- Email: [email protected]
Supply Chain Integration Strategy: A Conceptual Model of Supply Chain Relational Capital Enabler in the Malaysian Food Processing Industry
Available online at www.sciencedirect.com
ScienceDirect Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590
Global Conference on Business & Social Science-2014, GCBSS-2014, 15th & 16th December, Kuala Lumpur
Supply Chain Integration Strategy: A Conceptual Model of Supply Chain Relational Capital Enabler in the Malaysian Food Processing Industry Zurita Mohd Saleha*, Rosmimah Mohd Roslinb a,b
Faculty of Business Management, Universiti Teknologi MARA, Shah Alam, 40450, Malaysia
Abstract Previous literature has confirmed the association between SCI and firm’s performance. However, limited success of integration with key supply chain partners were found in literature. Indeed, the impact of SCRC that may facilitate to the success of SCI was not fully understood. Thus, this paper is to propose a framework in investigating the influence of SCRC on the execution of SCI by adopting relational capital theory. Through a review of related literature and formal interview, relational elements such as trust, commitment and socialization have become significant elements to facilitate the execution of SCI practices among firms in food processing industry. © by by Elsevier Ltd.Ltd. This is an open access article under the CC BY-NC-ND license © 2015 2015The TheAuthors. Authors.Published Published Elsevier (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of GLTR International Sdn. Berhad. Peer-review under responsibility of GLTR International Sdn. Berhad.
Keywords: supply chain integration; supply chain relational capital; food processing industry; relationship management; operational performance
1. Introduction Due to the increase of contemporary turbulent and dynamic business environment in recent years, it is no longer significant for firms to increase their competitiveness that is solely relying on their own internal capabilities and competencies. As asserted by Tukamuhabwa, Eyaa and Derek (2011), nowadays, firms have to seek a new effective way to compete in order to survive in the intense global market. It was apparently and frequently described in current
* Corresponding author. Tel.: +6-013-2328296 E-mail address: [email protected]
1877-0428 © 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of GLTR International Sdn. Berhad. doi:10.1016/j.sbspro.2015.01.406
586
Zurita Mohd Saleh and Rosmimah Mohd Roslin / Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590
literature that firms may not be able to heighten their competitiveness if they isolated their internal process and structure with their external trading partners (Danese & Romano, 2011). In other word, competition that is based on a single firm competition is no longer relevant in today’s business environment and therefore, competition between firms in the entire supply chain with another supply chain entities are perceived more significant by a substantial number of authors (Antai, 2011; Fawcett, Stanley, & Smith, 1997). The emergence of such competition has increased the need for firms in the whole supply chain system to cooperate, coordinate, collaborate, and integrate in order to ensure the investment effort in supply chain relationship will provide high value of return to the whole supply chain participants (Flint, 2004). On top of that, the success of collaboration and cooperation among supply chain participants is resulted from the mechanism of integration as described by Mendes Primo (2010). Although integrative relationship is considered as a vital source of competitive advantage that may provide numerous benefits to firm either in a form of economic or non-economic value, close relationship of focal firm with its supply chain partners is difficult to achieve and execute (Dunne, 2008). In fact, there were a substantial number of authors who disagree with the notion that supply chain integration (SCI) will always have positive impact on firms performance either from the aspect of tangible or non-tangible performance (Bask & Juga, 2001; Power, 2005) and the potential benefits that associated with SCI were ambiguous (Pagell, 2004). Yet, empirical research by Zailani and Rajagopal (2005) has shown that the linkages between supply chin integration and performance was positively significant. From the above discussion, it could be argued that the collaborative and integrative advantage could not be achieved by firms due to the disability of firms to collaborate with supply chain partners effectively and efficiently. As an evidence, Spekman, Jr, and Myhr (1998) reported that 60 per cent of firms failed in supply chain partnership initiative, and approximately 70 per cent of supply chain relationship tend to fail (Sambasivan, Siew-Phaik, Mohamed, & Leong, 2011). This in turn has contributed to a negative implication of SCI on firm’s operational performance in terms of flexibility, delivery, cost and quality. Therefore, it is vital to identify factors that