing risk mitigation plans, maintaining common

platforms for products, connecting directly with suppliers and establishing industry standards.

They also suggest that purchasing organizations develop multiple sources for strategic items,

hold safety stocks and maintain a well-stocked supply line (Zsidisin, Panelli, and Upton 2000).

Johnson (2001) presented ways of managing supply risk in the toy industry. First, a

company can reduce capacity risks by outsourcing and building flexible partners. The company

can also conduct outsourcing as a proactive solution for mitigating risk. Second, the companies

need to use information, air freight, and warehouse consolidation to improve supply and demand

matching. Establishing an electronic supply chain by sharing information helps supply chain

members improve in matching supply and demand. Finally, companies can reduce currency and

political risk through operational hedging. Diversifying supply sources internationally is one way

to avoid currency and political risk.

Consistent with previous suggestions, Harland et al. (2003) also found similar supply risk

management strategies. First, forming a collaborative supply network strategy is very critical.

More involvement from supply network key players leads to better supply network design.

Second, implementing a supply network risk strategy is very important for the organizations

Developing new skills for managing interrelationship with other supply network members is

necessary for managers so that they can be educated about supply network risk.

19
 Optimal
Resource
Performance
Allocation in
Supply Chain

Supply Chain
Practices

Risk in Supply Environmental

Internal Risk
Chain Risk

Figure 2. A Framework for Supply Chain Risk Management

2.4. Strategic Sourcing

Strategic sourcing is defined as a systematic and comprehensive process of acquiring input as

well as managing supplier relations in a manner that moves toward achieving the organizations

long term objectives (Smeltzer, Manship, and Rossetti 2003). Strategic sourcing is viewed as the

use of supplier capabilities in the process of design, engineering and manufacturing to achieve

strategic objectives (Narasimhan and Das 1999a). It is also defined as a framework that can assist

managers in the process of making buying decisions with consideration of the following factors:

20
competitive advantage and demand flexibility as primary factors, and process capability, process

maturity and systematic risk as secondary factors (Sislian and Satir 2000). Strategic sourcing has

another definition as a procurement framework based on the concept of total cost of ownership,

which helps firms add value and improve their competitive positions (Anderson and Katz 1998).

These definitions and findings over the years have pointed out four essential dimensions

of strategic souring: 1) the strategic role of purchasing, 2) effective internal coordination of

purchasing function with other functions, 3) effective information sharing with suppliers and, 4)

supplier development and supply base management (Kocabasoglu and Suresh 2006). Figure 3

describes four dimensions of strategic sourcing to explain the concept of strategic sourcing.

Figure 3. Four Dimensions of Strategic Sourcing (Kocabasoglu and Suresh 2006)

21
 Strategic sourcing has been shown to have a significant impact on several aspects of firm

performance. In an early work, Carter and Narasimhan (1996) identified six strategic factors

affecting performance, measured by market position, customer satisfaction and market share.

They rank-ordered the six strategic purchasing factors as: the importance of purchasing, human

resource management, interaction with suppliers, influence over suppliers, interaction with other

departments, and the purchasing organization and structure (Carter and Narasimhan 1996).

Carr and Pearson (1999) examined the role of strategic purchasing on the firms financial

performance, buyer-supplier relationship as well as supplier evaluation systems. Their study

confirmed that strategic purchasing is positively associated with a firms financial performance.

Their study also found that strategic purchasing has a positive impact on buyer-supplier

relationships and supplier evaluation systems (Carr and Pearson 1999).

Carr and Smelzer (1999) tested the hypothesis that strategic purchasing is positively

related to supplier responsiveness, supplier communication, changes in supplier market and firm

performance. Their study showed that strategic purchasing not only affects the firms

performance positively but also improves the relationship with suppliers, encouraging both a

higher level of cooperation with suppliers as well as increasing responsiveness to customers

(Carr and Smeltzer 1999).

The study of Narasimhan and Das (1999a) focused on the relationship between strategic

sourcing and manufacturing flexibility. Their study results confirmed that strategic sourcing has

a positive impact on modification flexibility; however, it did not show any significant

relationship between volume flexibility and new product development flexibility. In addition,

strategic sourcing was found to have an indirect relationship with manufacturing cost reduction.

22
This study provided insights into how strategic sourcing can help improve manufacturing

flexibility and establish appropriate sourcing strategies (Narasimhan and Das 1999a).

Das and Narasimhan (2000) investigated the relationship between purchasing

competence and manufacturing performance. They found that purchasing competence has four

dimensions: supply base optimization (parts bundling), buyer-supplier relationship development,

supplier capability auditing and purchasing integration. They confirmed that buyer-supplier

relationship development, supplier capability auditing and purchasing integration are positively

related with manufacturing performance. Purchasing integration was also found to have played a

significant role in improving manufacturing performance (Das and Narasimhan 2000).

Adding to the above results, Narasimhan et al. (2001) found five dimensions of

purchasing competence: empowerment, employee competence, interaction effectiveness-tactical,

interaction effectiveness-new product development, and buyer-seller relationship management.

Purchasing competence was related to performance, which was composed of market share, TQM

and customer satisfaction. The results showed that purchasing competence has a significant

relationship with TQM and customer satisfaction. This study emphasizes that purchasing

competence can also serve to achieve better TQM as well as better customer satisfaction,

although no significant relationship with market share was found (Narasimhan, Jayaram, and Das

2001).

Likewise, Narasimhan and Das (2001) examined the impact of purchasing integration and

practices on manufacturing performance. Three research models were tested: 1) impact of

purchasing integration and practices on manufacturing performance, 2) impact of purchasing

practices on manufacturing performance, with an additional direct relationship between

purchasing integration on purchasing practices, and 3) moderating effect of purchasing

23
integration between purchasing practices and manufacturing performance. These results provide

insights into how purchasing should be internally integrated into business process and planning

for competitive advantage.

Carr and Pearson (2002) investigated the impact of purchasing/supplier involvement on

strategic purchasing and its impact on firms financial performance. Their study presented that

purchasing/supplier involvement is positively associated with strategic sourcing and strategic

sourcing has a positive influence on firms financial performance (Carr and Pearson 2002).

Chen et al. (2004) used a different approach for examining the indirect relationship

between strategic purchasing and financial performance. In their research, strategic purchasing

affects three factors, which are communication with suppliers, limiting the number of suppliers

and the development of long-term relationships with suppliers. Their empirical research results

showed that these factors were affected positively. However, only two factors, communication

with suppliers and long-term supplier relationships are positively related to customer

responsiveness, which has a positive impact on financial performance. This research implies that

strategic sourcing promotes better supply management capability which leads to improved

customer responsiveness and financial performance (Chen, Paulraj, and Lado 2004).

Gonzalez-Benito (2007) investigated the impact of both purchasing efficacy and

purchasing strategic integration on business performance. Their results showed that both

purchasing efficacy and purchasing strategic integration have a positive relationship with two

aspects of business performance: commercial and financial. He also examined the moderating

effect of purchasing strategic integration, and the results show that the relationship between

purchasing efficacy and business performance is enhanced by purchasing strategic integration

24
(Gonzalez-Benito 2007). Table 2 presents the summary of the literature reviews on strategic

sourcing.

Table 2. Summary of literature reviews on strategic sourcing

Description Variables Findings

Carter 302 Importance of These factors positively affect the
and responses purchasing, Interaction firm performance.
Narasim from all with suppliers, Level of Importance of purchasing function in
han levels of interaction with other the organization is a critical factor in
(1996) purchasing functions, Human success measure. Benefits of buyer-
personnel in resource management, supplier relationship influences firm
NAPM Influence over suppliers, performance. Finally, purchasing
member Competitive focus, does have an important role in
firms Purchasing organization corporate strategy.
and structure, Firm
performance

Carr and 739 Status of purchasing, Status of purchasing function,

Smeltze responses Purchasing knowledge purchasing knowledge and skills,
r (1997) from high- and skills, Risk on purchasing willingness to take risks,
level purchasing, Purchasing purchasing resources are positively
purchasing resources, Level of associated with level of strategic
executives in strategic purchasing purchasing.
NAPM
member
firms

Carr and 739 surveys, Strategic Purchasing, Strategic purchasing positively

Pearson then 168 Buyer-Supplier affects firms financial performance
(1999) responses Relationships, Supplier as it has a positive impact on buyer-
from high- Evaluation Systems, supplier relationships and supplier
level Firms financial evaluation systems. Supplier
purchasing performance evaluation systems positively
executives in influence buyer-supplier
NAPM relationships that also positively
member affect firms financial performance.
firms

25
Carr and 739 surveys Level of Strategic Strategic purchasing has a significant
Smeltze received purchasing, Supplier relationship with supplier
r (1999) from high communication, Supplier communication, supplier
level responsiveness, Change responsiveness, change in supplier
purchasing in supplier market, market and firms performance.
executives in Firms performance
NAPM
Narasim 75 surveys Strategic sourcing, Strategic sourcing positively affects
han and were Advanced manufacturing supplier responsiveness and
Das received strategies, Modification assistance. Strategic sourcing has a
(1999a) from senior flexibility, Volume significant relationship with only
managers in flexibility, New product modification flexibility not with
NAPM with development flexibility, volume flexibility and new product
follow-up Mfg. Cost functions development flexibility. Since
interviews modification flexibility is positively
associated with mfg. cost reductions,
strategic sourcing indirectly
influences manufacturing
performance.
Das and 322 surveys Purchasing competence, Purchasing competence has four
Narasim received Parts bundling, Buyer- dimensions of parts bundling, buyer-
han from supply supplier relationship supplier relationship development
(2000) executives in development practices, practices, supply capability auditing,
NAPM Supply capability and purchasing integration. Supplier
auditing, Purchasing capability auditing and purchasing
Integration integration has a positive relationship
Mfg. performance with manufacturing performance.

Narasim 322 surveys Purchasing integration, Purchasing integration and practices

han and supply Purchasing practices are positively associated with
Das executives in Mfg. performance manufacturing performance.
(2001) NAPM Purchasing integration has a
moderating effect between
purchasing integration and
manufacturing performance.

Car and 175 surveys Purchasing/Supplier Purchasing/supplier involvement has

Pearson from Involvement, Strategic a positive impact on strategic
(2002) purchasing Purchasing, Firms purchasing. Strategic purchasing
professionals Financial Performance positively affects firms financial
performance.

26
Smeltze 29 Case Negotiation plans Lack of understanding exists on
r et al. studies from Strategic sourcing integrating the strategic sourcing and
(2003) Fortune 500 negotiation plans. Thus, supply
firms. managers should emphasize on
integrating these two processes.

Chen et 232 surveys Strategic Purchasing, Strategic purchasing positively

al. received Communication, Limited affects communication between
(2004) from supply Number of Suppliers, buyers and suppliers and long-term
executives in Long-term Orientations, orientation. Communication and
ISM Customer long-term orientation have a positive
Responsiveness impact on customer responsiveness
Fin. Performance which positively influences financial
performance. However, limited
number of suppliers does not have a
significant relationship with
customer responsiveness.

Kocabas 140 surveys Status of purchasing, Status of purchasing, internal

oglu and received Internal coordination, coordination, information sharing
Suresh from supply Information sharing and and development of supplier are four
(2006) executives in Development of supplier dimensions of strategic sourcing.
ISM Strategic sourcing

Gonzale 141 Purchasing Efficacy, Purchasing efficacy and purchasing

z-Benito companies Purchasing Strategic efficacy by purchasing strategic
(2007) from Spanish Integration, Purchasing integration positively affect both
manufacturin Efficacy by Purchasing commercial and financial
g companies Strategic Integration performance. However, purchasing
Commercial strategic integration does not have
performance, Financial any relationship with both
performance commercial and financial
performance.

27
2.5. E-Business Technologies in Supply Chain

There has also been a major technological transformation in purchasing, by way of e-business

technologies, which can provide organizations with a wide range of benefits such as savings in

transaction costs, inventory reduction, and the establishment of communication networks

between buyers and suppliers (Min and Galle 1999; Deeter-Schmelz et al. 2001). E-business

technology also enables firms to collect and analyze real-time information resulting in enhanced

collaboration among firms (Vakharia 2002). E-business technologies are categorized into various

forms of e-business technology into three types: e-commerce, e-procurement, and e-collaboration.

(Johnson and Whang 2002). Among these, e-procurement, referring to the use of e-business

technologies in purchasing, allows firms to purchase materials using the Internet (Presutti 2003).

In addition to Internet technologies, technologies such as electronic data interchange (EDI) as

part of e-procurement are included in this study. Figure 4 describes the e-business technologies

usage in the supply chain.

Figure 4. E-Business technologies in a supply chain adapted from (Vakharia 2002, p.498)

28
 Many studies have pointed out the potential benefits of e-procurement. four main benefits

are identified: 1) lower procurement process cost, compared to manual procurement processes, 2)

greater visibility on expenditure control, 3) increased procurement control, and 4) benefits from

managing suppliers (Croom 2000). E-procurement may also generate secondary benefits by

streamlining purchasing processes (e.g. decreased paperwork, quick and prompt order processing,

and improved order accuracy), internal cost reduction in purchasing (e.g. transparency, order

discounts and price efficiency) and external business innovations such as new market penetration

(Benton 2007). E-procurement promotes better management of suppliers information and

knowledge, better understanding of weaknesses, better control of supplier operations, reduced

mistakes in procurement, and optimizes inventory (Muffatto and Payaro 2004). In addition, e-

procurement may result in greater transparency in procurement, with more detailed data

(Puschmann and Alt 2005); increased speed, quantity and quality of information processing,

especially with international suppliers (Essig and Arnold 2001); and improved processing of

requests for quotes (RFQ), as it results in savings in cost of processing, increased accuracy of

quotations, and higher job satisfaction for quote analysts (Weil 2000).

Among many studies on the impact of e-procurement, Boyer and Olsen (2002) found that

purchasing performance is improved with Internet purchasing. Purchasing performance was

assessed on the two dimensions of cost performance (reduced cost of activities associated with

purchasing and cost of personnel training) and other performance aspects (billing accuracy and

availability of supplies). The broader impact on firm or supply chain performance was not

assessed. It was shown that Internet sitespecific factors had a significant impact on purchasing

performance (Boyler and Olson 2002).

29
 Wu, Mahajan and Balasubramanian (2003) assessed the impact of firm characteristics,

competitive environment and intensity of e-business adoption on performance. E-procurement

was considered one of the four elements of adoption intensity of e-business technology.

Performance outcomes are related to efficiency, sales performance, customer satisfaction, and

relationship development. It was shown that performance was improved due to e-business-based

communication and internal administration but not online order taking and e-procurement (Wu,

Mahajan, and Balasubramanian 2003).

Wu, Zdisin and Ross (2007) utilized the same data to analyze the impact on intensity of

e-procurement, along with the antecedents of top management emphasis, organizational learning

ability and normative pressures. The outcome measures were relationship development and

perceived efficiency gains. The use of coordination e-procurement applications was found to

have both direct and indirect effects on perceived efficiency gains, while transactional

application use can directly lead to efficiency gains (Wu, Zsidisin, and Ross 2007).

E-business technologies are utilized in a case study approach to document e-procurement

adoption and its benefits in Greek government (Panayiotou, Gayialis, and Tatsiopoulos 2004).

Johnson et al. (2007) presented the findings from a study of drivers and the outcomes of e-

business technology use in the supply chain. Their study examined the impact of the industrial

context, firm characteristics and firm-level strategic resources, such as purchasing teams, on the

exploitation of e-business technologies and the relationship between e-business technology use

and firm performance. A two-dimensional framework for e-business technology was proposed

with transactional and relational dimensions. Transactional technologies were further subdivided

into dyadic cooperation and price determination. Significant differences were found between the

two dimensions in terms of their overall levels of adoption, with dyadic coordination being the

30
most widely adopted. Finally, e-business technologies targeted at reducing dyadic coordination

costs were found to lead to improved financial performance. On the other hand, price

determination and private exchange in e-business technologies did not affect the firms financial

performance (Johnson et al. 2007).

In Devaraj et al. (2007), it was hypothesized that while e-business technologies may offer

no direct benefit to performance, these technologies might support customer integration and

supplier integration in the supply chain, which in turn might impact operating performance. It

was shown that there was no direct benefit of e-business technologies on performance; however,

these technologies supported customer integration and supplier integration. Furthermore,

supplier integration was found to positively impact cost, quality, flexibility, and delivery

performance; however, there was no significant relationship between customer integration and

performance (Devaraj, Krajewski, and Wei 2007).

Vaidyanathan and Devaraj (2008) explored the role of quality in e-procurement

performance. Using dynamic capabilities theory and a resource-based view, it was postulated

that online information and process act as resources that result in logistics fulfillment

capabilities. These capabilities in turn lead to satisfaction with e-procurement, which was the

performance measure. It was shown that information flow process quality, including online

information, and order procedures are positively associated with logistics fulfillment process

quality. Logistics fulfillment process quality, measured by fulfilled order accuracy and fulfilled

order timeliness, was seen to positively affect satisfaction with e-procurement performance

(Vaiduanathan and Devaraj 2008). It is found that the Internet did not increase the capability of

process efficiency, but it boosted the integration process capability in procurement (Ordanini and

31
Rubera 2008). Table 3 presents the summary of the literature reviews on e-business technologies

in a supply chain.

Table 3. Summary of literature review on e-business technologies in a supply chain

Articles Description Variables Findings

Boyer 416 surveys IV: Purchasing Internet-specific factors had the
and from customers Company Factors largest impact on purchasing
Olson of an Internet (Strategy and performance. Performance improved
(2002) retailer of office Environment), with Internet purchasing.
supplies Internet Factors
(Internet specific
and site specific)
DV: Purchasing
Performance

Wu et al. Field interviews IV: Firm Intensity of e-business adoption had

(2003) and 144 characteristics, significant impact on performance.
responses from Competitive Communication in e-business
managers in Environment, adoption positively affected
technology Intensity of e- performance. Internal administration
firms business Adoption in e-business adoption influenced
(includes e- customer satisfaction and relationship
procurement) development.
DV: Performance
outcomes
Panayiot Case study of IV: E-procurement The benefits of e-procurement are
ou et al. Greek in government reduction of supply costs, reduction of
(2004) government purchasing cost per tender, lead time saving and
DV: Outcomes and other intangible benefits.
benefits
Johnson 284 survey IV: Purchasing Dyadic coordination in e-business
et al. responses from Teams, E-Business technologies positively affects return
(2007) member firms Technologies, on assets and return on sales.
of Purch. Mgt. Purchasing However, price determination and
Assoc. of Structure, Size and private exchange in e-business
Canada Sector technologies do not have significant
(PMAC) DV: Firm relationship with ROA and ROS.
performance

32
 Articles Description Variables Findings
Devaraj 120 responses IV: E-business Purchasing and collaboration in e-
et al. from senior capabilities business capabilities are positively
(2007) managers in (customer, associated with customer and supplier
various SIC purchasing and integration. Only supplier integration
codes collaboration), positively affects operational
Supplier performance.
integration,
Customer
integration,
DV: Operational
performance

Vaidyan 131 surveys IV: Information Information flow process quality

athan were received flow process quality including online information, order
and from purchasing (online information, procedures is positively associated
Devaraj managers order procedures), with logistics fulfillment process
(2008) Logistics quality including fulfilled order
fulfillment process accuracy, fulfilled order timeliness.
quality (fulfilled Logistics fulfillment process quality
order accuracy, composed of fulfilled order accuracy,
fulfilled order fulfilled order timeliness positively
timeliness) affects satisfaction of e-procurement
DV: Satisfaction (e- performance.
proc. Performance)

2.6. Supply Chain Integration

Supply chain integration has been emphasized in the past literature because it plays a critical role

in creating value for supply chain partners (Mitra and Singhal 2008; Watson and Zheng 2005).

