Supply Chain Management in Telecommunication Industry: The Mediating Role of Logistics Integration

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1 Supply Chain Management in Telecommunication Industry: The Mediating Role of Logistics Integration Noraini Ahmad 1, Adam Mohd Saifudin 2 1 Othman Yoep Abdullah Graduate School of Business Universiti Utara Malaysia 2 School of Technology Management and Logistics College of Business Universiti Utara Malaysia Abstract. Increase in the competitive environment in Telecommunication industry, customer demand for more cheap product with better quality service. Hence, Telecommunication companies need to operate efficiency for their supply chain management in order to perform the best performance. The supply chain management practice has mostly been analyzed as a strategy that to gain competitive advantage in business performance. Therefore, the purpose of this paper is to propose the structural relationship between the supply chain management practice and supply chain performance and whether this relationship is mediated by the logistics integration in the Telecommunication industry. The proposed framework expects to be tested using Statistical Package for Social Sciences (SPSS) 21th version for testing the measurement model and the data will be collected from companies in the Telco industry. The research is limited literature review and end with suggested future research. Keywords: supply chain management practice, supply chain performance, logistics integration, Telecommunication industry 1. Introduction Department of Statistics Malaysia reported that the percentage share of economic activities main sector are service sector(54.6%), followed by manufacturing (24.9%), mining and quarrying (8.4%), agriculture (7.3%) and construction (3.5%) (Department of Statistics Malaysia, 2012). Telecommunication industry is under service sector. Thus it showed that the Telecommunication industry contribute a lot in the Malaysia economic activity. Besides that, Industry Performance Report by Malaysia Communication and Multimedia Commission (MCMC) highlighted that communication industry in a steady growth 7.2% and this growth rate is in line with government nation status 2020(Report, 2012). This study focuses on Telecommunication companies in Malaysia since Telecommunication industry contributes a high percentage of shares of economic activities. Therefore, in order to maintain the companies remain competitive, supply chain needs to manage accordingly. The Telecommunication industry consists of the few businesses along with the supply chain. Figure 1 showed the high level supply chain structure in the Telecommunication industry. Figure 1 :High level supply chain structure in Telecommunication industry(pettersson & Segerstedt, 2013) 648

2 1.1 Objective The purpose of this paper is to propose the structural relationship between the supply chain management practice and supply chain performance and whether this relationship is mediated by the logistics integration in the Telecommunication industry. This paper will discuss the literature review, the proposed research framework, methodology, contribution, conclusion and suggestion for future research. 2. Literature Review Supply chain management practice define as a set of activities undertaken by organization to promote effective management of its supply chain (Li, Ragu-Nathan, Ragu-Nathan, & Subba Rao, 2006). From past literature, there are a lot of the supply chain management practice dimension discuss by the researcher. Table 1 summarizes the theoretical studies of dimension of supply chain management practice from the past research. In this study, four dimensional of supply chain management practice which are a strategic supplier partnership, customer relationship and information sharing will be used as a independent variable. Logistics integration will be used as a mediating variable and supply chain performance as a dependent variable. Table 1: Dimension of Supply Chain Management Practice Source Supply Chain Management Practice Dimension Mediator/Moderator Industry/Country (Li et al., Strategic supplier partnership, Customer None Different industries 2006) relationship, Information sharing, Information quality, Internal lean practice, Postponement (Koh, Strategic collaboration and lean practice, None SME companies from Turkey Demirbag, Outsourcing and multi supplier Bayraktar, Tatoglu, & Zaim, 2007) (Chow et al., Customer and supplier management None US and Taiwan 2008) Supply chain features, Communication and speed, manufacturing comparison Information sharing, Customer relationship (Omain, Customer relationship, Close supplier relationship, None Agriculture in Malaysia Bakar, Information sharing, Supply chain integration, Hamid, Logistics, Strategic location Rahman, & Rahim, 2010) (Cook, Information sharing, Long term relationship, Supply chain roles as Nonacademic North America Heiser, & Advance planning system, Leveraging the internet, a moderator membership of the Institute Sengupta, Distribution Network Structure of Supply Chain 2011) (Sundram, Supplier strategic partnership, Customer None Electronics Industry in Ibrahim, & relationship, Information Malaysia Govindaraju, Sharing, Information quality, Postponement, 2011) Agreed vision & goal, Risk and reward sharing 649

3 (Tan, 2012) Information and technology management, Allience integrated Public healthcare in Malaysia Demand management, Customer relationship network as mediator management, Supplier relationship management, Capacity and resource management (Asmida, Leadership, Supplier relationship, Customer None Automotive Industry in Sah, focuses, Quality information and Malaysia Habidin, analysis, Internal lean practice Latip, & Salleh, 2014) 2.1 Strategic supplier partnership Li et al described strategic supplier partnership as a long term relationship to influence the both parties between supplier and company to achieve significant benefit between them (Li et al., 2006). Long term relationship refer to the deal is not temporary (Chen & Paulraj, 2004). Indra et al has investigated that strategic supplier partnership has significant relationship with competitive advantage of the firm in term of quality, price, delivery, time to market and product (Sukati, Abu, Abdul, Prof, & Baharun, n.d.). The supply chain performance affected by the competitive advantage(datt, 2009). Hence, the strategic supplier partnership is crucial to enhance the supply chain performance. 2.2 Customer relationship Customer relationship is how to manage the customer complaints, enhanced customer satisfaction and create long term relationship with customer (Sundram et al., 2011). Chow et al in their research found that supply chain management practice made up of customer relationship has direct impact on organizational performance in Taiwan but indirect impact on organizational in US (Chow et al., 2008). Hence, customer relationship will be able to enhance supply chain to better performance. 2.3 Information sharing Information sharing refer to how the critical information is being shared among the supply chain member regarding to customer information, product and market (Sundram et al., 2011). Information sharing is an essential dimension in supply chain management practice. Sezen in his study on manufacturing firms in Turkey found that information sharing are correlated with supply chain performance but with lower relative effect size(sezen, 2008). Thus it is essential to include in information sharing in this study. 2.4 Logistics integration In 2013, Moskdanian and Molahosseini reported that logistic integration is one of important variable in measuring the performance(moshkdanian & Author, 2013).Stock described logistics integration as a logistics practices and operational activities that coordinate the flow of material from supplier to customer throughout the value stream (Gregory, 1998). Bannet and Klug in their studies concluded that logistics integration is a new form of criteria for companies to evaluate the performance between the company and supplier (Bennett, 2012). Moskdanian and Molahosseini in their research demonstrated that there is positive and strong relationship between logistics integration and performance in Bahaman Group which is a manufacturing company (Moshkdanian & Author, 2013). Projogo also believed that improvement in logistics integration contribute to the increasing of operational benefit (Prajogo, 2012). But the research is limited in manufacturing industry and organizational performance, due to the research gap, this paper interested to study the logistics integration mediating effect on structural relationship between the supply chain management practice and supply chain performance in Telco industry. 650