influence the failure or success of supply chain partnership or integration initiative from the perspective of soft behavioural attributes. As such, relationship management which considers soft behavioural attributes of integration has recently become a central issue within supply chain management context that could be the best element to explain the success of supply chain integration. Some authors like Vanichchinchai (2012) argued that most previous studies within supply chain management context lack to consider soft behavioural attributes such as trust, commitment and socialization. Those soft behavioural attributes are claimed to be vital elements in supply chain relational capital (SCRC), particularly in the food processing industry due to high customer’s requirement towards product quality, safety and fast delivery in recent years. However, to establish and maintain supply chain relationship such as integration remained formidable and challenging (Sambasivan et al., 2011) owing to the lack of understanding regarding on the relevant factors that might contribute to the success of supply chain integration (Richey, Chen, Upreti, Fawcett, & Adams, 2009). Both, trust and commitment are perceived as a cornerstone of supply chain partnership and imperative aspect of relational exchanges between firm and supply chain partners (Kwon & Suh, 2004) Indeed, Han (2013) revealed that both relational capital dimensions, trust and commitment have significant relationship with cooperative improvement. Moreover, another important element of relational capital such as socialization plays a significant role in supply chain intra-and inter-firms relationship (Cousins, Handfield, Lawson, & Petersen, 2006). Therefore, by understanding the important factors of relational capital that influence the establishment of supply chain integration enable participants in supply chain to complement and espouse resources and information among them (Ferrer, Santa, Hyland, & Bretherton, 2010). As reported in previous literature, information sharing plays an important role in improving supply chain integration through the influence factor of relational capital (Yim, & Leem, 2013). To conclude, it can be postulated that supply chain relational capital may act as an enabler to facilitate to the success of supply chain integration. 2. Background of the study Supply chain in the food processing industry is considered complex in terms of information sharing as it involves multiple interactions of supply chain participants such as farmers or producers, manufacturers, multiple distributor channels and customers in the supply chain system (Matopoulos, Vlachopoulou, Manthou, & Manos, 2007). In addition, issues on the availability of resources and uncertainty of customer demand have partly contributed to the complexity of food supply chain system (Kumar & Nigmatullin, 2011). According to the authors, integration among
Zurita Mohd Saleh and Rosmimah Mohd Roslin / Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590
supply chain participants in this industry will enable firms to control over the entire food delivery process and consequently, allow them to meet customer’s expectation regarding on supply and production integrity as well as to maximize customer’s value. In fact, integrative relationship allows firms to improve lead time through effective communication and coordination among food supply chain partners. Although the Malaysian food processing industry plays a significant role to the Malaysian economy growth (Ahmed, 2012), statistical report by Companies Commission of Malaysia (SSM, 2013) have shown that most of the firms in this industry were experiencing unsatisfactory performance that subsequently, have urged them to close down their businesses. The above situation could be due to supply chain performance problem and this notion could be espoused by a study conducted by Tukamuhabwa (2011) who revealed that most firms in the study collapsed which resulted from supply chain performance problem. Therefore, supply chain integration as a source of competitive advantage should not be denied by researcher and should be considered as a strategic weapon in the Malaysian food processing industry. Unfortunately, the production and distribution system in the food supply chain industry in Malaysia has been segregated (Mohezar & Mohd Nor, 2014) and low of integration between the two entities has led to the deterioration of operational performance. Therefore, this study adopts the understanding that the supply chain relational factor may act as enabler factors which may facilitate the execution of supply chain integration in the processing industry in Malaysia. 