Supply chain integration is defined as the degree to which a manufacturer strategically

collaborates with its supply chain partners and collaboratively manages intra and inter-

organization processes (Flynn, Huo, and Zhao 2010). The purpose of stimulating supply chain

integration is to coordinate the production process so that competitors cannot easily match the

resulting competitive advantage created (Anderson and Katz 1998; Lummus, Vokurka, and

Alber 1998). Other aspects of the benefits of supply chain integration are reduced inventory, lead

33
times, order delays and bullwhip effect as well as increased customer satisfaction (Sahin and

Robinson 2005; Mitra and Singhal 2008). Integration, information sharing and coordination

improved the ability of the supply chain to react to changes in a dynamic environment (Lee, So,

and Tang 2000). Figure 5 illustrates integration in the supply chain.

Figure 5. Integration in the supply chain adapted from (Frohlich and Westbrook 2001,
p.186)

Internal integration within the firms makes a positive, direct impact on both business and

operational performance. Customer integration affect positively and directly on operational

performance. Interestingly, supplier integration does not have a direct relationship with either

performance (Flynn, Huo, and Zhao 2010). It is important to approach internal integration and

supplier integration differently. In order to improve the performance, internal integration should

be facilitated first to promote the supplier integration (Das, Narasimhan, and Talluri 2006).

Supply chain integration has a positive influence on suppliers communication performance, but

not on suppliers operational performance (Cousins and Menguc 2006). More importantly,

internal integration affects positively the external integration with suppliers and customers. Both

internal and external integrations are significant antecedents of improving firms supply chain

34
agility (Braunscheidel and Suresh 2009). Figure 6 describes that extensive integration in the

supply chain improves the performance.

Figure 6. Arcs of the Integration adapted from (Frohlich and Westbrook 2001, p.187)

Supply chain integration is applied in a variety of contexts in manufacturing. In the

design perspective, external integration in design and internal integration in design process

positively affect firms performance (Droge, Jayaram, and Vickery 2004). In the integration with

global suppliers, supplier integration helps suppliers to have capabilities on process management

and performance management (Lockstrom et al. 2010). In the projects of developing new

products, integration with manufacturing and marketing helps to improve the projects return on

investments (Swink and Song 2007). Supply chain integration has the moderating effect on the

relationship between product diversification and the performance and between international

market diversification and the performance. In other words, supply chain integration intensifies

the positive impact of product diversification on improving the performance. Supply chain

35
integration increases the positive effects of international market diversification on improving the

performance (Narasimhan and Kim 2002). In the context of joining the industry exchanges by

supply chain integration, investors in the stock markets react positively with announcements of

joining the industry exchanges. The market return shows abnormal returns, which added firms

values (Mitra and Singhal 2008).

In Frohlich and Westbrook (2001), supply chain integration was depicted to have three

dimensions: internal integration, customer integration and supplier integration. Supply chain

integration is divided by the supply chain integration of information and delivery in terms of

direction in flow: backward and forward. It was empirically confirmed that the greatest degree of

supply chain integration strongly relates with a higher level of performance (Frohlich and

Westbrook 2001). Likewise, in Braunscheidel and Suresh (2009), supply chain integration was

categorized into three ways: internal integration within the firms, external integration with key

suppliers, and external integration with key customers. Many factors affect internal supply chain

integration such as organizational culture and structure, informal and formal communications

among departments within the firm, facility layout, job rotation and cross functional teams

(Pagell 2004). This dissertation approached supply chain integration in terms of internal

integration of the focal firm, integration with suppliers.

Supply chain integration generates benefits on both suppliers and customer sides. On the

supplier side, greater information exchange with suppliers increased joint problem solving and

created efficient routines for accessing information (Eisenhardt and Martin 2000; Uzzi 1996).

Petersen et al. found that increased coordination with suppliers led to better design and financial

performance for both suppliers and buyers (Petersen, Handfield, and Ragatz 2005). Lawson et al.

(2008) confirmed that supplier integration promoted close personal relationships, closeness and

36
interaction as well as trust and respect with suppliers. In terms of customers, Vickery et al. (2003)

found that supply chain integration had beneficial impacts on customer service metrics. Because

integration with customers derives coordination with key customers, it is considered to be one of

the most important factors influencing competitive performance (Zhao et al. 2008).

2.7. Organizational Culture

In the field of supply chain and operations management, there is a gap in research on the

relationship between organizational culture and supply chain risk. This research examines how

organizational culture affects supply chain risk. A general definition of organizational culture is

an indoctrination of mind that distinguishes human members of one group from other groups

(Hofstede 1980). Organizational culture also refers to the beliefs and values which provide

foundations for management systems, practices as well as members behaviors (Denison 1990).

It is defined as a pattern of basic assumptionsinvented, discovered, or developed by a given

group as it learns to cope with its problems of external adaptation and internal integrationthat

has worked well enough to be considered valid and, therefore, to be taught to new members as

the correct way to perceive, think, and feel in relation to those problems (Schein 1985, p 9;

McDermott and Stock 1999, p 524). Obviously, organizational culture plays an important role in

affecting all aspects of organizations (Denison and Mishra 1995). Therefore, this research

anticipates that organizational cultures will influence supply chain risk and performance.

The study of Denison and Spreitzer (1991) described organizational culture in figure 1.

According to their research, organizational culture has two dimensions, represented by the

vertical and horizontal axes. At the high end of the vertical axis is flexibility, which can absorb

change in the organization, and at the low end of the vertical axis is control, which maintains

stability and order. At the left end of the horizontal axis is an internal focus, which maintains and

37
improves activities within organizations, and at the right end of the horizontal axis is an external

focus, which represents competition, adoption and interaction with the external environment.

As shown in Figure 1, these two dimensions form four major models in organizational

culture. Group culture is located in the quadrant of high flexibility and high internal focus. Its

characteristics include being open to change as well as concern and commitment to the internal

organization. Developmental culture is located in the quadrant of high flexibility and high

external focus. Its characteristics include being open to innovation, adaptation and support from

external organization. Hierarchical culture is located in the quadrant of high control and high

internal focus. Its characteristics include stability, control, measurement and information

management in internal organizations. Rational culture is located in the quadrant of high control

and high external focus. Its characteristics include accomplishment, productivity, direction and

decisiveness in external organizations (Denison and Spreitzer 1991).

38
 Figure 7. The Competing Values Framework of Organizational Culture adapted
from (Denison and Spreitzer 1991, p.12)

Schein (1986, 1992) categorized three cultural aspects: artifacts, espoused values and

basic underlying assumptions. Artifacts are behaviors that people can see, hear and feel when

people face unfamiliar culture. Artifacts are the focus of operations management research

regarding organizational culture since they are visible. Espoused values become visible as people

think that their considered beliefs are right leading to their behaviors. These basic underlying

assumptions are perceptions and feelings that become the basis of values and actions.

39
 Prior literature discussed market orientation and learning orientation as a cultural factor

in organizational performance and practices (Braunscheidel and Suresh 2009). Market

orientation focuses on creating behaviors to create the value for customers (Narver and Slater

1990). This research considers basic underlying assumptions as customer orientation because

supply managers perceptions and feelings based on their values and actions on serving

customers. It also focuses on espoused values of supply chain professionals to find out cultural

impact in their organizations. Because espoused values are regarded as the beliefs that members

of the organization hold, they are not visible (Nahm, Vonderembse, and Koufteros 2004). This

study investigates managers beliefs about supply chain.

2.8. Business Environment and Characteristics

Since the business environment is viewed as an important source of organizational contingencies,

Ward et al. (1995) established three dimensions of the business environment. First,

environmental munificence represents the extent to which the business environment supports

organizational growth (Ward et al. 1995). Second, environmental dynamism represents

unexpected changes in environmental circumstances (Dess and Beard 1984). This concept is

similar to high velocity environments, which refers to discontinuous change in demand,

competitors and technology (Bourgeois and Eisenhardt 1988). Third, environmental complexity

represents the range of heterogeneity and range of organization activities (Child 1972).

Business environment is also considered part of business uncertainty, which has four

dimensions (Kocabasoglu, Prahinski, and Klassen 2007). Consistent with previous research,

munificence has a meaning of external environments which can support firms growth in their

industry (Dess and Beard 1984). Dynamism refers to the extent of change in design, technology

and customer preference of business environment (Achrol and Stern 1988). Hostility represents

40
the degree of competition and external control in the industry (Miller 1987). Heterogeneity refers

to the level of dissimilarity in the industry (Aldrich 1979). This study follows four dimensions of

business environment: munificence, dynamism, hostility and heterogeneity and integrate four

dimensions on two aspects: dynamic and competition. Therefore, this research focuses on

dynamic and competitive markets that firms face with and consider dynamic and competitive

markets as business environments.

Previous research has generally neglected to empirically test the influence of business

characteristics on supply chain integration and performance (Van der Vaart and Van Donk 2008).

Fischer (1997) argued that the effectiveness of supply chain management depends on various

business characteristics such as product life cycle and process. Business conditions can be

measured by market dynamics, the availability of a substitute product, changes in technology,

market maturity and product life cycle. In their study, they found that supply chain performance

differs based on the business conditions of product type (Ramdas and Spekman 2000). Other

business conditions, such as decoupling point, delivery time, process type, volume and variety

characteristics and order-winners are applied to examine the impact on supply chain integration

(Van Donk and Van der Vaart 2004). This dissertation research considers manufacturing

approaches such as pull and push, industry, globalization and firm size as business characteristics.

Business characteristics are considered as an internal factor of the firms. Because business

environment and characteristics are neglected in supply chain management, this research

emphasizes considerations of business environment and characteristics as they apply to risk

mitigating strategy. Figure 8 describes a framework of business environment and characteristics

and supply chain risks.

41
Figure 8. A Framework of Business Environment and Characteristics

42
 3. Model Development
This section develops the basic conceptual model and a research model. In the first section, the

conceptual model is based on the analysis of the literature and a consideration of gaps in prior

research. This model is aimed at answering questions regarding the relationships between supply

chain management practices and supply chain risk as well as between supply chain risk and

performance. In the second section, a research framework is developed with full effects and

moderating effects. A research model with full effects describes a framework of supply chain

risk management which deals with supply chain practices, organizational culture, supply chain

risk and performance. A research model with moderating effects describes a framework of

supply chain risk management with an indirect impact from business environment and

characteristics.

3.1. The Conceptual Model

Previous literature has suggested many strategies for mitigating supply chain risk. Because this

study identifies risk from three sources: internal risk, internal supply chain network risk and

environmental risk, this section begins with operations strategies for mitigating internal risk and

operational risk. Lewis (2003) delineate cause, control and consequences of operational risk

According to his research, every decision made by managers in operations management can

involve both beneficial and detrimental risk factors. In order to reduce adverse consequences,

operations managers needed to control all processes, which is impossible. He pointed out that too

much control can lead to fewer competitive advantages.

There are various risks existing in supply chains. Previous literature presents many

strategies to deal with supply chain risk. The study of Braunscheidel and Suresh (2009) applied

43
supply chain agility approach in order to deal with supply chain disruptions. According to their

study, supply chain agility and its antecedents give organizations the ability to respond quickly to

changes and disruptions in the market. They emphasized that internal and external supply chain

integration and external flexibility, such as mix and volume flexibility, positively affect a firms

supply chain agility, which can be used as an important tactic for responding to disruptions in

supply chain (Braunscheidel and Suresh 2009).

The study of Chopra and Sodhi (2004) introduced seven strategies for mitigating risk:

increasing capacity, acquiring redundant suppliers, increasing responsiveness, increasing

inventory, increasing flexibility, pool or aggregate demand and increasing capability. In their

study, they emphasized the role of managers because they had to understand and recognize

supply chain risks and determine how to adopt mitigating strategies that would work for their

organizations.

The research of Christopher and Lee (2004) suggested three strategies for eliminating

spiraling supply chain risk. First, information in supply chain should be accurate and visible.

More importantly, it should be accessible by all members of the supply chain so that they can

plan appropriately. Second, they need to be quickly informed when something is out of control.

Supply chain members can react quickly to minimize the variations of demand and supply. Third,

they need to take corrective actions in order to recover from disruptions with help of contingency

plans.

Craighead et al. (2007) suggested two mitigation capabilities: recovery capability and

warning capability. Recovery capability refers to interactions between supply chain entities and

the coordination of supply chain resources that speed recovery from disruptions. Warning

capability refers to the interaction and coordination of supply chain resources in order to detect

44
potential disruptions and give out information to supply chain entities that could help mitigate

risk.

Christopher and Peck (2004) pointed out the importance of risk assessment prior to

setting up risk mitigating strategies A good understanding of supply chain network and supply

base strategy is necessary for firms managers to have in order to set up proper strategies. They

then emphasized the importance of supply chain collaboration, such as information sharing and

supply chain agility, in supply chain networks. Figure 9 describes various approaches to mitigate

the risk in the supply chain.

45
 Figure 9. Creating risk mitigating strategies in a supply chain adapted from (Chrsitoper
and Peck 2004, p.24)

The study of Faisal et al. (2006) listed eleven enablers of risk mitigation and established

an interpretive structural model for supply chain risk mitigation. In tier 1, collaborative

relationships, information sharing and trust among supply chain partners had interactive

relationships. Three enablers in tier 1 affected aligning incentives and revenue sharing policies

and knowledge about various types of risks in a supply chain in tier 2. Two enablers in tier 2

46
influenced cooperate social responsibility and strategic risk planning, which affected each other

in tier 3. Two enablers in tier 3 made an impact on risk sharing in the supply chain and

information security in the supply chain in tier 4. Two enablers in tier 4 affected continual risk

assessment analysis and agility in the supply chain in the final tier.

The research of Juttner et al. (2003) presented four mitigating strategies. The first

strategy is to avoid high risk by dropping specific products and geographical markets that had

unreliable supply. The second strategy is to utilize contingency plans for controlling various risk

sources such as increasing inventory and maintaining excessive capacity in production, handling,

storage and transportation. The third strategy is to inspire cooperation, such as information

sharing and joint plans by joint agreement, which can reduce uncertainty in production. The last

strategy is flexibility, such as postponement and multiple sourcing, which increase

responsiveness to supply chain disruptions.

The study of Kleindorefer and Saad (2005) introduced ten principles of risk mitigating

strategies. First, the focal firm must take care of itself before asking other supply chain entities

to mitigate supply chain risks, which requires internal integrations. Second, a diversification is

necessary toward sourcing options, facility locations, operational nodes and logistics by applying

a portfolio theory. Third, strong incentives and collaboration would help the weakest link in a

supply chain network in order to minimize the probability of supply chain disruptions. Fourth,

prevention is the best strategy so that the firms should avoid high supply chain vulnerability.

Fifth, supply chain entities should not seek for extreme leanness and efficiency, which increases

supply chain vulnerabilities. Sixth, organizations need to develop contingency plans in

preparation for supply chain disruptions. Seventh, collaborative information sharing is a key to

supply chain partners preparing for the disruptions. Eighth, firms need to emphasize risk

47
assessment since crisis management is not sufficient. Ninth, agility and flexibility in supply

chains are also essentials for supply chain risk management. Finally, emphasis on quality

management can reduce the supply chain risk.

Norman and Johnson (2004) used a case study of Ericsson in supply chain risk

management. Its approach was to collaborate with suppliers, as the company conducted open

discussions with suppliers in all aspects of supply chain risk. This proactive approach was able to

reduce the risk as well as consequences for Ericsson, although continuous implementation was

required.

Since this study focuses on the supply side of supply chain risk, risk mitigating strategies

relating to supply are discussed. Supply risk mitigating strategies have very similar approaches to

supply chain risk mitigating strategies because there are not clear distinctions between supply

risk and supply chain risk. The research result found that close buyer-supplier relationships,

sharing risk mitigation plans, direct access to suppliers and developing standards for the products

were key components of mitigating supply risks. Additional suggested solutions were to

establish multiple sources for suppliers, well-stocked supply lines and hold high safety stocks

(Zsidisin, Panelli, and Upton 2000). It is proposed that a low level of differentiation in suppliers

and that a low fixed number of suppliers tended to reduce the supply risk, as shown by the

example of Toyotas supply management (Choi and Krause 2006).

Johnson (2001) used the toy industry to suggest strategies for managing supply risk. First,

companies can adopt outsourcing and build flexible partners. Second, companies need to

maximize information usage to improve supply and demand matching. Third, companies can

utilize supplier diversification.

48
 Consistent with previous suggestions, Harland et al. (2003) also found similar supply risk

management strategies. First, promoting collaboration in supply chain networks is very crucial

for better supply chain network designs. Second, implementing supply network risk strategy is

very critical for the organizations as managers need to be educated about supply risks.

The research of Jiang et al. (2009) investigated the labor turnover ratio of suppliers and

supply risks. They suggested that buyers need to cooperate with suppliers to improve labor

conditions with proactive approaches through long-term supplier relationships, which would

reduce supply risks.

Previous literature has suggested many kinds of supply chain risk mitigating strategies.

Prior literatures suggest that supply chain practices are tools for performing these strategies

because supply chain practices promote collaboration, information sharing and flexibility.

Therefore, this study introduces supply chain practices such as strategic sourcing, e-business

technologies in the supply chain and supply chain integration to mitigate supply chain risks.

Strategic sourcing, e-business technologies in the supply chain and supply chain integration

contain all important elements to successfully mitigate supply chain risks among supply chain

practices. Details regarding those supply chain practices will be discussed in the next section of

the research model.

The relationship between supply chain risks and performance is a new emerging area for

researchers. Although previous literature indicated that supply chain glitches and delays in new

product introductions cause loss of shareholders value in the stock market (Hendricks and

Singhal 1997, 2003), there is little or no research about whether successful mitigating risk

strategies improves performance or not. More importantly, as far as it is known, there is no study

which investigates how supply chain risks perceived by supply and purchasing managers affect

49
the performance. This research also measures the performance in three different dimensions. In

order to investigate the impact of supply chain risks on the performance in various approaches,

financial, operational and supply chain performance would be measured. Thus, this research

examines how supply chain risks affect firms financial performance, operational performance

and supply chain performance. Figure 10 introduces the supply chain risk management

framework.

Figure 10. Supply chain risk management framework adapted from (Ritchie and Brindley
2007a, p 1401)

Successful risk mitigating strategies by Ericson helped to reduce its insurance cost, which

covered supply chain disruptions (Norrman and Jansson 2004). The study of Ritchie and

Brindley (2007b) developed a conceptual framework for a linkage between risk and performance

by applying case study approaches. They suggested causal pathways between risk sources and

performance as topics for future research, which could make meaningful contributions to

academia and practitioners. Therefore, this research also investigates the causal relationship

50
between risk sources and supply chain performance. Figure 11 describes a conceptual model for

this research, which is consists of supply chain practices, supply chain risks and performance.

Figure 11. The Conceptual Model

In addition, this research considers organizational culture and business environments.

Although cultural impact is considered a significant factor for supply chain risk management,

these cultural impacts have not been fully investigated yet. It is found that cultural factors had a

significant impact on supply chain agility and flexibility, which facilitate supply chain risk

mitigation (Ritchie and Brindley 2007b). The research of Braunscheidel and Suresh (2009) also

emphasized the importance of cultural impacts. In their study, they divided cultural aspects into

market orientation and learning orientation. Market orientation culture was defined as

organizational culture that could create superior values for customers while learning orientation

culture was defined as organizational culture that looked to learning for improvement and which

attempts to create value for an organization. These two kinds of organizational culture positively

influenced internal and external integration as well as external supply chain flexibility

51
(Braunscheidel and Suresh 2009). Unlike their studies, this study investigates how an underlying

level of beliefs in organizational culture affects managers perceptions toward supply chain risk

as well as its performance. In this conceptual model, organizational culture is regarded as an

internal factor for affecting supply chain risks.

In our conceptual model, business environments and characteristics are considered

because they are important factors that affect managers perception toward supply chain risk and

performance. In the supply chain risk management framework, environments and industry

characteristics are included as sources of risk (Ritchie and Brindley 2007b). Environmental

factors are critical in influencing strategic purchasing as well as buyer-supplier relationships in

the supply chain (Chen and Paulraj 2004). Business environments and uncertainties are applied

as antecedents to forward and reverse supply chain risk propensity, which presented the

significance of the business environment (Kocabasoglu, Prahinski, and Klassen 2007). In this

research, business environments are considered as an external factor for affecting supply chain

practices as well as supply chain risks. It has been criticized to neglected business conditions in

supply chain practices research (Van der Vaart and Van Donk 2008). In this research, business

characteristics are considered as an internal factor of influencing the relationship between supply

chain practices such as strategic sourcing, e-business technologies in the supply chain and supply

chain integration and supply chain risks. Therefore, this research examines the role of business

environment and characteristics in supply chain practices, supply chain risk and performance.

More details regarding organizational culture will be discussed in the next section.

52
Figure 12. The Full Conceptual Model

53
3.2. The Research Model

Risk mitigating strategies emphasize the significance of information sharing, supplier

development, flexibility and internal coordination. One definition of strategic sourcing addressed

collaboration with suppliers, as it was defined as the use of supplier capabilities in establishing

incorporated relationships in the process of design, engineering and manufacturing to achieve

strategic objectives (Narasimhan and Das 1999). The definition also mentioned that strategic

sourcing should consider demand flexibility and systematic risk, as they defined it as a

framework for assisting the buying decision-making process while considering the importance of

these factors: competitive advantage and demand flexibility as a primary factor and process

capability, process maturity and systematic risk as a secondary factor (Sislian and Satir 2000). It

has been pointed out the significance of managing supplier relationships as they defined it, a

systematic and comprehensive process of acquiring inputs as well as managing supplier relations

in a manner that achieves value in obtaining the organizations long term objectives (Smeltzer,

Manship, and Rossetti 2003, p. 16).

Based on these definitions, strategic sourcing has two main aspects and four dimensions.

The role of purchasing within the firm represents two dimensions, which are a strategic role on

the status of purchasing and effective internal coordination of purchasing with other functions of

the firm. The building of effective relationships represents two dimensions, which are

information sharing with suppliers and development of suppliers (Kocabasoglu and Suresh 2006).

Strategic sourcing enables buyers to develop relationships with suppliers through information

sharing as well as internal integration. This study anticipates strategic sourcing to affect supply

chain risks negatively. Therefore, this study proposes hypothesis 1:

H1: Strategic sourcing mitigates supply chain risks.

54
 Many studies indicate that E-business technologies provide organizations the benefits of

cost savings on transactions, inventory reduction, improvement on products and establishment of

communication networks between buyer and supplier relationships (Min and Galle 1999; Heizer

and Render 2000; Deeter-Schmelz et al. 2001). E-business can also promote effective supply

chain management decision-making by enabling the collection and analysis of real time

information, which revitalizes collaboration between firms (Vakharia 2002). E-business

technologies promote better firm management of information and supplier knowledge, better

understanding of weaknesses, better control of supplier operations, and they decrease

procurement mistakes, optimize inventory stock and increase the number of products by main

suppliers (Muffatto and Payaro 2004). One of the benefits of e-business technologies is that it

gives purchasers the capability of increasing the speed, quantity and quality of information

processing, especially with international suppliers (Essig and Arnold 2001). E-business

technologies boosted integration with suppliers and customers (Devaraj, Krajewski, and Wei

2007). Based on these findings, it can be concluded that e-business technologies helps supply

chain entities share their real-time information, integrate with each other and manage

information better, thus increasing flexibility. This study anticipates that e-business technologies

will reduce supply chain risks. Therefore, this study proposes hypothesis 2:

H2: E-business technologies mitigate supply chain risks.

The drivers of supply chain integration are the information technology revolution,

increased competition in markets and a new type of inter-organizational relationship (Handfield

and Nichols 1999). As supply chain networks become increasingly complex and the level of

competitions in the global market becomes extremely competitive, the implementation of supply

55
chain integration becomes critical to mitigate supply chain risks. The basic elements of supply

chain integration are cooperation, collaboration, information sharing, trust, partnership,

information technology sharing, and managing integrated processes in the supply chain

(Akkermans, Bogerd, and Vos 1999). Power also identified five aspects of supply chain

integration: information flows, physical logistics, partnerships, alliance and cooperation(Power

2005). It has been pointed out that information technology enables supply chain entities to share

all information, resulting in minimizing the inventory level and improving the partnerships in the

supply chain networks.

While supply chain integration might provide all solutions for mitigating supply chain

risk, the result is found that internal and external integration positively affect supply chain agility,

which helped to mitigate supply chain risk (Braunscheidel and Suresh 2009). It is empirically

confirmed that integration mitigated supply chain process variability in high demand,

unpredictable circumstances (Germain, Claycomb, and Droge 2008). This study anticipates

supply chain integration will reduce supply chain risk. This leads to hypothesis 3:

H3: Supply chain integration mitigates supply chain risks.

The implementation of supply chain practices such as strategic sourcing, e-business

technologies and supply chain integration are influenced by organizational cultures. Individuals

in organizations who have different beliefs and values will adopt these practices differently. It

has been proposed that organizational cultures are also associated with the benefits of magnitude,

flexibility and speed of response obtained by implementing advanced manufacturing technology

(Zammuto and O'Connor 1992). The study of McDermott and Stock (1999) empirically tested

Zammuto and OConnors propositions. They found that organizational culture and advanced

56
manufacturing technology implementation are closely associated with each other. Their research

results showed that group culture correlated positively with advanced manufacturing technology

outcomes but that development culture negatively correlated with advanced manufacturing

technology.

In addition, externally oriented culture positively correlated with competitive benefits

(McDermott and Stock 1999). From a knowledge management perspective, the organizational

members values influence knowledge management practices (Alavi, Kayworth, and Leidner

2005-6). Organizational cultures had a significant relationship with leadership, strategic planning,

customer focus, information analysis, people and process management in total quality

management practices (Prajogo and McDermott 2005). Beliefs in the value of investment in

production, group work, external orientation, control and integration are associated with time-

based manufacturing practices (Nahm, Vonderembse, and Koufteros 2004).

Organizational culture affects supply chain and other manufacturing practices because it

makes an impact on managers perception as well as behaviors toward supply chain and other

manufacturing practices. Thus, this research assumes that the organizational culture influences

supply and purchasing managers attitude toward supply chain risks. Their attitudes relating to

supply chain risks are very crucial factors on how they perceive and react toward supply chain

risks. Therefore, this study proposes hypothesis 4:

H4: Organizational cultures are associated with supply chain risks.

In supply chain management, business environment and characteristics are often ignored,

although they have received some attention recently. Business environment is a very important

factor and affects performance both directly and indirectly. Business environment influenced

57
manufacturing flexibility and the role of manufacturing mangers in strategic decision-making

(Swamidass and Newell 1987). The three dimensions of environment, which are environmental

munificence, environmental dynamism and environmental complexity, made an impact on

performance, although the effect of environmental complexity was neglected (Ward et al. 1995).

Figure 13 describes the impact of business environments on supply chain practices as well as the

performance.

Figure 13. Impact of business environments adapted from (Ward et, al. 1995, p101)

Three environmental factors, competitive intensity, technological change and customer

type, were examined in terms of their moderating effect on the relationship between supply chain

relationship quality and supply chain performance (Fynes, De Burca, and Voss 2005). The

impact of business environment on strategic sourcing and buyer-supplier relationships was also

examined (Chen and Paulraj 2004). The relationship between business environments exhibiting

munificence, dynamism, hostility and heterogeneity and forward and reverser supply chain risk

propensity has been investigated (Kocabasoglu, Prahinski, and Klassen 2007).

Business environments are impossible for managers to control. However, they can adjust

and adapt to the business environments that they are facing with. Strategic sourcing, e-business

technologies and supply chain integration are very useful practices to have competitive

58
advantages in the dynamic and competitive business environments against competitors.

Therefore, this research reflects business environments on supply chain practices as well as the

relationship between supply chain practices and supply chain risks.

The current research focuses on the four dimensions of business environment:

munificence, dynamism, hostility and heterogeneity and investigates both their direct and

indirect impact on supply chain risk. Integrating four dimensions of business environments, this

research focuses on dynamic and competitive market conditions that firms deal with. Business

environments refer to the market condition that the firms are facing with. Therefore, this study

proposes hypothesis 5:

H5a: Dynamic and competitive business environments make a direct impact on strategic
sourcing.
H5b: Dynamic and competitive business environments have a moderating impact on the
relationship between strategic sourcing and supply chain risk.
H5c: Dynamic and competitive business environments make a direct impact on e-
business technologies.
H5d: Dynamic and competitive business environments have a moderating impact on the
relationship between e-business technologies and supply chain risk.
H5e: Dynamic and competitive business environments make a direct impact on supply
chain integration.
H5f: Dynamic and competitive business environments have a moderating impact on the
relationship between supply chain integration and supply chain risks.
H5g: Dynamic and competitive business environments make a direct impact on
organizational culture.
H5h: Dynamic and competitive business environments have a moderating impact on the
relationship between organizational culture and supply chain risks.
H5i: Dynamic and competitive business environments make a direct impact on supply
chain risks.

59
 Previous survey-research based studies have disregarded how business conditions affect

the relationship between supply chain integration and performance (Van der Vaart and Van

Donk 2008). Basically, it is argued that an effectiveness of supply chain management depends on

various business conditions such as the type of product, including life cycle and process (Fisher

1997). Business conditions are also measured by market dynamics, an availability of substitute

product, change in technology, market maturity and product life cycle, with product being

divided into two groups, functional and innovative products, in order to investigate the impact on

supply chain performance (Ramdas and Spekman 2000). Other business conditions, such as

decoupling point, delivery time, process type, volume and variety characteristics and order-

winners, are applied to examine the impact on integration (Van Donk and Van der Vaart 2004).

Adding to business conditions and environment, this study includes the firm characteristic of size.

Figure 14 describes various business conditions.

Figure 14. Business conditions in a supply chain adapted from (Van der Vaart and Van
Donk 2006, p. 11)

The business characteristics are very important factors for supply chain practices and

supply chain risks because there are a lot of possibilities that business characteristics can be a

60
source of supply chain risks or a useful tool of mitigating the supply chain risks. Firm size is

very critical because if firm size is greater, the firm has a capability of utilizing their resources to

mitigate the supply chain risks. On the other hand, if firm size is small, the firms have the

flexibility to react with supply chain risks quickly.

Thus, this research investigates the firm size as one of business characteristics. In

addition, this research examines how push and pull approach in manufacturing affect the

relationship between supply chain practices and supply chain risks. Since pull approach is

following the demand request from the markets unlike push approach, this research assume that

the manufacturing approach will make a difference on the relationship between supply chain

risks and supply chain practices.

This study also makes an interesting point about how global suppliers affect the

relationship between the supply chain risks and supply chain practices. Since there is a long

distance and time difference between suppliers and buyers, it will generate many problems on

communication, quality management and flexibility toward supply chain disruptions. Thus, this

research examines the suppliers locations. Adding to suppliers location, this research also

investigated the market locations. The comparisons of the research model in this study will

depend on manufacturing approach, such as push and pull types, industry types, globalization,

and firm size. Therefore, this study proposes hypothesis 6:

H6: The relationship between supply chain practices and supply chain risks will be
differentiated depending upon the organizations business characteristics.

The association between supply chain risks and performance is an area that has not yet

been actively researched. Previous literature empirically found that supply chain glitches and

delays in new product introductions made shareholders lose value in the stock market (Hendricks

61
and Singhal 1997, 2003). However, there is no empirical research on how successfully mitigating

risk strategies influence performance. As far as it is known, there is no empirical research on

investigating the relationship between supply chain risks and the performance.

It is important for supply and purchasing managers to recognize how supply chain risks

affect on the performance. Using Ericssons case study, successful mitigating risk strategies lead

to reducing insurance costs that cover supply chain disruptions since they do not have a direct

impact on the performance (Norrman and Jansson 2004). A conceptual framework regarding risk

and performance has been established and it suggested a causal relationship between risk sources

and performance (Ritchie and Brindley 2007b). This study proposes that the supply chain risks

have a negative relationship with the performance.

Prior literatures measured the performance in various ways. The performance is measured

by return on assets or investments, market shares increase and cost savings. In order to show

different aspects of the performance and how the supply chain risks affect multi dimensions of

the performance, this study uses three dimensions of the performance: financial, operational and

supply chain performance. Therefore, this research proposes hypothesis 7:

H7: Mitigating supply chain risks through supply chain practices influences performance.

Figure 15 describes the research model with full effects and figure 16 described the

research model with moderating effects. Table 4 and 5 summarizes hypotheses for this research.

62
 Table 4. Summary of Hypotheses on Full Effects

Full Effects
H1 Strategic sourcing mitigates supply chain risks.
H2 E-business technologies mitigate supply chain risks.
H3 Supply chain integration mitigates supply chain risks.
H4 Organizational cultures are associated with supply chain risks.
H5a Dynamic and competitive business environments make a direct impact on strategic
sourcing.
H5c Dynamic and competitive business environments make a direct impact on e-business
technologies.
H5e Dynamic and competitive business environments make a direct impact on supply
chain integration.
H5g Dynamic and competitive business environments make a direct impact on
organizational culture.
H5i Dynamic and competitive business environments make a direct impact on supply
chain risks.
H7 Mitigating supply chain risks through supply chain practices influences the
performance.

63
 Table 5. Summary of Hypotheses on Moderating Effects

Moderating Effects
H5b Dynamic and competitive business environments have a moderating impact on the
relationship between strategic sourcing and supply chain risks.
H5d Dynamic and competitive business environments have a moderating impact on the
relationship between e-business technologies and supply chain risks.
H5f Dynamic and competitive business environments have a moderating impact on the
relationship between supply chain integration and supply chain risks.
H5h Dynamic and competitive business environments have a moderating impact between
organizational culture and supply chain risks.
H6 The relationship between supply chain practices and supply chain risks will be
differentiated depending upon the organizations business characteristics.

64
Figure 15. A Research Model with Full Effects

65
Figure 16. A Research Model with Moderating Effects

66
 4. Research Methodology

The following section describes the research methodology to be utilized in this study. This

section discusses in detail the processes of developing the survey and measurements. This

section begins with the survey methodology, instrument development and measurements, the

pilot study, the full scale study and sample and partial least squares.

4.1. The Survey Methodology

While the importance of field-based research is recognized, survey research is a well-known

method for studying organizational problems in the production and operations management field

(Malhotra and Grover 1998). From 1992, survey research in the operations management area

was increased by 5.1% (Rungtusanatham et al. 2003). Previous literature points out the three

main ways of utilizing survey research. First, surveys are conducted to generate descriptions of

particular aspects of a sample population (Glock 1967). Second, information is gathered by

letting people answer predefined questions. Finally, although the information is collected from a

sample population, findings are generalized to the larger population (Pinsonneault and Kraemer

1993).

On the other hand, survey research is not free of problems. Pinsonneault and Kraemer

(1993) encountered problems with the survey research methodology, which they summarized.

First, the survey research method was used only when the research design required multiple

methods. Second, while the samples were supposed to be random, the sampling procedures were

unsystematic and often inadequate. Third, the survey research method had very low response

rates. Fourth, survey research showed weak linkages between units of analysis and respondents,

which should be consistent. Finally, the researchers relied too much on cross-sectional surveys

67
when they should conduct longitudinal surveys to validate their research design as well as

findings (Pinsonneault and Kraemer 1993). Although survey research is a very useful method,

researchers should carefully apply it depending on the purpose of their research, i.e., exploration,

description and explanation. The research of Malhotra and Grover (1998) summarized four

distinctive methods of survey research: first, the collection of information by asking respondents

questions in a structured format; second, a quantitative method that requires standardization of

the relationship between variables; third, using a sample for generalization; and finally, survey

research that aims at contributing to theory development, such as empirically validating a theory.

Their research also pointed out cumulative errors that may occur with the survey research

method:

1. Measurement error: multi-items, content validity, field-based pretesting, reliability,

construct validity, pilot test, confirmatory method

2. Sampling error: definition and justification of sample frame, random sample, the

response rate, non-response bias

3. Internal validity error: attempts to establish internal validity of the findings

4. Statistical conclusion error: sufficient statistical power to reduce statistical conclusion

error

In order to avoid these errors, this research attempts to ensure a survey research method of high

quality by following the steps outlined in figure 17.

68
 Instrument Development
Literature Review
Interview with Professionals
Feedback from Experts

Pilot Study
Reliability
Validity
Factor Analysis

Full-Scale Study
Measurement Model
Reliability
Validity
Confirmatory Factor Analysis

Full-Scale Study
Structural Model
Fit Indexes
Path Coefficients
Alternative Models

Figure
Figure17.
8. Steps
Steps for
for Developing
MeasurementMeasurements
Developments

4.2. Instrument Development and Measurements

This study develops instruments for survey measurements based on previous literature. Since it

does not utilize newly created constructs, it is expected that all constructs have acceptably

reliable and valid survey measurements. These measurements applied in firm levels. Tables 6

through 19 describe the details of the survey measurements for this study. The entirety of the

survey measurements are attached in an appendix.

69
 Table 6. Measurements for Strategic Sourcing

Constructs Measurements
Construct Dimension Source Items Scale
Strategic Purchasing (Carr and 1. Purchasing is included in the 1=Strongly
Sourcing Smeltzer firms strategic planning Disagree
1997) process. 7=Strongly
(Chen, 2. The purchasing function has Agree
Paulraj, and good knowledge of the firms
Lado 2004) strategic goals.
(Kocabasoglu 3. Purchasing performance is
and Suresh measured in terms of its
2006) contributions to the firms
success.
4. The purchasing professionals
development focuses on
elements of the competitive
strategy.
5. The purchasing department
plays an integrative role in the
purchasing function.

70
 Table 7. Measurements for extensive use of e-business technologies

Constructs Measurements
Construct Dimension Source Items Scale
E-Business Extensive (Johnson et 1. Electronic data interchange 1 = None
Technologies Use al. 2007) (EDI) 7=
2. Real-time electronic linkage Extensive
with suppliers
3. Electronic/online purchase order
system
4. Online reverse auction/e-
auction.
5. Public & Industry E-market
places
6. Private B2B exchange/Extranet

71
 Table 8. Measurement for intensity of e-business technologies adoption

Constructs Measurements
Construct Dimension Source Items Scale
E-Business Intensity of (Menon et al. 1. Coordinate new product and 1=Strongly
Technologies E-Business 1999; Wu, service development teams. Disagree
technologies Mahajan, and 2. Provide customers with 7=Strongly
adoption Balasubramanian general information about Agree
2003; Subramani our SBU (e.g., via Web sites
2004) and information boards).
3. Send customers regular
updates about new products
and other developments
within our SBU (e.g., via e-
mail).
4. Provide after-sales service
to our customers (e.g., via
online information about
installation and
troubleshooting).
5. Provide information in
response to consumer
questions or requests (e.g.,
via searchable online
databases).
6. Send suppliers regular
updates about new product
and service plans and
developments within our
SBU (e.g., via e-mail).
7. Provide specific online
information about product
and service specifications
that our suppliers must
meet.
8. Share product and inventory
planning information with
our suppliers.
9. Permit suppliers to directly
link up to our databases
(e.g., via Enterprise
Resource Planning/ERP
systems).
10. Perform financial and
managerial accounting.
11. Provide reimbursements and
manage payrolls.