3. Problem statement There are mounting empirical evidence that confirmed the association between SCI and firm’s performance. However, limited success of integration with key supply chain partners were reported in literature, and the impact of supply chain relational capital factor as an imperative enabler that may facilitate to the success of SCI are not fully understood. With regards to the above, some authors asserted that it is imperative to prescribe factors that affect the success of inter- and intra-firm relationship management, particularly from the aspect of soft behavioural attributes. Furthermore, in relation to the food industry, supply chain integration has been given less attention by authors within supply chain management context (van der Vaart & van Donk, 2008). Furthermore, issues on what enabler factors that might facilitate to the success of SCI should be addressed and identified in the study (Agan, 2005). 4. Literature review and proposed research frameworks The concept of coordination, cooperation, integration and collaboration that are embedded within supply chain context (Kanda & Deshmukh, 2008) relatively essential in creating sustainable value to firms or customers. On top of that, those elements within supply chain context are complimentary and support one another with the main objective is to increase the efficiency and effectiveness of firms in the whole supply chain system. Prominently, the term of integration was frequently appeared within supply chain concept in previous literature and was significantly considered as a new approach of business strategy within supply chain context in order to create continuous competitiveness (Kannan & Tan, 2010). For instance, Wisner (2003) through the empirical study that examined the implication of supply chain management on firm’s performance have revealed the importance of integration within supply chain context. In the context of supply chain, integration can be described as the extent to which supply chain participants are collectively work together with the main objective is to achieve and enhance supply chain advantages. Supply chain integration can be operationalized in a form of process or activities (information, physical and financial flow), integration of supply chain actors (internal and external integration) and technologies or system (Näslund, 2012). Internal integration is regarded as supply chain activities that are carried out by several functions within the firms (Flynn, Huo, & Zhao, 2010). Meanwhile, external integration is generally referred to the integration among supply chain partners across firm’s boundaries that encompasses of upstream and downstream supply chain (Sun, 2012) with the aim is to create value to the entire supply chain. Some authors claimed that internal integration is prerequisite to external integration (Horn, Scheffler, & Schiele, 2014) and the dimensions of SCI in the past literature were not consistent. For instance, Narasimhan and Kim (2002) operationalized supply chain integration from the aspect of internal and external integration, and meanwhile some authors have only considered internal integration (Foerstl, Hartmann, Wynstra, & Moser, 2013; Pagell, 2004) or external integration (Koufteros, Edwin Cheng, & Lai,
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2007; Sun, 2012) in their studies. Importantly, most of supply chain integration studies revealed that there is association between supply chain integration and firm performance (Flynn et al., 2010; Rajagopal, Zailani, & Sulaiman, 2009). As mentioned earlier, although there is a substantial number of evidence to show the association between supply chain integration and operational performance, the success rate of supply chain integration was relatively low. Therefore, this study attempts to identify the enabler factors that may facilitate the success of supply chain integration implementation (Agan, 2005) among supply chain partners. Supply chain relational capital is referred to the creation of value that resulted from the implementation of relationship between focal firms with its supply chain partners (Ponomarov, 2012) and is considered as main asset that embedded in supply chain relationship (Nahapiet & Ghoshal, 1998). It is important to highlight that integration strategies require mutual trust and commitment among supply chain partners (Day, Fawcett, Fawcett, & Magnan, 2013) from the perspective of relational capital. Trust and commitment have become important relational dimensions in previous literature (Fazli, Hooshangi, & Hosseini, 2013; Sambasivan et al., 2011; Yim, & Leem, 2013), and a part from the above dimensions, socialization has shown a significant association with inter-firms relationship (Cousins et al., 2006). Importantly, through empirical finding, Yim, & Leem (2013) has shown a significant relationship between relational capital and supply chain integration. In addition, Sambasivan et al. (2011) revealed that relational capital was significantly linked with strategic alliance. Another study has also proven that relational capital led to the success of supply chain relationship (Ferrer, Santa, Hyland, & Bretherton, 2010). Based on the evaluation of relevant literature, it was proposed that there is sufficient evidence to show the influence of supply chain relational capital on the execution of supply chain relational capital integration.