72
 Constructs Measurements
Construct Dimension Source Items Scale
12. Manage employee benefits
(e.g., life and medical
insurance).
13. Accept payments
electronically from
customers (e.g., online
payment).
14. Allow customers to track
and inquire about their
orders electronically.
15. Search and locate potential
suppliers online.
16. Place and track orders with
suppliers electronically
(e.g., online order
placement).
17. Allow suppliers to submit
bids online.
18. Use online marketplaces to
source supplies (e.g.,
Ariba.com,
Commerceone.com)

73
 Table 9. Measurements for e-business technology adoption in the supply chain

Constructs Measurements
Construct Dimension Source Items Scale
E-Business E-Business (Menon et al. 1. Order Processing, invoicing 1=Strongly
Technologies technologies 1999; Wu, and settling accounts Disagree
adoption in Mahajan, and 2. Exchange of shipment and 7=Strongly
the supply Balasubramanian delivery information Agree
chain 2003; Subramani 3. Managing warehouse stock
2004) and inventories
4. Understanding trends in
sales and customer
preferences with your
suppliers
5. Integrating your functions
(e.g. design and
manufacturing) with
suppliers
6. Sharing your firms
expertise to create new
business opportunities with
your suppliers

74
 Table 10. Measurements for Internal Integration

Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Internal (Pagell 2004; 1. We use cross functional teams 1=Strongly
Integration Integration Jaworski and to solve problems. Disagree
Kohli 1993; 2. Internal management 7=Strongly
communicates frequently about
Narasimhan goals & priorities. Agree
and Kim 3. Our firm does not encourage
2002; openness and teamwork
Braunscheidel 4. Formal meetings are routinely
and Suresh scheduled among various
2009) departments.
5. When problems or
opportunities arise, informal,
face-to-face meetings never
occur.

75
 Table 11. Measurements for Integration with Customers

Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Integration (Frohlich and 1. Our customers give us 1=Strongly
Integration with Westbrook feedback on quality and Disagree
customers 2001; Shah delivery performance. 7=Strongly
2. Customers are actively
2002; involved in our new product Agree
Narasimhan development process.
and Kim 3. Customers frequently share
2002; demand information with our
Braunscheidel firm.
and Suresh 4. Our production plans are
2009) shared with our customers.
5. Our inventory levels are shared
with our customers

76
 Table 12. Measurements for Integration with Suppliers

Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Integration (Frohlich and 1. Our inventory levels are shared 1=Strongly
Integration with Westbrook with our suppliers. Disagree
suppliers 2001; Shah 2. Our key suppliers deliver to 7=Strongly
our plant in a JIT basis.
2002; 3. We have high corporate level Agree
Christopher communication on important
2000; van issues with key suppliers.
Hoek, 4. Sharing of information via the
Harrison, and Internet is important to our
Christopher supply chain.
2001; 5. We work with our suppliers to
seamlessly integrate our inter-
Narasimhan firm processes
and Kim 6. Our supply chain employs
2002; rapid response initiatives.
Braunscheidel 7. We jointly develop new
and Suresh products/services with our
2009) suppliers.

77
 Table 13. Measurements for Organizational Culture

Constructs Measurements
Construct Dimension Source Items Scale
Organizational Espoused (Taylor and 1. We want to encourage our 1=Strongly
Culture Values: Bowers 1972; workers to work in innovative Disagree
Beliefs Sakakibara et ways. 7=Strongly
al. 1997; 2. We want to increase creativity Agree
Bates et al. among our workers.
1995; Nahm, 3. Functional departments
Vonderembse, should work together as a
and Koufteros team.
4. Employees from one
2004) department should work with
employees from other
departments.
5. Employees should work
together as a team.
6. Departmental managers
should make decisions that
benefit the whole company.
7. When making decisions, the
overall effects of a decision
should be considered.
8. Decisions should be based on
overall company objectives.
9. Managers should take tight
control upon their
subordinates.
10. Command and control is the
best way to manage.
11. Workers should simply follow
the directions given by their
managers.
12. Our suppliers can be part of
our success in our business.
13. Our suppliers are strategic
partners in building up our
competitive capabilities.
14. The best suppliers are the
ones who enable us to provide
value to customers.

78
 Table 14. Measurements for Supply Chain Risk

Constructs Measurements
Construct Dimension Source Items Scale
Supply Chain Probability (Slovic 1. It is highly unlikely that we 1=Extremely
Risk of Supply 1987; Yates will experience an interruption low
Disruption and Stone in the supplies from our 7=Extremely
suppliers.
Risk, 1992a, 2. There is a high probability that high
Magnitude 1992b; our suppliers will fail to
of Supply Shapira provide supplies to us.
Disruption 1995; 3. We worry that suppliers may
Risk, Zsidisin not provide suppliers as
Overall 2003a; Ellis, specified within out purchase
Supply Henry, and agreement.
4. An interruption in the supplies
Disruption Shockley from our suppliers would have
Risk 2010) severe negative financial
consequences for our business.
5. Suppliers inability to provide
supplies would jeopardize our
business performance
Information system
sophistication.
6. We would incur significant
costs and/or losses in revenue if
our suppliers failed to provide
supplies Legal liabilities.
7. Overall, the supplies from our
suppliers are characterized by
low levels of risk.

79
 Table 15. Measurements for Financial Performance

Constructs Measurements
Construct Dimension Source Items Scale
Performance Financial (Miller 1991; 1. Average Return on investment 1 = Well
Germain, 2. Average Return on Assets Below
Claycomb, 3. Average Profit Industry
and Droge 4. Increase in Market Share Average
2008; Yeung 7= Well
2008) Above
Industry
Average

80
 Table 16. Measurements for Operational Performance

Constructs Measurements
Construct Dimension Source Items Scale
Performance Operational (Vickery, 1. Percent defects during 1 = Well
Droge, and production Below
Markland 2. Delivery reliability Industry
1993; Miller 3. Production & Inventory costs Average
and Roth 4. Production lead time 7= Well
1994; Above
Devaraj, Industry
Hollingworth, Average
and
Schroeder
2004;
Devaraj,
Krajewski,
and Wei
2007)

81
 Table 17. Measurements for Supply Chain Performance

Constructs Measurements
Construct Dimension Source Items Scale
Performance Supply (Beamon 1. Ability to respond to and 1 = Well
Chain 1999; Sezen accommodate periods of poor Below
2008) supplier performance Industry
2. Ability to respond to and
accommodate new products, Average
New markets, or new 7= Well
competitors Above
3. Customer response time Industry
4. Total cost of distribution, Average
including transportation and
handling costs
5. Total cost of manufacturing,
including labor, maintenance
and re-work costs

82
 Table 18. Measurements for Dynamic Business Environment

Constructs Measurements
Construct Dimension Source Items Scale
Business Dynamism (Kocabasoglu, 1. Rate at which products and 1 = Slow
Envrionments Prahinski, and services become outdated 7 = Rapid
Klassen 2007; 2. Rate of introduction of new
Miller 1987; products and services
Ward et al. 3. Rate of change in tastes and
1995) preferences of customers in
your industry
Heterogeneity (Dess and 1. In your industry, success 1=Strongly
Beard 1984; depends on providing to a Disagree
Achrol and large range of consumer 7=Strongly
Stern 1988; tastes Agree
Miller 1987; 2. your primary challenge in
Kocabasoglu, production is to customize
Prahinski, and the product for different
Klassen 2007) tastes
3. your market has many
different customer segments

83
 Table 19. Measurements for Competitive Business Environments

Constructs Measurements
Construct Dimension Source Items Scale
Business Munificence (Dess and 1. Economic growth in your 1=
Environment Beard 1984; market Dramatically
Ward et al. 2. Growth in consumer demand decreased
1995; within the industry 7=
Kocabasoglu, 3. Growth in industry sales Dramatically
Prahinski, increased
and Klassen
2007)
Hostility (Ward et al. 1. Market activities of your key 1=Strongly
1995; Miller competitors have become less Disagree
1987; predictable 7=Strongly
Kocabasoglu, 2. Market activities of your key Agree
Prahinski, competitors have become
and Klassen more hostile
2007) 3. Market activities of your key
competitors now affect your
plant in more ways than in
the past

4.3. The Pilot Study

A pilot study is considered an important step in empirical research because it can help increase

the quality of the survey. If the pilot study is properly conducted with small samples, researchers

can correct any problems in the development stage of the full scale survey. More importantly,

researchers can verify the constructs measurements.

The survey was reviewed by a group of experts in the field of supply chain management.

They went over the survey and provided feedback on how well the survey items were measured.

Their recommendations were incorporated and the instruments were modified based on their

feedback by rewording items to increase clarity and make them easier to answer. The most

common criticism was that the survey was not easy to answer.

84
 A total of 32 responses were collected for the pilot study. The respondents were supply

managers, purchasing managers, vice presidents and purchasing and supply management

executives of manufacturing companies located in the mid-western United States. The

respondents were in high enough positions that they were able to answer all questions in the

survey. Based on the results of Cronbachs , the survey instruments were removed. Items with a

value of less than 0.60, the acceptance level of Cronbachs , have been removed. Table 20

describes the eliminated survey items.

Table 20. Deleted Survey Items in the Pilot Study

Scale Cronbachs Alpha

Business Environments
The rate of process obsolescence is high in our 0.48
industry
The production technology changes frequently 0.54
and sufficiently
E-Business Technology
Electronic/online supplier catalogue 0.35
Online bidding / tendering 0.48
Supply Chain Performance
Average profit growth 0.52
Increase in sales volume 0.50
Delivery speed of products and service 0.41
Order fill rate 0.58
Total cost of resources used 0.59

85
4.4. The Full Scale Study and Sample

The full-scale study required a two-step process. The first step identified the target population

and selected an appropriate sample. The target population for this survey is executives in US

firms. First, institutions, including the National Association of Purchasing Management

(NAPM)-Buffalo, the Association for Operations Management (APICS)-Buffalo and the Institute

of Supply Management-Pittsburgh, were contacted and sent an e-mail announcement requesting

their participation in the survey, which helped to increase the response rate.

Second, supply and purchasing managers in companies located on the West Coast, in the

Mid West and Eastern US were contacted and sent the e-mail announcement to encourage

completion of the survey. These techniques were executed to increase the response rate (Frohlich

2002).

This research utilized a web version of the survey because for the following reasons. Since

survey respondents are geographically dispersed, cost and time were saved. Compared to the

traditional mail survey, a web survey generated a better response rate and item completion rate.

The measurements on the web survey items are the same as those on paper surveys (Klassen and

Jacobs 2001; Boyer et al. 2002). After collecting all surveys, this research established

measurement models as well as structural models by using partial least squares.

4.5. Partial Least Squares Methodology

This research applied the partial least squares (PLS) technique of structural equation modeling

(SEM) to establish measurement models and investigate the structural model. There are two

main reasons for using PLS. PLS, a variance-based approach to structural equation modeling,

can be used to specify both the relationships among the constructs as well as a measurement of

the constructs (Wold, 1989). Compared to LISREL or AMOS, PLS has the advantage of not

86
making any assumptions about population or scale measurement while working with no

distributional assumption (Haenlein and Kaplan, 2004). The other advantage of PLS is that it is

less restrictive with regard to a sample size with unbiased estimates (Falk and Miller, 1992).

Using partial least squares, convergent and discriminant validity as well as reliability were

examined. In addition, confirmatory factor analysis was also conducted.

The partial least squares have other advantage toward LISREL or AMOS. The PLS does

not require strong theoretical backgrounds. In addition, it only requires the structurally linking

among the constructs to have the measurement and structural models. More importantly, the

constructs need to be formative measurement items (Cenfetelli and Bassellier 2009). Thus,

although this research is based on the dynamic capability theory, the PLS can be utilized to

investigate the relationship among the constructs.

As it is mentioned above, PLS has less restrictions on the sample size. However, the

minimum requirements exist for the PLS data analysis. There is a rule of thumb that ten cases are

necessary per indicators (Marcoulides, Chin, and Saunders 2009). Therefore, this research does

not have enough sample size to conduct the data analysis with LISREL or AMOS. However, it

has enough sample size with PLS for the data analysis.

This research has more reasons for applying the PLS. This research has constructs which

require for multi-dimensions such as the performance which has three dimensions: financial,

operational and supply chain performance. The PLS modeling is more suitable to use for more

complex models which includes the multi-dimensions because PLS can establish high orders for

the performance, multi-dimension constructs. More importantly, the PLS is more appropriate to

examine the moderating effects (Wetzels, Odekerken-Schroder, and van Oppen 2009). Therefore,

this research applied the PLS for data analysis.

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 Another important reason for using the PLS is the sub group analysis for investigating the

moderating effect of business characteristics on the relationship between supply chain practices

and supply chain risks. Basically, this research compares the path coefficients between groups.

The PLS is a proper methodology for this research because of the sample size. Because this

research does not have enough sample size for both groups, it is appropriate to use the PLS in

order to capture the difference between both groups. If this research has enough sample size for

both groups, it should use the LISREL or AMOS for sub group analysis (Qureshi and Compeau

2009). Because of all above reasons, this research uses the PLS for data analysis.

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 5. Data Analysis and Findings

This chapter provides the results of data analyses. Section 5.1 provides a profile of the survey

participants in this research. Section 5.2 contains the assessment of the measurement scales,

which establishes the reliability and validity of the survey instruments in this research. Section

5.3 provides analysis of the structural model for generating the results for full and moderating

effects.

5.1. Profile of Respondents

This research focuses on supply chain risk management. The respondents are composed of

supply and purchasing management executives from manufacturing companies located in the

US. They are members of NAPM-Buffalo, APICS-Buffalo, ISM-Pittsburgh and ISM members in

the Eastern and Western U.S. The respondents were mainly from manufacturing industries with

SIC codes ranging from 20 to 39.

Specifically, the respondents were from industries in SIC code 25, furniture and fixtures

(8 firms), code 28, chemicals and allied products (10 firms), code 30, rubber and plastic products

(2 firms), code 32, stone, clay, glass and concrete products (3 firms), code 33, primary metal

products (15 firms), code 34, fabricated metal products (14 firms), code 35, industrial machinery

and computing equipment (41 firms), code 36, electronic and electrical equipment and

components (37 firms), code 37, transportation and machinery items (11 firms), and code 38,

measuring, analyzing and controlling instruments (9 firms). Table 21 describes the industries

from which the respondents were selected.

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 Table 21. Industry Code for Respondents Firms
Industry (Industry Code) Frequency
furniture and fixtures (25) 8
chemicals and allied products (28) 10
rubber and plastic products (30) 2
stone, clay, glass and concrete products (32) 3
primary metal products (33) 15
fabricated metal products (34) 14
industrial machinery and computing equipment
41
(35)
electronic and electrical equipment and
37
components (36)
transportation and machinery items (37) 11
measuring, analyzing and controlling
9
instruments (38)
missing 2
Total 152

Because this research investigates a moderating impact on the relationship between

supply chain practices and supply chain risk, it is very important to categorize the firms

depending on the business characteristics, manufacturing approach, suppliers and market

location and firm size. Table 22 describes business characteristics of the samples, manufacturing

approach, suppliers and market location and firm size.

The e-mail announcement of the survey was sent to members of NAPM-Buffalo, APICS-

Buffalo, ISM-Pittsburgh and other ISM members, a total of 622 members. Due to incentives for

participants, only one week was used for the window of completing the survey. One hundred

fifty-nine members participated in the survey, making the response rate 25.56 %, although seven

members did not complete the survey. Thus, a total of one hundred fifty-two surveys were used

for data analysis.

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 Table 22. Business Characteristics of Respondent Firms
Manufacturing Approach
Pull Push
85 61
Suppliers Location
US Global
70 77
Market Location
US Global
62 84
Firm Size by Annual Sales
Less than $10 million 4
$10 to $50 million 29
$51 to $100 million 24
$101 to $ 250 million 18
$251 to $500 million 22
$501 to $1 billion 20
Over $1 billion 31

This study conducts various response bias tests. Because the respondents came from all

over the US, this study has to ensure that the responses do not have any differences depending on

their companies locations. The responses were collected from Buffalo, Pittsburgh, East coast

and the West coast areas. Therefore, this study conducted a one factor ANOVA test to compare

the mean difference test among their responses. The test shows no statistical difference of means

on each measurement items as it found no significant differences across the different regions.

The collecting period was only two weeks period as it is assumed that there would be no

bias between early and late responders. However, in order to increase the reliability as well as the

validity of this research, it also conducted a mean different test between early responders and late

responders. Since the collecting period was only two weeks. It divides the responses which were

collected during the first week into the early responders and the responses which were collected

during the second week into the late responders. The test is conducted to compare the means on

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each measurement item between early responders and late responders. It found no statistical

significant differences between two groups.

Response bias is considered as an important issue in the empirical research corresponding

to low rate of the response rate. The response rate of this research was not low compared to other

empirical research in supply chain and operations management field. However, this research

ensures whether there is a response bias exists or not. To perform the test of the response bias,

this research compares sales levels, firm size between responders and non responders, which are

available in the web survey. ANOVA analysis indicates no statistical significance between these

two groups, which means that the response bias between responders and non responders does not

exist in this research.

In addition, less than one percent of the responses were missing due to a special function

of the web-survey. This study did not consider missing responses since it would not have made a

significant impact on the research results.

5.2. Evaluation of Measurement Models

All survey items were adopted from previously published literature. All items were assessed

using the seven-point Likert scale. The strategic sourcing indicator measured the purchasing

functions toward firms competitive strategy. The supply chain integration indicator measured a

firms internal integration as well as its integration with suppliers. The e-business technologies

indicator measured functions and extensive usage of e-business technologies. The organizational

culture indicator measured beliefs about working with others, management control and

integrating with suppliers. The supply chain risk indicator measured the probability and

magnitude of supply chain disruption risk. The business environments indicator measured a

firms competitive environment, the rate of change in the industry, market activity and market

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heterogeneity. The performance indicator measured financial, operational and supply chain

performance.

For assessing reliability, the factor loadings of the indicators of latent constructs must be

greater than 0.7 in order to establish strong reliability (Fornell and Larker 1981). Cronbachs

was also used to assess reliability. The acceptable score for Cronbachs is 0.7 for existing

constructs and 0.6 for newly created constructs. Based on these criteria, all indicators of the

measurement model, as shown in Table 23 and 24, are of acceptable reliability.

Composite reliability (CR) and average variance extracted (AVE) were used in this study

to assess convergent validity. Values above the threshold value of 0.7 for composite reliability

suggest good internal consistency (Hulland 1999). Additionally, AVE, representing the

proportion of average variance between constructs and indicator variables, needed to be greater

than 0.5 to suggest good convergent validity (Chin 1998). All measures of CR and AVE, as

shown in Table 25, indicate good convergent validity.

Table 23. Reliability and Convergent Validity

Constructs Cronbachs Alpha Composite Reliability Average Variance

(CR) Extracted (AVE)
Strategic Sourcing
0.877 0.910 0.718
(SS)
Supply Chain
0.857 0.886 0.750
Integration (SCI)
E-Business
0.938 0.9441 0.872
Technology (EBT)
Organizational
0.927 0.9432 0.835
Culture (OC)
Business
0.805 0.849 0.638
Environments (BE)
Supply Chain Risk
0.875 0.923 0.736
(SCR)
Performance (PER) 0.816 0.814 0.626

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Using PLS, this research conducted a factory analysis on survey items. All loadings are above

0.7, which is acceptable (Chin 1998), and no significant cross loadings are found, which provides

evidence of scale unidimensionality. Table 24 describes factor analysis results.

For evaluating discriminant validity, this study followed the suggestion of Fornell and

Larker (1981): the square root of AVE should be greater than the correlations of the variables in

order to confirm discriminant validity. Accordingly, the value of diagonal elements should be

greater than those of off-diagonal elements (Fornell and Larker 1981; Hulland 1999). Thus, the

values shown in Table 25 indicate good discriminant validity.

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 Table 24. Factor Analysis by PLS

SS SCI EBT OC BE SCR PER

SSa 0.828 0.273 0.412 -0.094 0.140 -0.189 0.004
SSb 0.835 0.186 0.364 -0.184 0.344 -0.135 -0.012
SSc 0.904 0.235 0.431 -0.240 0.415 -0.239 -0.005
SSd 0.820 0.300 0.193 -0.106 0.344 0.050 -0.308
SSe 0.889 0.386 0.273 -0.306 0.247 -0.211 -0.189
SCIa 0.105 0.838 0.398 -0.024 0.499 -0.052 0.071
SCIb -0.005 0.808 0.186 -0.267 0.394 -0.099 0.081
SCIc 0.038 0.726 0.202 -0.287 0.461 -0.188 0.082
SCId 0.284 0.774 0.388 -0.064 0.357 -0.087 0.158
SCIe 0.168 0.839 0.365 -0.165 0.446 -0.155 0.040
SCIf 0.140 0.955 0.489 -0.158 0.308 -0.200 0.117
SCIg 0.026 0.915 0.232 -0.196 0.330 -0.123 -0.043
SCIh 0.152 0.826 0.134 -0.209 0.366 -0.161 0.183
EBTa 0.319 0.180 0.831 -0.063 0.285 -0.172 0.014
EBTb 0.244 0.130 0.800 0.093 0.250 0.062 -0.188
EBTc 0.308 -0.219 0.909 -0.192 0.305 -0.078 -0.068
EBTd 0.348 -0.139 0.769 -0.018 0.309 0.004 0.174
EBTe 0.233 -0.093 0.820 -0.279 0.204 -0.140 0.045
EBTf 0.348 -0.101 0.744 -0.167 0.275 -0.035 -0.031
EBTg 0.391 -0.104 0.826 -0.079 0.268 -0.070 -0.092
EBTh 0.331 0.029 0.861 0.024 0.378 0.029 -0.196
OCa 0.335 -0.027 0.367 0.831 0.318 -0.053 -0.371
OCb 0.159 -0.031 0.121 0.899 -0.050 -0.072 -0.388
OCc 0.216 0.167 0.227 0.907 0.037 0.041 0.027
OCd 0.329 0.290 0.109 0.868 -0.020 0.225 0.102
OCe 0.302 0.208 -0.133 0.879 -0.058 0.426 0.037
OCf 0.582 0.090 -0.109 0.752 -0.031 0.434 -0.110
OCg 0.511 -0.110 -0.148 0.842 0.027 0.459 -0.159
OCh 0.080 -0.009 -0.217 0.797 -0.065 0.389 -0.147
OCi 0.144 0.310 -0.297 0.842 -0.047 0.475 -0.241
BEa 0.183 0.300 -0.190 0.374 0.721 0.344 -0.303
BEb 0.209 0.206 0.054 0.328 0.756 0.292 -0.198
BEc 0.289 0.221 -0.204 0.047 0.776 0.397 -0.168
BEd 0.195 0.402 0.161 -0.064 0.852 0.064 0.122
BEe 0.160 0.321 0.242 0.104 0.909 0.039 -0.095
BEf 0.070 0.364 -0.063 0.173 0.724 0.145 -0.570
BEg 0.124 0.438 0.171 0.164 0.755 0.084 -0.321
BEh 0.026 0.508 0.039 -0.282 0.817 0.049 0.164
BEi 0.024 0.326 0.210 0.022 0.889 -0.419 0.157
BEj 0.186 0.174 0.366 0.188 0.766 -0.119 -0.010
BEk 0.289 0.239 0.334 0.256 0.858 -0.107 -0.141
BEl 0.134 0.455 0.321 -0.115 0.811 0.066 -0.034

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 SS SCI EBT OC BE SCR PER
SCRa -0.116 0.415 0.260 -0.187 -0.065 0.915 -0.039
SCRb -0.134 0.455 0.115 -0.027 -0.047 0.875 -0.062
SCRc 0.146 0.415 0.318 -0.113 0.432 0.818 -0.173
SCRd 0.176 0.526 0.208 -0.107 0.506 0.759 0.069
SCRe 0.132 0.396 0.197 -0.127 0.015 0.864 -0.483
SCRf 0.195 0.403 0.448 -0.084 0.247 0.903 -0.265
PERa 0.247 0.473 0.403 -0.078 0.011 0.089 0.892
PERb 0.335 0.385 0.364 -0.121 0.133 -0.054 0.757
PERc 0.428 0.394 0.531 0.073 0.247 0.002 0.833
PERd 0.291 0.489 0.196 0.141 0.393 0.204 0.803
PERe 0.146 0.375 0.113 0.036 0.101 0.075 0.770
PERf 0.360 0.275 0.368 0.153 0.297 0.015 0.769
PERg 0.354 0.408 0.179 0.256 0.300 0.081 0.783
PERh 0.332 0.392 0.363 0.194 0.293 0.194 0.863
PERi 0.208 0.223 0.355 0.102 0.244 0.072 0.871

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 Table 25. Discriminant Validity

Variables SS SCI EBT OC BE SCR PER

SS (0.847)
SCI 0.507 (0.866)
EBT 0.374 0.572 (0.934)
OC 0.219 -0.126 -0.213 (0.914)
BE 0.164 0.382 0.514 -0.019 (0.799)
SCR 0.134 -0.029 -0.168 0.494 -0.119 (0.856)
PER -0.350 -0.447 -0.106 -0.189 -0.044 -0.251 (0.791)
SS: Strategic Sourcing, SCI: Supply Chain Integration, EBT: E-business technologies
OC: Organizational Culture, BE: Business Environments, SCR: Supply Chain Risks
PER: Performance
The number in parenthesis is the square root of AVE.

5.3. Evaluation of Structural Models

This study applied the partial least squares (PLS) technique of structural equation modeling

(SEM) to investigate the structural model. A bootstrap resampling procedure was conducted to

examine the stability of the estimates (Chin, Marcolin, and Newsted 2003) and to develop robust

confidence intervals (Chin 1998).

5.3.1. Full Effects

This research examined hypothesis 1, 2, 3, 4, 5A, 5C, 5E, 5G, 5I and 7 with the full effects

model. Hypothesis 1, 2, 3, and 4 examined a direct relationship between supply chain practices

and supply chain risks. Hypothesis 5A, 5C, 5E, and 5G examined a direct relationship between

dynamic and competitive business environments and supply chain practices. Hypothesis 5I also

examined a direct relationship between dynamic and competitive business environments and

supply chain risks. Finally, hypothesis 7 examined a direct relationship between supply chain

risks and performance.

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 The results of the research confirm that strategic sourcing negatively affects supply chain

risk, which supports hypothesis 1: strategic sourcing mitigates supply chain risks. The results

indicate there is statistical significance to this negative relationship, with a path coefficient of -

0.220 and t-score of 2.33 at a 0.01 level of significance. The results also show there is a negative

relationship between e-business technologies and supply chain risks, which supports hypothesis

2: e-business technologies mitigate supply chain risks. The results show there is a statically

significant negative relationship between the path coefficient of -0.175 and t-score of 2.17 at a

0.01 level. Hypothesis 3 was also supported by the research results as implementing supply

chain integration has a significantly negative relationship with supply chain risks with a path

coefficient of -0.208 and t-score of 2.84 at a 0.01 level of significance. However, the results do

not support hypothesis 4: organizational cultures are associated with supply chain risks. No

statistical significance was found between organizational culture and supply chain risks.

The data analysis results show that dynamic and competitive business environments

positively affect strategic sourcing, supporting hypothesis 5a: dynamic and competitive business

environments make a direct impact on strategic sourcing. A statistically positive relationship was

found between a path coefficient of 0.163 and a t-score of 1.89 at a 0.05 level. Hypothesis 5c,

dynamic and competitive business environments make a direct impact on e-business

technologies, was also supported by the research results as business environments have a positive

impact on e-business technologies. The path coefficient was 0.314 and the t-score was 3.05 at a

0.01 level significance. The research results support hypothesis 5e, dynamic and competitive

business environments make a direct impact on supply chain integration, as a positive

relationship between business environments and supply chain integration was shown. A path

coefficient of 0.282 with t-score of 3.70 indicated a statistically positive relationship. On the

98
other hand, this research found no statistical significance between business environments and

organizational culture. Therefore the research results do not support hypothesis 5g: dynamic and

competitive business environments make a direct impact on organizational cultures. As expected,

the result support hypothesis 5i: dynamic and competitive business environments make a direct

impact on supply chain risks.

This research found statistically significant positive relationship between business

environments and supply chain risks with the path coefficients, 0.215 and t-statistics, 2.78 at p <

0.01 significance level. Finally, the research results confirm that supply chain risks negatively

influence performance, which supports hypothesis 7: mitigating supply chain risks by supply

chain practices influences the performance. A statistically negative relationship was established,

with a path coefficient of -0.251 and t-score of 2.80 at a 0.01 level. R2 in supply chain risks for

the structural model was 36.64%, which was explained by the following factors: strategic

sourcing, supply chain integration, e-business technologies, organizational cultures and business

environments. Figure 10 describes the research results with full effects.

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Figure 18. Research Results for Full Effects

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5.3.2. Moderating Effects
To analyze moderating effects, two different types of analysis were conducted based on the

variable characteristics. First, for business environments and the first business characteristic

(firm size), a moderating effects analysis was conducted, since the research examines how the

relationship between supply chain practices, such as strategic sourcing, e-business technologies

and supply chain integration and supply chain risks, is affected as a variable (such as the rate of

change) ranges in value from low to high. The moderating effects of business environments and

firm size were analyzed with this approach, as described below.

Second, for the three business characteristics of manufacturing approach, suppliers and

market location, a subgroup analysis was conducted, given the fact that the firms in the data

sample belonged to two different subgroups. Therefore, this study added a multi-group PLS

analysis for examining moderating effects since subgroup analysis is a proper methodology for

examining the strength of a moderating effect when dealing with nominal moderating variables,

which this study uses (Qureshi and Compeau 2009; Sia et al. 2009).

5.3.2.1. Analysis of Moderating Effects

The moderating effects of business environments and firm size, on both the relationships

between supply chain practices such as strategic sourcing, supply chain integration and e-

business technologies and supply chain risks as well as on the relationship between

organizational culture and supply chain risks, were analyzed as follows. PLS can evaluate

interaction effects by comparing the R2 of the main model with that of the full model, which

includes both the main model and the interaction model (Chin, Marcolin, and Newsted 2003).

Accordingly, the moderating effects of business environments and firm size were

analyzed along the lines of the research of Carte and Russell (Carte and Russell 2003). The

101
difference in variance was examined between moderating and main effects using the following

F-statistics: F (df interaction - df main, N - df interaction - 1) = [ R2 / (df interaction df main)) / [(1-R2

interaction) / (N-df interaction-1)]. Following the research of Chin et al. (Chin, Marcolin, and Newsted

2003), moderating effects are also validated by comparing the R2 of the main and moderating

effects using Cohens f = [R2 (interaction model R2 (main effects model)] / [1-R2 (main effect

model)) (Cohen 1998).

First, the research results show that dynamic and competitive business environments have

significant moderating effects on the relationship between strategic sourcing and supply chain

risks. The effect size of the interaction between strategic sourcing and supply chain risks

indicates an f statistic of 4.01 with significance at a 0.05 level, and a Cohens f of 0.05, which is

a small effect size. Dynamic and competitive business environments do affect the relationship

between strategic sourcing and supply chain risks. This indicates that the negative relationship

between strategic sourcing and supply chain risks is stronger when business environments

become more competitive, which supports hypothesis 5b: b dynamic and competitive business

environments have the moderating impact between strategic sourcing and supply chain risks.

Second, the study results show that dynamic and competitive business environments have

significant moderating effects on the relationship between e-business technologies and supply

chain risks. The effect size of the interaction between e-business technologies and supply chain

risks indicates an f statistic of 3.85, which is significant at the 0.05 level, and Cohens f of 0.05,

which is again a small effect size. Dynamic and competitive business environments also affect

the relationship between e-business technologies and supply chain risks. This result points out

that the negative relationship between e-business technologies and supply chain risks becomes

stronger in more dynamic markets, supporting hypothesis 5b, dynamic and competitive business

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environments have the moderating impact between e-business technologies and supply chain

risks.

Third, the research results confirm that dynamic and competitive business environments

have significant moderating effects on the relationship between supply chain integration and

supply chain risks. The effect size of the interaction between supply chain integration and supply

chain risks indicates an f statistic of 5.96, which is significant at a 0.025 level, and Cohens f of

0.07, which is a medium effect size. Thus, dynamic and competitive business environments

affect the relationships between supply chain integration and supply chain risks, supporting both

hypotheses 5d: dynamic and competitive business environments have the moderating impact

between e-business technologies and supply chain risks. This suggests that the negative positive

relationship between supply chain integration and supply chain risks are greater when faced with

greater market competition. In addition, because the relative interaction size for supply chain

integration is greater than that for strategic sourcing and e-business technologies, it appears to

serve to mitigate supply chain risks more than strategic sourcing and e-business technologies in

more competitive markets.

However, the research results do not provide empirical evidence that dynamic and

competitive business environments have a statistically significant moderating effect on the

relationship between organizational culture and supply chain risks. More importantly, the

research results indicate that dynamic and competitive business environments do not have any

direct impact on organizational culture, statistically. Therefore, hypothesis 5h, dynamic and

competitive business environments have the moderating impact between organizational culture

and supply chain risks, is not supported.

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 Regarding the moderating effects of firm size, the effect size of the interaction between

strategic sourcing and supply chain risks indicates an f statistic of 4.05, significant at the 0.05

level, and Cohens f of 0.04, which is a small effect size. The effect size of the interaction

between e-business technologies and supply chain risks indicates an f statistic of 3.93, at the 0.01

level, and Cohens f of 0.04, which is a small effect size. The effect size of the interaction

between supply chain integration and supply chain risks indicates an f statistic of 5.21, at the

0.025 level, and Cohens f of 0.06, which is a small/medium effect size. However, the effect size

of the interaction between organizational culture and supply chain risks indicate no statistical

significance of both the f statistic and Cohens f. The firm size does have a moderating effect on

the relationships between strategic sourcing, e-business technologies, supply chain integration

and supply chain risks but not organizational culture. This result represent that as the firm size

increases, the negative relationships hypothesized are stronger. Thus the research results support

hypotheses 6: the relationship between supply chain practices and supply chain risks will be

differentiated depending upon organizations business characteristics. Figure 19 describes the

research results on moderating effects.

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Figure 19. Research Results for Moderating Effects

105
5.3.3. Analysis of Subgroup Effects
A subgroup analysis was performed with PLS for the business characteristics variables of

manufacturing approach, suppliers and market location. Dividing the firms into multiple groups

based on these business characteristics, this study examined the significance of the differences in

path coefficients corresponding to these business characteristics using bootstrapping procedures

(Chin 1998; Fisher and Gregoire 2006; Duxbury and Higgins 1991; Howell and Hall-Merenda

1999). This research followed the steps of the research of Ahuja and Thatcher 2005.

First, the full model was estimated with all samples and then for each subgroup, i.e., pull

and push for manufacturing approach, domestic and international suppliers for suppliers

location and domestic and international markets for market locations. In order to investigate the

moderating effects of these business characteristics, this research followed the studies of Chin

(2000) and Keil et al. (2000) to figure out the differences by comparing the structural model.

To compare the statistical path, the path coefficients for two groups need to be figured

out. Then, a standard error estimate for the two structural models multiplied by the percentage of

the two group sample numbers should be added together. The square root of this number should

be multiplied by the square root of one over the two sample numbers. Finally, the difference of

path coefficients from two groups is divided by the number just calculated. A subgroup analysis

of the moderating effect between organizational culture and supply chain risks was not tested

because the relationship between organizational culture and supply chain risks was not

statistically significant in full structural model.

First, from the results indicating that there were moderating effects on the relationships

between strategic sourcing, e-business technologies, supply chain integration and supply chain

risks, a subgroup analysis of the two manufacturing approaches was performed. In the pull

approach (85 responses, or 55.9% of the total sample), the path coefficients were -0.236 from

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strategic sourcing to supply chain risks, -0.180 from e-business technologies to supply chain

risks, and -0.152 from supply chain integration to supply chain risks, with t-scores of 2.220,

1.934 and 1.734, respectively, which were statistically significant at p < 0.05 in all relationships.

Likewise, as seen in Table 22, there were 61 responses (40.1% of the total sample) in the push

approach. The respective path coefficients were -0.211, -0.229, and -0.272 for strategic sourcing,

e-business technologies and supply chain integration with t-scores of 1.995, 2.121 and 2.479,

respectively, which were statistically significant at p < 0.05 and < 0.01 in all relationships.

When the path coefficients were compared between the pull and push subgroups,

statistically significant differences were found depending on manufacturing approach. The t-

values of comparison paths for strategic sourcing, e-business technologies and supply chain

integration with supply chain risks were 1.928, 2.416 and 4.381, respectively, which are

statistically significant at the 0.05 and 0.01 levels in all relationships. This research result

supported hypothesis 6: the relationship between supply chain practices and supply chain risks

will be differentiated depending upon organizations business characteristics.

Table 26. Statistical Comparison of Paths in Manufacturing Approach

Pull Subgroup Push Subgroup Statistical

Constructs R2= 0.387 (85) R2= 0.334 (61) Comparison
of Paths
Standardized T- Standardized T-Value T-Value
Path Value Path
Coefficient Coefficient
Strategic Sourcing
-0.201 1.985* -0.246 2.295* 1.928*
Supply Chain Risks
E-Business
Technologies Supply -0.180 1.934* -0.229 2.121* 2.416*
Chain Risks
Supply Chain Integration
-0.152 1.734* -0.272 2.479** 4.381**
Supply Chain Risks
*=.05 significance, **=.01 significance

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 Second, from the results indicating moderating effects on relationships among strategic

sourcing, e-business technologies, supply chain integration and supply chain risks, a subgroup

analysis was performed based on suppliers location. It may be seen from Table 23 that for firms

that have only US suppliers (70 responses or 46.1% of the total sample), the path coefficients for

strategic sourcing and e-business technologies and supply chain integration with supply chain

risks were -0.191, -0.174 and -0.188, respectively, with t-scores of 2.043, 1.999 and 2.001,

respectively, which were statistically significant at the p < 0.05 level in all relationships. Table

17 shows that there were 77 responses (50.7% of the total sample), from firms with global

suppliers. The respective path coefficients were -0.258, -0.357 and -0.222 for strategic sourcing,

e-business technologies and supply chain integration with supply chain risks with t-scores of

2.839, 3.268 and 2.405, respectively, which were statistically significant at p < 0.05 and < 0.01

in all relationships.

When the path coefficients were compared between the US and global subgroups,

statistically significant differences were found. The t-values of the comparison paths for strategic

sourcing, e-business technologies and supply chain integration with supply chain risks are 2.780,

5.186 and 1.793, which were statistically significant at the 0.05 and 0.01 levels in all

relationships. This research result supported hypothesis 6: the relationship between supply chain

practices and supply chain risks will be differentiated depending upon organizations business

characteristics.

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 Table 27. Statistical Comparison of Paths in Suppliers Location

US Subgroup Global Subgroup Statistical

Constructs R2= 0.404 (70) R2= 0.322 (77) Comparison
of Paths
Standardized T- Standardized T-Value T-Value
Path Value Path
Coefficient Coefficient
Strategic Sourcing
-0.191 2.043* -0.258 2.839** 2.780**
Supply Chain Risks
E-Business
Technologies Supply -0.174 1.999* -0.357 3.268** 5.186**
Chain Risks
Supply Chain Integration
-0.188 2.001** -0.222 2.405* 1.793*
Supply Chain Risks
*=.05 significance, **=.01 significance

Finally, from the results indicating similar relationships among strategic sourcing, e-

business technologies, supply chain integration and supply chain risks, a subgroup analysis was

performed based on the firms market locations. For US the subgroup (62 responses, or 40.8% of

the total sample), the path coefficients for strategic sourcing and e-business technologies and

supply chain integration with supply chain risks were -0.218, -0.165 and -0.200, respectively,

with respective t-scores of 1.988, 1.772 and 1.899, which were statistically significant at the p <

0.05 level in all relationships. For global groups (84 responses, 55.3% of the total sample), the

respective path coefficients were -0.225, -0.184 and -0.213 for strategic sourcing, e-business

technologies and supply chain integration with supply chain risks, with respective t-scores of

2.110, 1.808 and 1.969, which were statistically significant at p < 0.05 in all relationships.

As Table 24 shows, when the path coefficients of the US and global subgroups were

compared, statistically significant differences were not found. The t-values of the comparison

paths for strategic sourcing, e-business technologies and supply chain integration with supply

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chain risks also turned out to be insignificant. These results do not support hypothesis 6: the

relationship between supply chain practices and supply chain risks will be differentiated

depending upon an organizations business characteristics.