Fig. 1. Proposed research framework
5. Conclusion As a conclusion, the review of literature together with initial exploratory interviews with key manufacturers of food products in Malaysia have revealed the significant influence of supply chain relational capital dimensions on the execution of supply chain integration initiatives. Without doubt, it is worthy to study what enabler factors that may facilitate the execution of integration as it appears to be a subject of interest among the academia, practitioners and policy makers who understand the critical application of supply chain integration within supply chain management context. It is hoped that when this study is implemented, much will be understood about the relevant factors that may facilitate the formation of supply chain integration initiatives and may also add value and enhance the existing body of knowledge on supply chain integration. Acknowledgements The author would like to thank the Ministry of Public Service Department of Malaysia for its financial support of this research. References Agan, Y. (2005). A resource-based approach to supply chain integration.PhD Thesis. University of Memphis
Zurita Mohd Saleh and Rosmimah Mohd Roslin / Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590 Ahmed, E. M. (2012). Malaysia ’ s Food Manufacturing Industries Productivity Determinants, 2012(July), 444–453. Antai, I. (2011). A Theory of the Competing Supply Chain : Alternatives for Development, 4(1), 74–85. Bask, A. H., & Juga, J. (2001). Semi-integrated Supply Chains: Towards the New Era of Supply Chain Management. International Journal of Logistics Research and Applications: A Leading Journal of Supply Chain Management, 4(2), 137–152. Cousins, P. D., Handfield, R. B., Lawson, B., & Petersen, K. J. (2006). Creating supply chain relational capital: The impact of formal and informal socialization processes. Journal of Operations Management, 24(6), 851–863. Danese, P., & Romano, P. (2011). Supply chain integration and efficiency performance: a study on the interactions between customer and supplier integration. Supply Chain Management: An International Journal, 16(4), 220-230. Day, M., Fawcett, S. E., Fawcett, A. M., & Magnan, G. M. (2013). Trust and relational embeddedness: Exploring a paradox of trust pattern development in key supplier relationships. Industrial Marketing Management, 42(2), 152–165. Dunne, a. J. (2008). The impact of an organization’s collaborative capacity on its ability to engage its supply chain partners. British Food Journal, 110(4/5), 361–375. Fawcett, S. E., Stanley, L. L., & Smith, S. R. (1997). Developing a logistics capability to improve the performance of international operations. Journal of business logistics, 18(2). Fazli, S., Hooshangi, M., & Hosseini, S. A. (2013). The relationship between relational capital and buyer performance, 5(4), 436–440. Ferrer, M., Santa, R., Hyland, P. W., & Bretherton, P. (2010). Relational factors that explain supply chain relationships. Asia Pacific Journal of Marketing and Logistics, 22(3), 419–440. Flint, D. J. (2004). Strategic marketing in global supply chains: Four challenges. Industrial Marketing Management, 33(1), 45–50. Flynn, B., Huo, B., & Zhao, X. (2010). The impact of supply chain integration on performance: a contingency and configuration approach. Journal of Operations Management, 28, 58–71. Foerstl, K., Hartmann, E., Wynstra, F., & Moser, R. (2013). Cross-functional integration and functional coordination in purchasing and supply management: Antecedents and effects on purchasing and firm performance. International Journal of Operations & Production Management, 33(6), 689–721. Han, J. (2013). The impact of supply chain integration on firm performance in the pork processing industry in China. Chinese Management Studies, 7, 230–252. Horn, P., Scheffler, P., & Schiele, H. (2014). ”Internal integration as a pre-condition for external integration in global sourcing: a social capital perspective“. International Journal of Production Economics. Kanda, A., & Deshmukh, S. G. (2008). Supply chain coordination: Perspectives, empirical studies and research directions. International Journal of Production Economics, 115(2), 316–335. Kannan, V. R., & Tan, K. C. (2010). Supply chain integration: cluster analysis of the impact of span of integration. Supply Chain Management: An International Journal, 15(3), 207–215. Koufteros, X. a., Edwin Cheng, T. C., & Lai, K.