Table 28. Statistical Comparison of Paths in Market Location

US Subgroup Global Subgroup Statistical

Constructs R2= 0.373 (62) R2= 0.351 (84) Comparison
of Paths
Standardized T- Standardized T-Value T-Value
Path Value Path
Coefficient Coefficient
Strategic Sourcing
-0.218 1.988* -0.225 2.110* 1.301
Supply Chain Risks
E-Business
Technologies Supply -0.165 1.772* -0.184 1.808* 1.555
Chain Risks
Supply Chain Integration
-0.200 1.899* -0.213 1.969* 1.494
Supply Chain Risks
*=.05 significance, **=.01 significance

Based on the subgroup analyses, two business characteristics, manufacturing approach

and suppliers location, had a moderating effect on the relationships between the supply chain

practices strategic sourcing, e-business technologies and supply chain integration and supply

chain risks. However, market location, one of the business characteristics that this research

investigated, did not have a moderating effect on those relationships. Thus, hypothesis 6, the

relationship between supply chain practices and supply chain risks will be differentiated

depending upon organizations business characteristics, was supported except for the market

location business characteristic. Table 25 summarizes the results of all of the research hypotheses.

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 Table 29. Summary of Results on Full Effects Research Hypotheses
Research Hypothesis Status
H1 Strategic sourcing mitigates supply chain risks. Supported
H2 E-business technologies mitigate supply chain risks. Supported
H3 Supply chain integration mitigates supply chain risks. Supported
H4 Organizational cultures are associated with supply chain risks. Not Supported
H5a Dynamic and competitive business environments make a Supported
direct impact on strategic sourcing.
H5c Dynamic and competitive business environments make a Supported
direct impact on e-business technologies.
H5e Dynamic and competitive business environments make a Supported
direct impact on supply chain integration.
H5g Dynamic and competitive business environments make a Not Supported
direct impact on organizational culture.
H5i Dynamic and competitive business environments make a Supported
direct impact on supply chain risks.
H7 Mitigating supply chain risks through supply chain practices Supported
influences the performance.

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 Table 30. Summary of Results on Moderating Effects Research Hypotheses
Research Hypothesis Status
H5b Dynamic and competitive business environments have a Supported
moderating impact on the relationship between strategic
sourcing and supply chain risks.
H5d Dynamic and competitive business environments have a Supported
moderating impact on the relationship between e-business
technologies and supply chain risks.
H5f Dynamic and competitive business environments have a Supported
moderating impact on the relationship between supply chain
integration and supply chain risks.
H5h Dynamic and competitive business environments have a Not Supported
moderating impact on the relationship between organizational
culture and supply chain risks.
H6 The relationship between supply chain practices and supply Supported except for
chain risks will be differentiated depending upon market location
organizations business characteristics.

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 6. Discussion of Results
The main objective of this research is to investigate the relationship between supply chain

practices such as strategic sourcing, e-business technologies and supply chain integration with

supply chain risks. From the buyers perspective, this research framework empirically validates

that implementation of supply chain practices mitigate supply chain risks. Since industry has

become global and highly competitive, performance emerges as a key objective for all supply

chain members in order to survive in the market. Therefore, mitigating supply chain risks to

improve performance and determining the role of supply chain practices in supply chain risk

management are important topics of discussion, particularly in light of the results of this study.

In addition, this study considers the internal factor of organizational culture and the

external factors of business environments and characteristics within the main research

framework of supply chain risks management. Therefore, this research shows that firms have to

deal with these factors in supply chain risks management in order to have competitive

advantages and that they also need to allocate their resources, based on dynamic capability,

effectively in order to improve performance.

6.1. The Effect of Strategic Sourcing on Supply Chain Risk

The research results supported hypothesis 1: strategic sourcing mitigates supply chain risks. Five

of the measurement items of strategic sourcing contained two main dimensions: the strategic role

of purchasing and the effective internal coordination between the purchasing function and other

functions. In addition, the concept of strategic sourcing has been developed by including

effective information sharing with suppliers and supplier development (Kocabasoglu and Suresh

2006). Strategic sourcing is utilized not only for improving the competitive advantage for

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purchasing but also for interacting with suppliers closely. More importantly, strategic sourcing

should consider flexibility and risk in making buying decisions (Sislian and Satir 2000). Based

on the dimensions of strategic sourcing, this research investigated the impact of strategic

sourcing in mitigating supply chain risks.

The research results empirically support that strategic sourcing decreases supply chain

risks. This research measured supply chain risks in both of the following dimensions: probability

and magnitude of supply chain disruption risk. Strategic sourcing is very effective in minimizing

the probability and magnitude of supply chain disruption risk largely for the following reason:

strategic sourcing enabled buyer firms to interact very close with suppliers in order to help them

develop. Thus, strategic sourcing improved suppliers ability to provide high quality supplies to

buyers without any disruptions. Even if supply disruptions occurred, supplier and buyers worked

together to minimize the magnitude of supply chain disruption so that they can reduce damage to

the supply chain. Because of this reason, supplying and purchasing managers consider strategic

sourcing as an effective supply chain practice for mitigating supply chain risks.

Prior literature showed that implementing strategic sourcing results improves a firms

performance (Carr and Pearson 1999; Das and Narasimhan 2000; Narasimhan and Das 2001;

Chen, Paulraj, and Lado 2004). Adding to previous research, implementing strategic sourcing

leads not only to the enhancement of the firms performance but also the mitigation of supply

chain risks. The many benefits of implementing strategic sourcing encourages firms to adopt

strategic sourcing in order to gain competitive advantages. Table 31 describes measurement

indicators as well as loadings for strategic sourcing.

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 Table 31. Cross loadings for measurement indicators of strategic sourcing

Measurement Indicators Loadings

Purchasing is included in the firms strategic planning process. 0.828

The purchasing function has a good knowledge of the firms strategic 0.835
goals.

Purchasing performance is measured in terms of its contributions to the 0.904

firms success.

The purchasing professionals development focuses on elements of the 0.820

competitive strategy.

The purchasing department plays an integrative role in the purchasing 0.889

function.

6.2. The Effect of E-Business Technologies on Supply Chain Risk

The research results supported hypothesis 2: e-business technologies mitigates supply chain

risks. Eight of the measurement items of e-business technologies strategic sourcing contained

two main dimensions: usage of e-business technologies and extensive use of e-business

technologies. E-business technologies are measured in two dimensions because this research

investigated what kinds of e-business technologies are utilized in supply chains, for what purpose

and how extensively are they utilized in supply chains

E-business technologies are utilized for various reasons. E-business technologies provide

savings in transaction costs, reduce inventory and establish communication networks between

buyers and suppliers (Min and Galle 1999; Deeter-Schmelz et al. 2001). More importantly, e-

business technologies give supply chain members real time information so that they can

collaborate easily, a key element in supply chain risk management (Vakharia 2002). Based on

the benefits of supply chain e-business technologies, this research investigated the impact of e-

business technologies in mitigating supply chain risks.

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 The research results empirically support that e-business technologies decrease supply

chain risk. E-business technologies have become very useful to the minimization of the

probability and magnitude of supply chain disruption risk for one main reason: e-business

technologies enable buyer firms to communicate with suppliers and collect real-time information

in the supply chain. Thus, buyer firms can monitor all activities in the supply chain. Even if

supply disruptions occur, buyers and suppliers can communicate and work together very easily to

minimize the magnitude of supply chain disruption so that they can reduce the damage to the

supply chain. E-business technologies become more effective when suppliers are located outside

of US. The cost of communication is less expensive and there is significantly less lag time when

compared to face-to-face communication. Because of this reason, supply and purchasing

managers regard e-business technologies as valuable and helpful for mitigating supply chain

risks.

Prior literature has confirmed that implementing e-business technology results in better

performance for firms (Johnson et al. 2007; Devaraj, Krajewski, and Wei 2007; Wu, Mahajan,

and Balasubramanian 2003). Adding to previous research, implementing e-business technologies

generates improved outcomes in performance as well as supply chain risk mitigation. The

various benefits of implementing e-business technologies promote firms adoption of e-business

technologies in order to enhance their productivity and become more cost effective. Table 32

describes measurement indicators as well as loadings for e-business technologies.

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 Table 32. Cross loadings for measurement indicators of e-business technologies

Measurement indicators Loadings

Order Processing, invoicing and settling accounts. 0.831
Exchange of shipment and delivery information. 0.800
Managing warehouse stock and inventories. 0.909
Using Electronic data interchange (EDI). 0.769
Using Real-time electronic linkage with suppliers. 0.820
Using Electronic/online purchase order system. 0.744
Provide specific online information about product and service 0.826
specifications that our suppliers must meet.
Share product and inventory planning information with our suppliers. 0.861

6.3. The Effect of Supply Chain Integration on Supply Chain Risk

The research results supported hypothesis 3: supply chain integration mitigates supply chain

risks. Eight of the measurement items of supply chain integration included two dimensions:

internal integration and supplier integration. These two aspects of supply chain integration were

measured because this research investigated the inbound perspective, which made this research

focus on internal integration within buyer firms and integration with suppliers, but not with

customers.

Like strategic sourcing and e-business technologies, supply chain integration also

contributes to improving performance by reducing cost and increasing customers satisfaction

(Frohlich and Westbrook 2001). Adding to this benefit, supply chain integration has been

receiving a lot of attentions in the area of supply chain risk management. Supply chain

integration, including both internal and external, is considered one of the key antecedents of

supply chain agility, which is empirically confirmed (Braunscheidel and Suresh 2009). In supply

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chain risk management literature, supply chain agility is considered one of the most important

supply chain components because it allows for an increased ability to mitigate supply chain risk

and respond to supply chain disruptions (Christopher and Peck 2004). Based on the benefits of

supply chain integration, this research examined the direct impact of supply chain integration in

mitigating supply chain risks.

The research results empirically support that supply chain integration decreases supply

chain risks. Supply chain integration is very effective in improving performance as well as

supply chain agility. More importantly, it happens to be a good mitigating strategy for

diminishing the probability and magnitude of supply chain disruptions for one main reason:

supply integration helps establish strong networks with suppliers in the supply chain. Like

strategic sourcing, supplier integration enabled suppliers and buyers to share the information,

increase communication levels and improve the responsiveness. Due to these benefits, the

damages of supply disruptions can be prevented or minimized even if supply disruptions occur.

Internal integration within the firm plays a very similar role with supplier integration. It increases

communication levels and improves teamwork so that the firm can react quickly toward supply

chain disruptions. Because of these reasons, supply chain integration is a very popular practice in

supply chain management, not only for improving performance but also mitigating supply chain

risks.

Prior literature confirmed that implementing supply chain integration improves

performance as well as supply chain agility in supply chain risk management (Frohlich and

Westbrook 2001; Braunscheidel and Suresh 2009). Adding to previous research, this research

confirmed that implementing supply chain integration makes a direct impact on mitigating

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supply chain risk. Table 33 describes the measurement indicators as well as loadings for supply

chain integration.

Table 33. Cross loadings for measurement indicators of supply chain integration

Measurement indicators Loadings

Our inventory levels are shared with our suppliers. 0.838

Our key suppliers deliver to our plant in a JIT basis. 0.808

We have high corporate level communication on important issues with 0.726

key suppliers.

Sharing of information via the internet is important to our supply chain. 0.774

We work with our suppliers to seamlessly integrate our inter-firm 0.839

processes (e.g. order placement).

Our supply chain employs rapid response initiatives. (e.g. continuous 0.955
replenishment (CR) or vendor managed inventory (VMI).

We use cross functional teams to solve problems. 0.915

Internal management communicates frequently about goals & priorities. 0.826

6.4. The Effect of Organizational Culture on Supply Chain Risk

Interestingly, the research results did not support an association between organizational cultures

and supply chain risks. Although previous literature pointed out the significance of

organizational culture in supply chain risk management, there was a lack of prior literature that

set up the relationship between organizational culture and supply chain risks. Thus, this research

attempts to investigate the association between organizational culture and supply chain risks.

This research approached perspective of Schein (1985) for organizational culture, which are the

espoused values and beliefs of purchasing and supply managers. Organizational culture was

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measured in beliefs in three dimensions, belief in team works, belief in autonomy in management

control and beliefs in efforts to maximize the organizations benefits. Although prior studies

indicated that organizational cultures make an impact on various supply chain practices,

purchasing managers beliefs in the three dimensions state above do not have any significant

relationship with supply chain risks.

In this study, organizational culture was regarded as an internal factor in supply chain

risk management. Supply chain risk management categorizes supply chain risk in three ways:

internal risk to the firm, external risk to the firm with internal risk in the supply chain and

environmental risk and external risk in the supply chain (Christopher and Peck 2004). Because

this proposes that organizational culture influence supply and purchasing managers attitude

toward supply chain risks, our data analysis result is expected to empirically support this

relationship. It is interpreted that organizational culture was established by employees beliefs

inside of organizations, (Schein 1985) so that external risk from outside of organizations does

not make any significant impact on the organizational culture.

Scheins approach which measures managers beliefs on team work, autonomy in

management control and decision making to maximize the organizations profits did not work in

this research. Because purchasing managers think supply chain risk is an external risk, they

consider organizational culture, which might be related to internal risk, as having nothing to do

with supply chain risks. Therefore, organizational culture established inside of the firm does not

have any relationship with supply chain risks. Table 31 describes the measurement indicators as

well as loadings for organizational culture.

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 Table 34. Cross loadings for measurement indicators of organizational culture

Measurement indicators loadings

Functional departments should work together as a team. 0.831
Employees from one department should work with employees from other 0.899
departments.
Employees should work together as a team. 0.907
Departmental managers should make decisions that benefit the whole 0.868
company.
When making decisions, the overall effects of a decision should be 0.879
considered.
Decisions should be based on overall company objectives. 0.752
Managers should take tight control upon their subordinates. 0.842
Command and control is the best way to manage. 0.797
Workers should simply follow the directions given by their managers. 0.842

6.5. The Direct and Moderating Effect of Business Environments on Strategic

Sourcing

The research results supported hypothesis 5a and 5b: dynamic and competitive business

environments make a direct impact on strategic sourcing and dynamic and competitive business

environments have a moderating impact on the relationship between strategic sourcing and

supply chain risks. The twelve measurement items of business environments have four

dimensions: munificence, change and growth in a competitive environment, dynamism, a degree

of change in design, technology and customer preference, hostility, the degree of competition

and external control, and heterogeneity level of dissimilarity (Kocabasoglu, Prahinski, and

Klassen 2007). In other words, munificence indicates growth opportunities for the firms.

Dynamism represents a degree of change. Hostility indicates a degree of competition.

Heterogeneity represents a product differentiation.

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 The research results provide empirical support that dynamic and competitive business

environments positively affect strategic sourcing and have a moderating effect on the

relationship between strategic sourcing and supply chain risks. Uncertainty in business

environments which manager should consider increases risks because they affect managers

perception toward supply chain risk and decision making in the supply chain. More importantly,

business environments are reflected as risk sources which influenced risks in the supply chain

(Ritchie and Brindley 2007b). The research of Chen and Paulraj also pointed out that business

environments are crucial influencing factors on both strategic purchasing and buyer-supplier

relationships within the supply chain (Chen and Paulraj 2004). Because business environments

are impossible to control, they are often ignored in supply chain management. This research

confirms the important influence of business environments on strategic sourcing as well as the

relationship between strategic sourcing and supply chain risks, which emphasizes the point that

business environments should not be ignored in supply chain management area.

This research presents the positive relationship between dynamic and competitive

business environments and strategic sourcing. If business environments experience high change

and growth in a competitive environment, high change in design, technology and customer

preference, high competition and external control and a high level of dissimilarity, then strategic

sourcing becomes more effective and helpful for firms. In other word, if business environments

become more dynamic, competitive and complex, firms need to implement strategic sourcing for

wide usage in order to react to dynamic, competitive and complex markets. This research

indicates the effectiveness and usefulness of strategic sourcing in responding to unpredictable

markets, which cannot be controlled by purchasing managers.

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 This research also confirms the moderating effect of dynamic and competitive business

environments have on the relationship between strategic sourcing and supply chain risks. This

indicates that the decrease in supply chain risks caused by strategic sourcing are strengthened in

more competitive and dynamic markets. In other words, if business environments experience

high change in technology, competition and customer preferences, mitigating effects of strategic

sourcing on supply chain risks becomes greater. Due to the characteristic of strategic sourcing,

implementing strategic sourcing emerged as a key solution to responding to dynamic and

competitive business environments. Although business environments cannot be controlled,

purchasing managers can find a solution for dealing with volatile markets.

6.6. The Direct and Moderating Effect of Business Environments on E-Business

Technologies

The research results supported hypothesis 5c and 5d, dynamic and competitive business

environments make a direct impact on e-business technologies and dynamic and competitive

business environments have a moderating impact on the relationship between e-business

technologies and supply chain risks. Prior literature indicates that e-business technologies help

firms improve operational agility when responding to competitive and dynamic environments

(Sambamurthy, Bharadwaj, and Grover 2003). Because implementing e-business technologies

should be considered when dealing with business environments and mitigating supply chain

risks, this research investigated how business environments influence e-business technologies,

and the results provide empirical support that business environments increase e-business

technology usage while having a moderating effect on the relationship between e-business

technologies and supply chain risks.

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 This research confirms the positive relationship between dynamic and competitive

business environments and e-business technologies. If firms face very competitive and dynamic

business environments, then e-business technologies become more practical and helpful. In other

word, if the market suffers high change in dissimilarity, competition, design, technology and

customer preference, then firms should implement e-business technologies for wide and

extensive usage in order to deal with dynamic, competitive and complex business environments.

This research emphasizes effective usage of e-business technologies to respond to unpredictable

markets, which cannot be controlled by supply managers.

This research also found that there is a moderating effect of dynamic and competitive

business environments on the relationship between e-business technologies and supply chain

risks. This indicates that the decrease in supply chain risks caused by e-business technologies

becomes more powerful in more competitive and dynamic markets. In other words, if business

environments experience rapid change in the market, the mitigating effect of e-business

technologies on supply chain risk becomes stronger. Because of the advantages of implanting e-

business technologies, e-business technologies offer key solutions on how to deal with dynamic

and competitive business environments.

6.7. The Direct and Moderating Effect of Business Environments on Supply

Chain Integration

The research results supported hypothesis 5e and 5f, dynamic and competitive business

environments make a direct impact on supply chain integration and dynamic and competitive

business environments have a moderating impact on the relationship between supply chain

integration and supply chain risks. The research of Stonebraker and Liao established a

conceptual framework in which business environments had a moderating effect on supply chain

124
integration (Stonebraker and Liao 2006). Because competitive and dynamic business

environments encourage firms to boost integration level, both within the firms themselves as

well as within the supply chain, and mitigate supply chain risks, this study examined both the

direct and moderating effects of business environments and supply chain integration. The

empirical data shows that business environments make a positive impact on supply chain

integration and have a moderating effect on the relationship between supply chain integration

and supply chain risks.

This study uncovered the positive relationship between dynamic and competitive

business environments and supply chain integration. If buyer firms need to bear rapid change and

turbulent business environments, supply chain integration becomes one of their most useful

supply chain practices. In other words, if the market experiences tremendous competition,

dynamic changes in technology and customer preference and very short product life cycles, firms

should raise their integration level with suppliers as well as the flexibility of functional teams

within their organization toward dynamic and competitive markets. Previous literature already

confirmed that supply chain integration improved performance. Adding to this finding, this

research suggests that supply chain integration is also an effective supply chain management

practice for dealing with impulsive markets.

The moderating effect of dynamic and competitive business environments on the

relationship between supply chain integration and supply chain risks was examined in this study.

The results of this research showed that the decrease in supply chain risks associated with supply

chain integration technologies grows stronger when business environments become more

competitive and unstable. To put it differently, if the market becomes more volatile and viable,

supply chain integrations mitigating effect on supply chain risk becomes stronger. Supply chain

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integration enabled firms to be flexible in adjusting their supply chain strategy toward dynamic

and competitive business environments.