-H. (2007). “Black-box” and “gray-box” supplier integration in product development: Antecedents, consequences and the moderating role of firm size. Journal of Operations Management, 25(4), 847–870. Kumar, S., & Nigmatullin, A. (2011). A system dynamics analysis of food supply chains – Case study with non-perishable products. Simulation Modelling Practice and Theory, 19(10), 2151–2168. Kwon, I. G., & Suh, T. (2004). Factors Affecting the Level of Trust and Commitment in Supply Chain Relationship. Journal of Supply Chain Management, 40(1), 4–14. Matopoulos, a., Vlachopoulou, M., Manthou, V., & Manos, B. (2007). A conceptual framework for supply chain collaboration: empirical evidence from the agri-food industry. Supply Chain Management: An International Journal, 12(3), 177–186. Mendes Primo, M. A. (2010). Supply chain integration mechanisms for alleviating supply problems in manufacturing firms. Operations Management Research, 3(1-2), 43–59. Mohezar, S., & Mohd Nor, M. N. (2014). Could supply chain technology improve food operators’ innovativeness? A developing country’s perspective. Trends in Food Science & Technology. Nahapiet, J., & Ghoshal, S. (1998). Social Capital, Intellectual Capital, and the Organizational Advantage. The Academy of Management Review, 23(2), 242. Narasimhan, R., & Kim, S. W. (2002). Effect of supply chain integration on the relationship between diversification and performance: evidence from Japanese and Korean firms. Journal of Operations Management, 20(3), 303–323. Näslund, D. (2012). Supply chain management integration: a critical analysis. Benchmarking: An International Journal, 19(4), 481–501. Pagell, M. (2004). Understanding the factors that enable and inhibit the integration of operations, purchasing and logistics. Journal of Operations Management, 22(5), 459–487. Ponomarov, S. (2012). Antecedents and Consequences of Supply Chain Resilience : A Dynamic Capabilities Perspective. Power, D. (2005). Supply chain management integration and implementation: a literature review. Supply Chain Management: An International Journal, 10(4), 252–263. Rajagopal, P., Zailani, S., & Sulaiman, M. (2009). Assessing the effectiveness of supply chain partnering with scalable partnering as a moderator. International Journal of Physical Distribution & Logistics Management, 39(8), 649–668. Richey Jr, R. G., Chen, H., Upreti, R., Fawcett, S. E., & Adams, F. G. (2009). The moderating role of barriers on the relationship between drivers to supply chain integration and firm performance. International Journal of Physical Distribution & Logistics Management, 39(10), 826–840. Sambasivan, M., Siew-Phaik, L., Mohamed, Z. A., & Leong, Y. C. (2011). Impact of interdependence between supply chain partners on strategic alliance outcomes: Role of relational capital as a mediating construct. Management Decision, 49(4), 548–569. Spekman, R. E., Jr, J. W. K., & Myhr, N. (1998). An empirical investigation into supply chain management: A perspective on partnerships. International Journal of Physical Distribution & Logistics Management, 28(8), 630–650.
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Zurita Mohd Saleh and Rosmimah Mohd Roslin / Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590 Sun, H. (2012). The impact of upstream supply and downstream demand integration on quality management and quality performance. International Journal of Quality & Reliability Management, 29(8), 872–890. Tukamuhabwa, B. R. (2011). A Conceptual Model for Explaining Supply Chain Performance in Uganda’s SMEs. Information Management and Business Review, 3(6), 336–344. Tukamuhabwa, B. R., Eyaa, S., & Derek, F. (2011). Mediating Variables in the Relationship between Market Orientation and Supply Chain Performance : A Theoretical Approach. International Journal of Business and Social Science, 2(22), 99–107. Van der Vaart, T., & van Donk, D. P. (2008). A critical review of survey-based research in supply chain integration. International Journal of Production Economics, 111(1), 42–55. Vanichchinchai, A. (2012). The relationship between employee involvement, partnership management and supply performance: Findings from a developing country. International Journal of Productivity and Performance Management, 61(2), 157–172. Yim, B., & Leem, B. (2013). The effect of the supply chain social capital. Industrial Management & Data Systems, 113(3), 324–349. Zailani, S., & Rajagopal, P. (2005). Supply chain integration and performance: US versus East Asian companies. Supply Chain Management: An International Journal, 10(5), 379–393.