6.8. The Direct and Moderating Effect of Business Environments on

Organizational Culture

Like the research result showing that organizational culture does not have any association with

supply chain risks, this research result does not support hypothesis 5g and 5h, dynamic and

competitive business environments make a direct impact on organizational culture and dynamic

and competitive business environments have a moderating impact on the relationship between

organizational culture and supply chain risks. Because this research utilized the survey

methodology, purchasing managers could be asked directly what their espoused values and

beliefs regarding the direct effect of business environments on their beliefs as well as their

beliefs about the moderating effect of business environments on the relationship between supply

chain risks and organizational culture.

Interestingly, dynamic and competitive business environments do not influence

organizational culture significantly, based on managers beliefs about team works, autonomy in

management control and efforts to maximize the organizations benefits. In addition, business

environments do not have a moderating effect on the relationship between organizational culture

and supply chain risks. Because the results did not support the direct associations between

organizational culture and supply chain risks, moderating effects turned out to be insignificant.

6.9. The Direct Effect of Business Environments on Supply Chain Risk

This research results support hypothesis 5i: dynamic and competitive business environments

make a direct impact on supply chain risks. The risk in the supply chain is affected by business

environments, external sources of risk from the supply chain. The supply chain risk is

126
categorized with internal risk, the risk in the supply chain and external risk from the supply chain.

Therefore, this research empirically confirms that business environments which can be a source

of the external risk from the supply chain have a positive relationship with supply chain risks. If

the market becomes very competitive and dynamic, the risk in the supply chain is increased.

Although the business environments are very hard to be controlled by the managers, it is very

important for managers to consider business environments in the context of supply chain risk

management. Table 35 describes the measurement indicators as well as loadings for dynamic and

competitive business environments.

Table 35. Cross loadings for measurement indicators of business environments

Measurement indicator Loadings

Economic growth in your market. 0.721

Growth in consumer demand within the industry. 0.756

Growth in industry sales. 0.776

Rate at which products and services become outdated. 0.852

Rate of introduction of new products and services. 0.909

Rate of change in tastes and preferences of customers in your industry. 0.724

Market activities of your key competitors have become less predictable. 0.755

Market activities of your key competitors have become more hostile. 0.817

Market activities of your key competitors now affect your plant in more 0.889
ways than in the past.

In your industry, success depends on providing to a large range of 0.766

consumer tastes.

Your primary challenge in production is to customize the product for 0.858

different tastes.

Your market has many different customer segments. 0.811

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6.10. The Moderating Effect of Business Characteristics on the Relationship
between Supply Chain Practices and Supply chain risk

The research results support hypothesis 6: the relationship between supply chain practices and

supply chain risks will be differentiated depending upon an organizations business

characteristics. Previous research has generally neglected to empirically examine the influence of

business characteristics on supply chain management (Van der Vaart and Van Donk 2008).

Although there is a lack of empirical studies reflecting the effect business characteristic have on

supply chain management, prior literature highlighted the importance of considering various

business characteristics in supply chain management (Fisher 1997; Ramdas and Spekman 2000;

Van Donk and Van der Vaart 2004).

This study investigates the relationship between supply chain practices and supply chain

risks as they are modified from the following four perspectives: firm size, manufacturing

approach, supplier and market globalization. Because organizational culture does not have a

significant relationship with supply chain risks, the moderating effect of business characteristics

between organizational culture and supply chain risks is not examined. In addition, the

moderating effect of firm size is tested through a moderating effect analysis and manufacturing

approach as well as supplier and market globalization are tested by a subgroup analysis.

Beginning with the moderating effects of firm size, the effect size of the interaction

between supply chain practices and supply chain risks appears to be different. The effect size of

the interaction between supply chain integration and supply chain risks was the greatest among

strategic sourcing and e-business technologies, which shared the same effect size. Because f-

statistics are all significant in all three effect sizes of interaction, this research empirically

supports that as firm size become larger, the mitigating effect of supply chain practices on supply

chain risks become more powerful. In addition, based on the effect size, supply integration was

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most influenced by firm size in moderating the effect of the relationship between supply chain

risk and supply chain integration. In order to mitigate the supply chain risk, the large firms need

to promote more integration with suppliers and within firms.

Based on the firms manufacturing approach, the path coefficients compared the

relationships between strategic sourcing, e-business technologies, supply chain integration and

supply chain risks. The research results show a statistically significant path coefficient

relationship between supply chain practices and supply chain risks, which means that the

moderating effects exist depending upon manufacturing approach. Interestingly, the path

coefficients in the pull approach between supply chain practices and supply chain risks are

greater than those in the push approach. Because firms subscribing to the push approach need to

react with the demand from market, it has an increased probability and magnitude of supply

chain disruption risk compared to the pull approach. On the other hand, the push approach is

scheduled to manufacture the orders stably, which minimizes the supply chain disruption risk.

Managers conception toward push and pull approach is different based on our empirical result.

They consider that pull approach has less probability of supply disruption risk comparing with

the push approach, leading to the different mitigating effects of supply chain management

practices on supply chain risk.

Thus, strategic sourcing, e-business technologies and supply chain integration become

more effective in mitigating the supply chain risk when firms use the push strategy rather than

the pull strategy in manufacturing their products. Another interesting point is that, like the firm

size result, the relationship between supply chain integration and supply chain risks shows the

largest manufacturing-approach-dependant difference as it showed the greatest f-statistics, 4.381.

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The push approach enabled firms to maximize the effectiveness of supply chain integration in

their supply chain risk mitigating strategy.

The path coefficients of the relationships between strategic sourcing, e-business

technologies, supply chain integration and supply chain risks are compared depending on the

suppliers location, i.e., whether they are within the US or outside of the US. The research results

indicate statistical significant path coefficients for the relationship between supply chain

practices and supply chain risks, finding moderating effects based on suppliers location.

Ironically, the path coefficients for the relationship between supply chain practices and supply

chain risks for global suppliers are greater than those of US suppliers. If firms receive supplies

from outside of the US, strategic sourcing, e-business technologies and supply chain integration

become more effective and reduce the probability and magnitude of supply chain disruption risk

compared to those of US suppliers. Due to advanced technology and frequent communication,

long distance appears to cause no problems for supply chain management practices. This

research result can also be interpreted in this way: if firms have global suppliers, they pay more

attention to maintaining close relationships with their supply network, and they also

communicate with them more frequently.

In addition, the firms are more willing to actively implement supply chain management

practices to improve their performance and diminish risk in the supply chain when they have

global suppliers. Another interesting point is that the relationship between e-business

technologies and supply chain risks shows the largest supplier-location-dependant difference

with the f-statistics 5.186. E-business technologies are very popular investments for firms

mitigating supply chain risks in global supply chain management.

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 The path coefficients for the relationships between strategic sourcing, e-business

technologies, supply chain integration and supply chain risks are compared based on whether

firms sell their products in the US or outside of the US. The research results found that the

moderating effects, as shown by the path coefficients, for the relationship between supply chain

practices and supply chain risks had no market-location-dependant significance, statistically

speaking. Unlike the above two business characteristics, market location makes no difference in

the relationships. Because this research examined supply chain risk from the inbound perspective,

the market location focusing on the outbound supply chain does not have a moderating effect on

the relationships between supply chain practices and supply chain risks. Therefore this research

supports hypothesis 6: the relationship between supply chain practices and supply chain risks

will be differentiated depending upon organizations business characteristics, except for market

location. Table 36 describes the measurement indicators as well as loadings for supply chain

risks.

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 Table 36. Cross loadings for measurement indicators of supply chain risk

Measurement indicator Loadings

It is highly likely that we will experience an interruption in the supplies 0.915

from our suppliers.

There is a high probability that our suppliers will fail to provide supplies 0.875
to us.

We worry that suppliers may not provide suppliers as specified within 0.818
out purchase agreement.

An interruption in the supplies from our suppliers would have severe 0.759
negative financial consequences for our business.

Suppliers inability to provide supplies would jeopardize our business 0.864

performance.

We would incur significant costs and/or losses in revenue if our suppliers 0.903
failed to provide supplies.

6.11. The Effect of Supply Chain Risks on Performance

The research results empirically confirmed that supply chain risks decreased significantly as

performance improved. The association between supply chain risks and performance has not

been seen to be investigated previously. The study of Ritchie and Brindley (2007b) suggested the

linkage between risk and performance as a topic for future study. Therefore, this research also

investigates the causal relationship between risk sources and performance in supply chains.

The supply chain risks have two dimensions which are probability and magnitude of

disruptions in the supply chain. Thus, it is assumed that the total effect of supply chain risks

influence the performance negatively. However, because this research asked supply and

purchasing managers regarding two dimensions of supply chain risk, their answers are based on

their perceived supply chain risks. It is very crucial to investigate their perceived supply chain

risks because this research also makes great contributions to help the purchasing and supply

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managers to recognize the importance of the supply chain risks and reflect them seriously in

setting up risk mitigating strategy in the supply chain.

Although this is the first study to investigate the relationship between the supply chain

risks and the performance, the measurement on the performance was carefully evaluated. In the

supply chain risk management, the conventional measurement of the performance has been

emphasized leading to the effective supply chain risk management (Ritchie and Brindley 2007a).

Following the study of Ritchie and Brindley (2007a), this research measured the performance

into three dimensions: fanatical, operational and supply chain performance. It helps this research

to not only evaluate the performance correctly but also examine which dimensions of the

performance supply chain risks affect negatively most. This research can compare the area that

the supply chain risks do the damages the most.

As this research proposed, the results statistically support hypothesis 7: mitigating supply

chain risks by supply chain practices influences the performance. High probability and

magnitude of supply chain disruption risk decreases a firms performance as low probability and

magnitude of supply chain disruption risks increase a firms performance. It is very significant

for supply and purchasing managers to perceive that supply chain risks influence negatively on

the performance. They have to recognize the negative relationship with the supply chain risks

and performance meaning that high supply chain risks become sources for decreasing firms

performance. This represents that purchasing and supply managers spend much money and times

on establishing the risk mitigating strategies in the supply chain in order to improve the

performance.

More importantly, in order to end the controversy on measurement issues of performance,

this research measures the performance in three dimensions: financial, operational and supply

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chain performance. Supply chain risks decrease the impact of financial, operational and supply

chain performance. This research utilizes the multi-dimensions of the performance because of

two main reasons. First, it prevents the controversial issues on measuring the performance.

Second, this research can provide the impact of the supply chain risks on three aspects of the

performance. In other words, this research result can provide the evidence that which area of the

performance is the most damaged by the supply chain risks.

Among three dimensions of the performance, the financial aspects were the most

damaged the performance caused by the supply chain risks. If disruptions occur in the supply

chain, the loss generates the financial area of the firms. With the supply disruptions, the firms

production is delayed, leading to the loss in the sales and revenues. Eventually, it would hurt the

market shares as well as return on assets and investment.

The second area was the operational performance. Operational performance focuses on

saving the cost. Actually, supply disruptions would increase the cost for the firms. Finally, the

supply chain performance was the last. The supply disruptions would decrease customers

satisfactions and the speed of reacting to the market in the supply chain. Table 37 describes the

measurement indicators as well as loadings for the performance.

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 Table 37. Cross loadings for measurement indicators of performance

Measurement indicator Loadings

Average Return on Assets 0.892

Average Profit 0.757

Increase in Market Share 0.833

Percent defects during production 0.803

Delivery reliability 0.770

Production and inventory costs 0.769

Ability to respond to and accommodate periods of poor supplier 0.783

performance

Customer response time 0.863

Total cost of manufacturing, including labor, maintenance and re-work 0.871

costs

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 7. Significance & Impact of Research
The purpose of this study is to establish a research framework for supply chain risk management

and empirically to investigate how supply chain practices and organizational culture influence

supply chain risks from the business environment perspective. In addition, this research also

examines whether successful supply chain risk management will improve the performance.

Because this research serves to close a gap in the literature of supply chain risk management, this

research will make a significant contribution to the academic and business world.

7.1. Contributions of Research

This research makes meaningful contributions for both academics and practitioners. First, this

research adopted a theoretical framework of dynamic capabilities that is based on a firms

processes for using and allocating resources to match and adjust to market changes as a

theoretical background. Because this research investigated the impact of business environments

on supply chain practices as well as supply chain risk management, it contributes that empirical

result of to the support of dynamic capability theory. In responding to market change, firms

allocated resources to strategic sourcing, e-business technologies and supply chain integration in

order to gain advantages in completive and dynamic markets.

Second, this research establishes a research framework of supply chain risk management.

In this research framework, the relationship between supply chain practices, such as strategic

sourcing, supply chain e-business technologies and supply chain integration, and supply chain

risks were investigated. This research also examined the relationship between supply chain risks

and performance. In the main research framework, this research also considered organizational

culture an internal factor and business environments and characteristics an external factor. This

research framework makes useful contributions to the literature by not only considering the

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implementation of supply chain practices for mitigating supply chain risk, leading to improved

performance, but also by considering the internal and external factors of the supply chain risk

management. More importantly, this research emphasized the importance of recognizing supply

chain risk as well as helping purchasing and supply managers institute risk mitigating strategy.

This research investigates the role of strategic sourcing on supply chain risk management.

The strategic sourcing is only considered as the purchasing function in the supply chain

management. However, this research contributes that strategic sourcing can also play an

important role in mitigating the supply chain risks. Additionally, it also expands the concept of

strategic sourcing from the purchasing function to the supply chain practices that can help

developing the relationships and communications between suppliers and buyers. More

importantly, dynamic and competitive business environments are reflected in the context of

strategic sourcing and supply chain risk management. It has managerial implications that

strategic sourcing is an effective supply chain practices to respond to dynamic and business

environments as well as risk mitigating strategy in dynamic and business environments. It also

emphasizes that managers need to consider business environments to imply strategic sourcing

and risk mitigating strategies.

This study examines the role of e-business technologies on supply chain risk management.

The e-business technologies are only considered as the information technologies for saving the

cost in the supply chain management. However, this study contributes that e-business

technologies can also play a critical role in mitigating the supply chain risks. In addition, because

managers worry about cost on information technology in the supply chain, leading to hesitation

on making an investment decision on IT, this research contributes that effectiveness of e-

business technologies helps mangers to invest the money on risk mitigating tools in the supply

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chain practices. More importantly, dynamic and competitive business environments are reflected

in the context of e-business technologies and supply chain risk management. It has managerial

implications that implementing e-business technologies is an effective supply chain practices to

respond to dynamic and business environments as well as risk mitigating strategy in dynamic and

business environments although it may be costly. It also emphasizes that managers need to

consider business environments to implement e-business technologies in their supply chain and

risk mitigating strategies.

This research explores the role of supply chain integration on supply chain risk

management. The supply chain integration is discussed on the context of buyer-supplier

relationship strategic sourcing. However, this research contributes that supply chain integration

can be applied in mitigating the supply chain risks. Additionally, supply chain integration is one

of the best solutions in setting up risk mitigating strategies in the supply chain. Because supply

chain integration is the most popular supply chain practices, it will have no risk in applying the

supply chain integration to reduce the supply chain risks. More importantly, dynamic and

competitive business environments are reflected in the context of supply chain integration and

supply chain risk management. It has managerial implications that supply chain integration is an

useful supply chain practices to react with dynamic and business environments as well as risk

mitigating strategy in dynamic and business environments. It also emphasizes that managers

need to consider business environments to imply supply chain integration and risk mitigating

strategies.

Third, there was a lack of empirical literature on supply chain risk management. As far as

I know, this is the first empirical study of supply chain risk management. This research makes

many contributions by empirically validating the research framework. It demonstrates that

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implementing supply chain practices, such as strategic sourcing, supply chain e-business

technologies and supply integration, mitigates supply chain disruption risk. Previous literatures

discuss the role of strategic sourcing, e-business technologies in the supply chain and supply

chain integration in hypothetical levels. However, this research contributes towards filling the

gap by empirically validating the impact of strategic sourcing, e-business technologies and

supply chain integration in mitigating the supply chain risks. The research results indicate that

strategic sourcing, e-business technologies and supply chain integration mitigates the supply

chain risks.

In supply chain risk management, previous literature introduces various risk mitigating

strategies. The solutions, suggestions and recommendations are mentioned although no research

manages to investigate the impact of supply chain practices in supply chain risk management.

More importantly, there is a lack of empirical validation. Because it is very important for

researchers to generate material implications, this research provides contributions that can give

purchasing and supply managers in the field solutions on mitigating the supply chain risks.

Fourth, it uncovered how purchasing managers perceived supply chain risk negatively

affects performance. The successful supply chain risk mitigating strategy improves performance.

This research presents why supply chain risks should be minimized. High supply chain risks

diminish the performance while low supply chain risks improve the performance. Another

important contribution is the measurement of performance in the three dimensions of financial,

operational and supply chain, thus avoiding the controversy surrounding these measurements.

Multi-dimensions of the performance make another contribution of empirically validating which

aspect of the performance is the most affected by the supply chain risks. Financial performance

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was the area where the supply chain risks affect the most negatively comparing with operational

and supply chain performance.

Fifth, this research makes contributions by emphasizing the role of business environment

and characteristics in supply chain management areas. While this research identifies supply chain

risk, it assesses the level of managers perceived risk depending on business environments and

business characteristics. It is expected that managers consider supply chain risk at different levels

because all organizations have to deal with different business characteristics and environments in

their own industry. It is very hard to control business environments because it is outside the

scope of the supply chain. However, they must not to be ignored because members of the supply

chain need to react quickly to changes in business environments to minimize risk.

This research contributes that dynamic and competitive business environments should be

considered in establishing the risk mitigating strategies. If business environments are dynamic

and competitive, the effectiveness of supply chain practices such as strategic sourcing, e-business

technologies and supply chain integration become stronger. When managers make a decision on

implementing the supply chain practices, they conduct the cost and benefit analysis to figure out

whether benefits outweigh the cost or not. If firms are facing with dynamic and business

environments, supply and purchasing managers need to consider their business environments in

their calculation. Therefore, this research emphasizes how important business environments are

in supply chain management and their roles for moderating the relationships between supply

chain practices and supply chain risks. It also shows supply managers directions and implications

of establishing risk mitigating strategy toward various business environments.

Finally, this research makes contributions by presenting different mitigating risk

strategies for each type of organization based on different business characteristics. By comparing

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the research model based on manufacturing approach, suppliers and market location, the

effectiveness and impact of supply chain practices turned out to be varied. Firms that subscribe

to the push strategy benefit more from supply chain strategies relating to mitigating supply chain

risks. On the relationship between strategic sourcing and supply chain risks, between e-business

technologies and supply chain risks, and between supply chain integration and supply chain risks,

path coefficients turn out to be larger in the push approach comparing with pull approach. In the

supply chain risk management, reacting to the market demand like pull approach creates higher

supply chain risks than push approach. Therefore, in order to minimize the risk in a supply chain,

the firms need to switch their manufacturing approach from pull to push approach.

Firms with global suppliers establish close relationships by implementing supply chain

practices so that they can successfully minimize risk in their supply chain networks. Interestingly,

the path coefficients happen to be larger in US suppliers comparing with global suppliers on the

relationship between strategic sourcing and supply chain risks, between e-business technologies

and supply chain risks, and between supply chain integration and supply chain risks. If the firms

have global suppliers, they focus more on the supply chain practices and invest more money in

implementing the supply chain practices. E-business technologies play a crucial role on

communicating with suppliers as the path coefficients are the greats among three supply chain

practices. This result gives managers implications that e-business technologies help to

communicate and interact with global suppliers and overcome long distance relationship.

The disadvantages of having suppliers from outside of the US were discussed in the prior

literatures. However, this research makes contributions that although the firms have global

suppliers, they can develop many strategies to mitigate the supply chain risks. Thus, this research

also introduces another advantage of having global suppliers. Additionally, the firms keep

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following the current trend, global supply chain management. This research emphasizes the

points that managers have to deal with different risks and use different strategy depending on

where their organizations are and what business characteristics their organizations have.

7.2. Limitations

This study has many of the same limitations as past empirical studies. First, this research surveys

only a single respondent within each firm. Although the respondent is in a high enough position

to answer all survey questions properly, a single respondent cannot represent all aspects of the

firm. Although the single respondent is randomly selected, it is not guaranteed that a single

respondent is the person who knows all aspects of the survey questions.

Second, the single firm is considered as a focal firm in the supply chain like previous

studies. This study has a buyer perspective, not a supplier perspective. Therefore, this research

focuses on buyer firms, resulting in the distribution of the survey to purchasing and supplying

managers. In order to overcome this limitation, future studies can distribute the surveys to both

supply and purchasing managers and marketing and sales managers. It will be very interesting to

investigate both buyers and suppliers perspectives.

Third, due to the inherent limitations of the survey research methodology, responses are

subjective, though this research tries to minimize the subjective aspects, especially in measuring

performance and supply chain risks. In order to be objective on performance, the survey

questions asked for performance in comparison to the industry average, one of the objective

measures of performance. In addition, the supply chain risk in this study is the managers

perceived risk, not actual risks. Even though survey measurement items adapted the

measurements of supply chain risk from prior literatures, the risk measurements are considered

subjective.

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 In order to validate the measurements, this research conducted the content validity check

based on previous literatures, interviews with supply chain professionals receiving the feedbacks

and comments on the survey and the pilot study. This research also drops the measurement items

which are below acceptable measurements scores. However, like other studies which use the

survey methodology, this research shares same limitations.

Finally, response bias may influence results, despite the best efforts of this study. For

survey participants who did not pay any attention when answering questions, dummy items were

included in order to filter out such participants. This research conducted several response bias

tests between early and later responders and between responders and non responders. Therefore,

this research diminishes the response bias.

7.3. Future Research

This research can be extended in at least four ways. First, this research establishes a research

framework in the supply chain risk management focuses on the manufacturing industry. A future

research can apply this research framework in the service industry like a health care industry. It

will be very interesting to investigate the role of supply chain practices on mitigating the supply

chain risk in the context of the service industry.

Second, in this research, organizational culture was not found to have any significant

relationship to supply chain risks. A future study might consider the cultural impact in other

countries. The research framework from this research in supply chain risk management might be

applied in China and Korea. The future study might show some direction in terms of how

purchasing managers in China and Korea perceive the supply chain risks as well as supply chain

practices. Since this research collected surveys from managers in the US, future research can

compare this framework when applied in China and Korea.

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 Third, this research has an inbound perspective, which means that the surveys were

distributed to purchasing and supply managers. However, future research can consider the

opposite perspective. The focal firms could be suppliers. Thus, the future study might suggest

interesting issues and perspectives in supply chain risk management.

Fourth, this research applies three supply chain practices, strategic sourcing, e-business

technologies in supply chain and supply chain integration. Future research can be extended to

investigate the joint impacts of the supply chain practices on mitigating the risk in the supply

chain. Future research can examine the synergy impact of two or more supply chain practices

together on supply chain risk management. More importantly, future study can be extended to

investigate the relationship among supply chain practices. It can empirically examine that e-

business technologies help promoting supply chain integration. It will be very interesting to see

how various supply chain practices influence each other in the context of supply chain risk

management.

Finally, because this research considers and reflects the impact of business environments,

future research can be extended to environmental practices. The future study can investigate how

environmental practices and regulations can influence supply chain practices as well as supply

chain risks. Instead of business environments, environmental practices would be positioned in

the research framework.

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 Appendix. Survey Measurements
Dear Supply Chain Professionals:

In todays highly competitive and global marketplace firms such as yours must be constantly assessing
their customers needs and competitive environment. A research team headed by Mr. Kim, at the State
University of New York at Buffalo is conducting an investigation entitled: Supply Chain Risk Management
in Purchasing/Procurement. The study investigates how managers can deal with supply chain risk caused
by dynamic business environment. Your participation in this study is completely confidential and
voluntary. However, you have the right not to answer any question if you so choose without penalty or
loss of benefits to which you are otherwise entitled. You are free not to answer any questions you
do not wish to answer. All surveys collected are anonymous. None of the data collected will be used
to identify particular individuals or companies. All data will be presented in aggregate form only. There
are no known risks involved in participating in this research. Your response to this survey indicates your
consent to participation. You are implicitly acknowledging your voluntary participation by
answering and returning the questionnaire.

If you have any questions regarding this survey please feel free to contact me at 716-645-3251 or by
email (mk94@buffalo.edu). This research study has been reviewed by the Social and Behavioral
Sciences Institutional Review Board, University at Buffalo. For questions regarding the rights of
participants in research, the IRB may be contacted at 716/645-6474 or 515 Capen, University at Buffalo,
Amherst, NY 14260.

Thank you very much for your participation in this research. We are looking forward to your response.

Sincerely,

Minkyun Kim
Principal Investigator
Supply Chain Risk Management Research

*Please answer below questions regarding demographic information

Demographic Information
Business Title:

Standard Industrial Classification (SIC) Code of

your firm:

Kind of Industry:

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 Part I. Environmental Uncertainty
A. Indicate your assessment of change in your plants Dramatically Dramatically
competitive environment: Decreased Increased
1. Economic growth in your market 1 2 3 4 5 6 7
2. Growth in consumer demand within the industry 1 2 3 4 5 6 7
3. Growth in industry sales 1 2 3 4 5 6 7

B. Indicate the rate of change in your industry for the Slow Rapid
following:
1. Rate at which products and services become outdated 1 2 3 4 5 6 7
2. Rate of introduction of new products and services 1 2 3 4 5 6 7
3. Rate of change in tastes and preferences of customers 1 2 3 4 5 6 7
in your industry

C. Indicate your assessment of market activity: Strongly Strongly

Disagree Agree
1. Market activities of your key competitors have 1 2 3 4 5 6 7
become less predictable
2. Market activities of your key competitors have 1 2 3 4 5 6 7
become more hostile
3. Market activities of your key competitors now affect 1 2 3 4 5 6 7
your plant in more ways than in the past

D. Indicate your assessment of market heterogeneity: Strongly Strongly

Disagree Agree
1. In your industry, success depends on providing to a 1 2 3 4 5 6 7
large range of consumer tastes
2. your primary challenge in production is to customize 1 2 3 4 5 6 7
the product for different tastes
3. your market has many different customer segments 1 2 3 4 5 6 7

Part II. Strategic Sourcing

A. Indicate your assessment of strategic sourcing in your Strongly Strongly

organization: Disagree Agree
1. Purchasing is included in the firms strategic planning 1 2 3 4 5 6 7
process
2. The purchasing function has a good knowledge of the 1 2 3 4 5 6 7
firms strategic goals
3. Purchasing performance is measured in terms of its 1 2 3 4 5 6 7
contributions to the firms success
4. The purchasing professionals development focuses 1 2 3 4 5 6 7
on elements of the competitive strategy
5. The purchasing department plays an integrative role 1 2 3 4 5 6 7
in the purchasing function

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 Part III. Internal Integration, External Integration with key Suppliers & Customers
A. Indicate your assessment of supply chain integration: Strongly Strongly
Disagree Agree
1. We use cross functional teams to solve problems. 1 2 3 4 5 6 7
2. Internal management communicates frequently 1 2 3 4 5 6 7
about goals & priorities.
3. Our firm does not encourage openness and 1 2 3 4 5 6 7
teamwork
4. Formal meetings are routinely scheduled among 1 2 3 4 5 6 7
various departments.
5. When problems or opportunities arise, informal, 1 2 3 4 5 6 7
face-to-face meetings never occur.
6. Our customers give us feedback on quality and 1 2 3 4 5 6 7
delivery performance.
7. Customers are actively involved in our new product 1 2 3 4 5 6 7
development process.
8. Customers frequently share demand information 1 2 3 4 5 6 7
with our firm.
9. Our production plans are shared with our customers. 1 2 3 4 5 6 7
10. Our inventory levels are shared with our customers. 1 2 3 4 5 6 7
11. Our inventory levels are shared with our suppliers. 1 2 3 4 5 6 7
12. Our key suppliers deliver to our plant in a JIT basis. 1 2 3 4 5 6 7
13. We have high corporate level communication on 1 2 3 4 5 6 7
important issues with key suppliers.
14. Sharing of information via the Internet is important 1 2 3 4 5 6 7
to our supply chain.
15. We work with our suppliers to seamlessly integrate 1 2 3 4 5 6 7
our inter-firm processes (e.g. order placement).
16. Our supply chain employs rapid response initiatives. 1 2 3 4 5 6 7
(e.g. continuous replenishment (CR) or vendor managed
inventory (VMI).
17. We jointly develop new products/services with our 1 2 3 4 5 6 7
suppliers.

Part IV. Organizational Culture

Indicate your assessment of the organizational culture of your organization
A. Through investments in facilities and equipment, Strongly Strongly
________ Disagree Agree
1. We want to encourage our workers to work in 1 2 3 4 5 6 7
innovative ways.
2. We want to increase creativity among our workers. 1 2 3 4 5 6 7
3. We want to support product and service 1 2 3 4 5 6 7
improvement efforts among our workers.

147
B. We believe that ________________________________ Strongly Strongly
Disagree Agree
1. Functional departments should work together as a 1 2 3 4 5 6 7
team.
2. Employees from one department should work with 1 2 3 4 5 6 7
employees from other departments.
3. Employees should work together as a team. 1 2 3 4 5 6 7
4. Departmental managers should make decisions that 1 2 3 4 5 6 7
benefit the whole company.
5. When making decisions, the overall effects of a 1 2 3 4 5 6 7
decision should be considered.
6. Decisions should be based on overall company 1 2 3 4 5 6 7
objectives.
7. We should be willing to make sub-optimal decisions in 1 2 3 4 5 6 7
local scale for maximum performance in global scale.
8. Please circle on number 7 for this question. 1 2 3 4 5 6 7
9. Managers should take tight control upon their 1 2 3 4 5 6 7
subordinates.
10. Command and control is the best way to manage. 1 2 3 4 5 6 7
11. Workers should simply follow the directions given by 1 2 3 4 5 6 7
their managers.
12. Our suppliers can be part of our success in our 1 2 3 4 5 6 7
business.
13. Our suppliers are strategic partners in building up our 1 2 3 4 5 6 7
competitive capabilities.
14. The best suppliers are the ones who enable us to 1 2 3 4 5 6 7
provide value to customers.

Part V. E-business
A. In our company, we use e-business tools to Strongly Strongly
_____________________ Disagree Agree
1. Facilitate internal communication between 1 2 3 4 5 6 7
employees in different departments and different locations.
2. Regularly update employees about developments 1 2 3 4 5 6 7
within the strategic business unit (SBU).
3. Facilitate discussions and feedback on various issues 1 2 3 4 5 6 7
of importance to our SBU.
B. In our company, we use e-business tools to Strongly Strongly
_____________________ Disagree Agree
1. Coordinate new product and service development 1 2 3 4 5 6 7
teams.
2. Provide customers with general information about our 1 2 3 4 5 6 7
SBU (e.g., via Web sites and information boards).
3. Send customers regular updates about new products 1 2 3 4 5 6 7
and other developments within our SBU (e.g., via e-mail).
4. Provide after-sales service to our customers (e.g., via 1 2 3 4 5 6 7
online information about installation and troubleshooting).

148
5. Provide information in response to consumer 1 2 3 4 5 6 7
questions or requests (e.g., via searchable online databases).
6. Send suppliers regular updates about new product 1 2 3 4 5 6 7
and service plans and developments within our SBU (e.g., via
e-mail).
7. Provide specific online information about product and 1 2 3 4 5 6 7
service specifications that our suppliers must meet.
8. Share product and inventory planning information 1 2 3 4 5 6 7
with our suppliers.
9. Permit suppliers to directly link up to our databases 1 2 3 4 5 6 7
(e.g., via Enterprise Resource Planning/ERP systems).
10. Perform financial and managerial accounting. 1 2 3 4 5 6 7
11. Provide reimbursements and manage payrolls. 1 2 3 4 5 6 7

C. In our company, we use e-business tools to Strongly Strongly

_____________________ Disagree Agree
1. Manage employee benefits (e.g., life and medical 1 2 3 4 5 6 7
insurance).
2. Accept payments electronically from customers (e.g., 1 2 3 4 5 6 7
online payment).
3. Allow customers to track and inquire about their 1 2 3 4 5 6 7
orders electronically.
4. Search and locate potential suppliers online. 1 2 3 4 5 6 7
5. Place and track orders with suppliers electronically 1 2 3 4 5 6 7
(e.g., online order placement).
6. Allow suppliers to submit bids online. 1 2 3 4 5 6 7
7. Use online marketplaces to source supplies (e.g., 1 2 3 4 5 6 7
Ariba.com, Commerceone.com)

D. To what extent do you use following IT based support to Minimal Significant

develop a relationship with your suppliers? Use Use
1. Order Processing, invoicing and settling accounts 1 2 3 4 5 6 7
2. Exchange of shipment and delivery information 1 2 3 4 5 6 7
3. Managing warehouse stock and inventories 1 2 3 4 5 6 7
4. Understanding trends in sales and customer 1 2 3 4 5 6 7
preferences with your suppliers
5. Integrating your functions (e.g. design and 1 2 3 4 5 6 7
manufacturing) with suppliers
6. Sharing your firms expertise to create new business 1 2 3 4 5 6 7
opportunities with your suppliers

E. To what extent does your firm make use of the following None Extensive
forms of e-commerce?
1. Electronic data interchange (EDI) 1 2 3 4 5 6 7
2. Real-time electronic linkage with suppliers 1 2 3 4 5 6 7

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3. Electronic/online supplier catalogue 1 2 3 4 5 6 7
4. Electronic/online purchase order system 1 2 3 4 5 6 7
5. Online reverse auction/e-auction. 1 2 3 4 5 6 7
6. Online bidding/tendering. 1 2 3 4 5 6 7
7. Public e-marketplaces (e.g., Global Healthcare 1 2 3 4 5 6 7
Exchange).
8. Industry-sponsored e-marketplaces (e.g., Covisint). 1 2 3 4 5 6 7
9. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
company for your suppliers.
10. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
supplier(s).
11. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
company for your customer(s).
12. Private B2B exchange/Extranetoperated by your 1 2 3 4 5 6 7
customer(s)

Part VI. Supply Chain Risk

A. How much do you agree with following statements regarding Strongly Strongly
supply chain risk of your company? Disagree Agree
1. It is highly unlikely that we will experience an 1 2 3 4 5 6 7
interruption in the supplies from our suppliers.
2. There is a high probability that our suppliers will fail 1 2 3 4 5 6 7
to provide supplies to us.
3. We worry that suppliers may not provide suppliers as 1 2 3 4 5 6 7
specified within out purchase agreement.
4. An interruption in the supplies from our suppliers 1 2 3 4 5 6 7
would have severe negative financial consequences
for our business.
5. Suppliers inability to provide supplies would 1 2 3 4 5 6 7
jeopardize our business performance.
6. We would incur significant costs and/or losses in 1 2 3 4 5 6 7
revenue if our suppliers failed to provide supplies.
7. Overall, the supplies from our suppliers are 1 2 3 4 5 6 7
characterized by low levels of risk.

B. How much do you agree with following statements regarding Strongly Strongly
financial condition of your suppliers? Disagree Agree
1. Our suppliers are financially independent. 1 2 3 4 5 6 7
2. We always evaluate our suppliers financial condition. 1 2 3 4 5 6 7
3. We make financial investments on our suppliers. 1 2 3 4 5 6 7
4. We closely communicate with suppliers regarding their 1 2 3 4 5 6 7
financial condition.

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 Part VII. Supply Chain Performance

A. Rate the performance of your firm in the following Well Below Well Above
areas: Industry Industry
Average Average
4. Average Return on investment 1 2 3 4 5 6 7
5. Average Return on Assets 1 2 3 4 5 6 7
6. Average Profit 1 2 3 4 5 6 7
7. Average Profit Growth 1 2 3 4 5 6 7
8. Increase in Market Share 1 2 3 4 5 6 7
9. Increase in Sales Volume 1 2 3 4 5 6 7

B. Rate the performance of your firm in the following Well Below Well Above
areas: Industry Industry
Average Average
4. Percent defects during production 1 2 3 4 5 6 7
5. Delivery speed of Products and Service 1 2 3 4 5 6 7
6. Delivery reliability 1 2 3 4 5 6 7
7. Production costs 1 2 3 4 5 6 7
8. Production lead time 1 2 3 4 5 6 7
9. Costs associated with held inventory 1 2 3 4 5 6 7
10. Order fill rate 1 2 3 4 5 6 7
11. Customer response time 1 2 3 4 5 6 7

C. Rate the performance of your firm in the following Well Well Above
areas: Below Industry
Industry Average
Average
1. Ability to respond to and accommodate periods 1 2 3 4 5 6 7
of poor manufacturing performance (machine
breakdowns)
2. Ability to respond to and accommodate periods 1 2 3 4 5 6 7
of poor supplier performance
3. Ability to respond to and accommodate new 1 2 3 4 5 6 7
products, New markets, or new competitors
4. Total cost of resources used 1 2 3 4 5 6 7
5. Total cost of distribution, including 1 2 3 4 5 6 7
transportation and handling costs
6. Total cost of manufacturing, including labor, 1 2 3 4 5 6 7
maintenance and re-work costs

151
Business Characteristics Please Select One
1. What is your primary manufacturing approach? Pull Push
2. Have you experience any disruptions in your suppliers? Yes No
3. Do you have suppliers from outside of the US? Yes No
4. Do you provide your service or operate plants outside of Yes No
the US?
5. Is your company in Manufacturing Industry or Service Manufacturing Service
Industry?
6. Please indicate the annual sales of your 1) Less than $10 million , 2) $10 to $50 million ,
business unit. 3) $51 to $100 million, 4) $101 to $250
million,
5) $251 to $500 million , 6) $500 million to $1
billion
7) over $1 billion

152
November 26, 2009

Dear NAPM-Buffalo Members:

Introduction:
In todays highly competitive and global marketplace firms such as yours must be constantly assessing
their customers needs and competitive environment. A research team headed by Mr. Kim, at theth State
University of New York at Buffalo is conducting an investigation entitled: Supply Chain Risk
Management in Purchasing/Procurement. The study investigates how managers can deal with supply
chain risk caused by dynamic business environment. Our goal is to identify supply chain risk and find
factors that mitigate the supply chain risk in order to improve the firms performance

Volunteer Status
Your participation in this study is completely confidential and voluntary. As a former purchasing
analysis,
s, I know that your time is extremely valuable. Each question in this survey received many
feedbacks from professionals in supply chain area and tested in the previous study so that you will be able
to answer. However, you have the right not to answer any question if you so choose without penalty or
loss of benefits to which you are otherwise entitled.

Time Commitment
We have tried to minimize the page of the survey in order to reduce your time on completing this survey.
It will take about 15 minutes.

Procedure
The survey is designed to be answered by supply, supply chain, purchasing in your organizations.

Confidentiality
All surveys collected are anonymous. None of the data collected will be used to identify particular
individuals or companies. All data will be presented in aggregated form only.

Consent
Your response to this survey indicates your consent to participation.

Risk
There are no known risks involved in participating in this research.

Further Information
If you have any questions regarding this survey please feel free to contact me at 716-645-3251
716 or by
email (mk94@buffalo.edu). This his research study has been reviewed by the Social and Behavioral
Sciences Institutional Review Board, University at Buffalo. For questions regarding the rights of

153
participants in research, the IRB may be contacted at 716-645-6474 or 515 Capen, University at Buffalo,
Amherst, NY 14260.

Thank you very much for your participation in this research. First 30 participants who complete the
survey will receive $20 gift certificate of Barnes Nobles or Target (your choice) as an incentive.
We are looking forward to your response.

Here is the link for the survey:

http://www.surveymonkey.com/s.aspx?sm=b9jS4l84PtHEPXXZHxG4Jw_3d_3d

Sincerely,

Minkyun Kim
Principal Investigator
Supply Chain Risk Management Research

You are free not to answer any questions you do not wish to answer

You are implicitly acknowledging your voluntary participation by answering and returning the
questionnaire.

154
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