ScienceDirect Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590
Global Conference on Business & Social Science-2014, GCBSS-2014, 15th & 16th December, Kuala Lumpur
Supply Chain Integration Strategy: A Conceptual Model of Supply Chain Relational Capital Enabler in the Malaysian Food Processing Industry Zurita Mohd Saleha*, Rosmimah Mohd Roslinb a,b
Faculty of Business Management, Universiti Teknologi MARA, Shah Alam, 40450, Malaysia
Abstract Previous literature has confirmed the association between SCI and firm’s performance. However, limited success of integration with key supply chain partners were found in literature. Indeed, the impact of SCRC that may facilitate to the success of SCI was not fully understood. Thus, this paper is to propose a framework in investigating the influence of SCRC on the execution of SCI by adopting relational capital theory. Through a review of related literature and formal interview, relational elements such as trust, commitment and socialization have become significant elements to facilitate the execution of SCI practices among firms in food processing industry. © by by Elsevier Ltd.Ltd. This is an open access article under the CC BY-NC-ND license © 2015 2015The TheAuthors. Authors.Published Published Elsevier (http://creativecommons.org/licenses/by-nc-nd/4.0/). Peer-review under responsibility of GLTR International Sdn. Berhad. Peer-review under responsibility of GLTR International Sdn. Berhad.
Keywords: supply chain integration; supply chain relational capital; food processing industry; relationship management; operational performance
1. Introduction Due to the increase of contemporary turbulent and dynamic business environment in recent years, it is no longer significant for firms to increase their competitiveness that is solely relying on their own internal capabilities and competencies. As asserted by Tukamuhabwa, Eyaa and Derek (2011), nowadays, firms have to seek a new effective way to compete in order to survive in the intense global market. It was apparently and frequently described in current
* Corresponding author. Tel.: +6-013-2328296 E-mail address: [email protected]
1877-0428 © 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of GLTR International Sdn. Berhad. doi:10.1016/j.sbspro.2015.01.406
586
Zurita Mohd Saleh and Rosmimah Mohd Roslin / Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590
literature that firms may not be able to heighten their competitiveness if they isolated their internal process and structure with their external trading partners (Danese & Romano, 2011). In other word, competition that is based on a single firm competition is no longer relevant in today’s business environment and therefore, competition between firms in the entire supply chain with another supply chain entities are perceived more significant by a substantial number of authors (Antai, 2011; Fawcett, Stanley, & Smith, 1997). The emergence of such competition has increased the need for firms in the whole supply chain system to cooperate, coordinate, collaborate, and integrate in order to ensure the investment effort in supply chain relationship will provide high value of return to the whole supply chain participants (Flint, 2004). On top of that, the success of collaboration and cooperation among supply chain participants is resulted from the mechanism of integration as described by Mendes Primo (2010). Although integrative relationship is considered as a vital source of competitive advantage that may provide numerous benefits to firm either in a form of economic or non-economic value, close relationship of focal firm with its supply chain partners is difficult to achieve and execute (Dunne, 2008). In fact, there were a substantial number of authors who disagree with the notion that supply chain integration (SCI) will always have positive impact on firms performance either from the aspect of tangible or non-tangible performance (Bask & Juga, 2001; Power, 2005) and the potential benefits that associated with SCI were ambiguous (Pagell, 2004). Yet, empirical research by Zailani and Rajagopal (2005) has shown that the linkages between supply chin integration and performance was positively significant. From the above discussion, it could be argued that the collaborative and integrative advantage could not be achieved by firms due to the disability of firms to collaborate with supply chain partners effectively and efficiently. As an evidence, Spekman, Jr, and Myhr (1998) reported that 60 per cent of firms failed in supply chain partnership initiative, and approximately 70 per cent of supply chain relationship tend to fail (Sambasivan, Siew-Phaik, Mohamed, & Leong, 2011). This in turn has contributed to a negative implication of SCI on firm’s operational performance in terms of flexibility, delivery, cost and quality. Therefore, it is vital to identify factors that influence the failure or success of supply chain partnership or integration initiative from the perspective of soft behavioural attributes. As such, relationship management which considers soft behavioural attributes of integration has recently become a central issue within supply chain management context that could be the best element to explain the success of supply chain integration. Some authors like Vanichchinchai (2012) argued that most previous studies within supply chain management context lack to consider soft behavioural attributes such as trust, commitment and socialization. Those soft behavioural attributes are claimed to be vital elements in supply chain relational capital (SCRC), particularly in the food processing industry due to high customer’s requirement towards product quality, safety and fast delivery in recent years. However, to establish and maintain supply chain relationship such as integration remained formidable and challenging (Sambasivan et al., 2011) owing to the lack of understanding regarding on the relevant factors that might contribute to the success of supply chain integration (Richey, Chen, Upreti, Fawcett, & Adams, 2009). Both, trust and commitment are perceived as a cornerstone of supply chain partnership and imperative aspect of relational exchanges between firm and supply chain partners (Kwon & Suh, 2004) Indeed, Han (2013) revealed that both relational capital dimensions, trust and commitment have significant relationship with cooperative improvement. Moreover, another important element of relational capital such as socialization plays a significant role in supply chain intra-and inter-firms relationship (Cousins, Handfield, Lawson, & Petersen, 2006). Therefore, by understanding the important factors of relational capital that influence the establishment of supply chain integration enable participants in supply chain to complement and espouse resources and information among them (Ferrer, Santa, Hyland, & Bretherton, 2010). As reported in previous literature, information sharing plays an important role in improving supply chain integration through the influence factor of relational capital (Yim, & Leem, 2013). To conclude, it can be postulated that supply chain relational capital may act as an enabler to facilitate to the success of supply chain integration. 2. Background of the study Supply chain in the food processing industry is considered complex in terms of information sharing as it involves multiple interactions of supply chain participants such as farmers or producers, manufacturers, multiple distributor channels and customers in the supply chain system (Matopoulos, Vlachopoulou, Manthou, & Manos, 2007). In addition, issues on the availability of resources and uncertainty of customer demand have partly contributed to the complexity of food supply chain system (Kumar & Nigmatullin, 2011). According to the authors, integration among
Zurita Mohd Saleh and Rosmimah Mohd Roslin / Procedia - Social and Behavioral Sciences 172 (2015) 585 – 590
supply chain participants in this industry will enable firms to control over the entire food delivery process and consequently, allow them to meet customer’s expectation regarding on supply and production integrity as well as to maximize customer’s value. In fact, integrative relationship allows firms to improve lead time through effective communication and coordination among food supply chain partners. Although the Malaysian food processing industry plays a significant role to the Malaysian economy growth (Ahmed, 2012), statistical report by Companies Commission of Malaysia (SSM, 2013) have shown that most of the firms in this industry were experiencing unsatisfactory performance that subsequently, have urged them to close down their businesses. The above situation could be due to supply chain performance problem and this notion could be espoused by a study conducted by Tukamuhabwa (2011) who revealed that most firms in the study collapsed which resulted from supply chain performance problem. Therefore, supply chain integration as a source of competitive advantage should not be denied by researcher and should be considered as a strategic weapon in the Malaysian food processing industry. Unfortunately, the production and distribution system in the food supply chain industry in Malaysia has been segregated (Mohezar & Mohd Nor, 2014) and low of integration between the two entities has led to the deterioration of operational performance. Therefore, this study adopts the understanding that the supply chain relational factor may act as enabler factors which may facilitate the execution of supply chain integration in the processing industry in Malaysia. 3. Problem statement There are mounting empirical evidence that confirmed the association between SCI and firm’s performance. However, limited success of integration with key supply chain partners were reported in literature, and the impact of supply chain relational capital factor as an imperative enabler that may facilitate to the success of SCI are not fully understood. With regards to the above, some authors asserted that it is imperative to prescribe factors that affect the success of inter- and intra-firm relationship management, particularly from the aspect of soft behavioural attributes. Furthermore, in relation to the food industry, supply chain integration has been given less attention by authors within supply chain management context (van der Vaart & van Donk, 2008). Furthermore, issues on what enabler factors that might facilitate to the success of SCI should be addressed and identified in the study (Agan, 2005). 4. Literature review and proposed research frameworks The concept of coordination, cooperation, integration and collaboration that are embedded within supply chain context (Kanda & Deshmukh, 2008) relatively essential in creating sustainable value to firms or customers. On top of that, those elements within supply chain context are complimentary and support one another with the main objective is to increase the efficiency and effectiveness of firms in the whole supply chain system. Prominently, the term of integration was frequently appeared within supply chain concept in previous literature and was significantly considered as a new approach of business strategy within supply chain context in order to create continuous competitiveness (Kannan & Tan, 2010). For instance, Wisner (2003) through the empirical study that examined the implication of supply chain management on firm’s performance have revealed the importance of integration within supply chain context. In the context of supply chain, integration can be described as the extent to which supply chain participants are collectively work together with the main objective is to achieve and enhance supply chain advantages. Supply chain integration can be operationalized in a form of process or activities (information, physical and financial flow), integration of supply chain actors (internal and external integration) and technologies or system (Näslund, 2012). Internal integration is regarded as supply chain activities that are carried out by several functions within the firms (Flynn, Huo, & Zhao, 2010). Meanwhile, external integration is generally referred to the integration among supply chain partners across firm’s boundaries that encompasses of upstream and downstream supply chain (Sun, 2012) with the aim is to create value to the entire supply chain. Some authors claimed that internal integration is prerequisite to external integration (Horn, Scheffler, & Schiele, 2014) and the dimensions of SCI in the past literature were not consistent. For instance, Narasimhan and Kim (2002) operationalized supply chain integration from the aspect of internal and external integration, and meanwhile some authors have only considered internal integration (Foerstl, Hartmann, Wynstra, & Moser, 2013; Pagell, 2004) or external integration (Koufteros, Edwin Cheng, & Lai,
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2007; Sun, 2012) in their studies. Importantly, most of supply chain integration studies revealed that there is association between supply chain integration and firm performance (Flynn et al., 2010; Rajagopal, Zailani, & Sulaiman, 2009). As mentioned earlier, although there is a substantial number of evidence to show the association between supply chain integration and operational performance, the success rate of supply chain integration was relatively low. Therefore, this study attempts to identify the enabler factors that may facilitate the success of supply chain integration implementation (Agan, 2005) among supply chain partners. Supply chain relational capital is referred to the creation of value that resulted from the implementation of relationship between focal firms with its supply chain partners (Ponomarov, 2012) and is considered as main asset that embedded in supply chain relationship (Nahapiet & Ghoshal, 1998). It is important to highlight that integration strategies require mutual trust and commitment among supply chain partners (Day, Fawcett, Fawcett, & Magnan, 2013) from the perspective of relational capital. Trust and commitment have become important relational dimensions in previous literature (Fazli, Hooshangi, & Hosseini, 2013; Sambasivan et al., 2011; Yim, & Leem, 2013), and a part from the above dimensions, socialization has shown a significant association with inter-firms relationship (Cousins et al., 2006). Importantly, through empirical finding, Yim, & Leem (2013) has shown a significant relationship between relational capital and supply chain integration. In addition, Sambasivan et al. (2011) revealed that relational capital was significantly linked with strategic alliance. Another study has also proven that relational capital led to the success of supply chain relationship (Ferrer, Santa, Hyland, & Bretherton, 2010). Based on the evaluation of relevant literature, it was proposed that there is sufficient evidence to show the influence of supply chain relational capital on the execution of supply chain relational capital integration.
Fig. 1. Proposed research framework
5. Conclusion As a conclusion, the review of literature together with initial exploratory interviews with key manufacturers of food products in Malaysia have revealed the significant influence of supply chain relational capital dimensions on the execution of supply chain integration initiatives. Without doubt, it is worthy to study what enabler factors that may facilitate the execution of integration as it appears to be a subject of interest among the academia, practitioners and policy makers who understand the critical application of supply chain integration within supply chain management context. It is hoped that when this study is implemented, much will be understood about the relevant factors that may facilitate the formation of supply chain integration initiatives and may also add value and enhance the existing body of knowledge on supply chain integration. Acknowledgements The author would like to thank the Ministry of Public Service Department of Malaysia for its financial support of this research. References Agan, Y. (2005). A resource-based approach to supply chain integration.PhD Thesis. University of Memphis
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