4 2.5 Supply chain performance ICTOM 04 4th International Conference on Technology and Operations Management Supply chain performance can be measured using efficiency and effectiveness (Hsu, 2005). There are two indicators for supply chain performance, first, cost containment indicator such as warehousing cost, cost inbound and outbound activities and increasing asset turnover. Second, reliability indicator which include inventory turns, safety stocks and order fulfilment (Lee, Kwon, & Severance, 2007). Veerat et al argues that supply chain performance measure long term goal which increase market share and short term goal which include reduce cost (Sundram et al., 2011). Supply chain performance is important for company to compete in global market. Previous literature shows that supply chain performance has a positive relationship with supply chain management practice in different industry, country and context. 3 Proposed Research Framework Based on the discussion on the literature review, there are a lots of study were explored regarding on supply chain management practises and supply chain performance but limited study on mediating and moderating effect (Danese, 2013). Thus, Figure 2 proposed the research framework of this study. Figure 2: Research Framework 4 Methodology This research is an empirical study which will employ the research by using the quantitative method. The method of data collection is by distributing the questionnaire to the managerial and executive level of worker from Telco companies. The proposed framework expects to be tested using Statistical Package for Social Sciences (SPSS) 21th version for testing the measurement model. 651

5 5 Contribution ICTOM 04 4th International Conference on Technology and Operations Management This study will investigate empirically on the mediating effect of logistics integration on the relationship of supply chain management practice and supply chain performance in the Telecommunication industry. Academically, the past literature review has been studied on different country and different industry of supply chain management practice(hong & Zailani, 2011; Koh et al., 2007; Omain et al., 2010; Sundram et al., 2011) but did not cover the mediating effect that will affect the relationship(sundram et al., 2011).Thus, an alternative framework sufficient to be added to measure the mediating effect in the supply chain management practice. 6 Conclusion and suggestion for future research Supply chain management practice and supply chain performance are becoming a crucial factor for the companies to establish in the global market. The fierce competition among companies in Telecommunication industry has driven supply chain management practice to the fore of key values drivers for companies to gain supply chain performance. The paper proposed the conceptual framework that there is the mediating effect of logistics integration on the relationship of supply chain management practice and supply chain performance in the Telecommunication industry. Future research may improve by extending the analysis to include others dimensional of supply chain management practice such as leadership, postponement, just in time and also extending on the mediating effect such as supply chain integration and information integration. 7 References Asmida, M., Sah, M., Habidin, N. F., Latip, N. A., & Salleh, M. I. (2014). A Review of Structural Relationship Between Supply Chain Management and Organizational Performance in Malaysian Automotive Industry, 2(1), 1 5. doi: /ujibm Bennett, D. (2012). Logistics supplier integration in the automotive industry. International Journal of Operations & Production Management, 32(11), doi: / Chen, I. J., & Paulraj, A. (2004). Towards a theory of supply chain management: the constructs and measurements. Journal of Operations Management, 22(2), doi: /j.jom Chow, W. S., Madu, C. N., Kuei, C.-H., Lu, M. H., Lin, C., & Tseng, H. (2008). Supply chain management in the US and Taiwan: An empirical study. Omega, 36(5), doi: /j.omega Cook, L. S., Heiser, D. R., & Sengupta, K. (2011). The moderating effect of supply chain role on the relationship between supply chain practices and performance: An empirical analysis. International Journal of Physical Distribution & Logistics Management, 41(2), doi: / Danese, P. (2013). The moderating role of supply network structure on the customer integrationefficiency relationship. International Journal of Operations & Production Management, 33(4), doi: / Datt, R. (2009). An Integrated Study for Supply Chain Management Practices, Performance and Competitive Advantage with Special Reference to Air India Cargo International Association of Computer Science and Information Technology - Spring Conference, doi: /iacsit-sc Gdp by state (2012). 652

6 Gregory, S. (1998). Logistics Strategy and Structure. International Journal of Operation and Production Management, 18(1), Hong, T. K., & Zailani, S. (2011). Service supply chain practices from the perspective of Malaysian tourism industry IEEE International Conference on Industrial Engineering and Engineering Management, doi: /ieem Hsu, L.-L. (2005). SCM system effects on performance for interaction between suppliers and buyers. Industrial Management & Data Systems, 105(7), doi: / Koh, S. C. L., Demirbag, M., Bayraktar, E., Tatoglu, E., & Zaim, S. (2007). The impact of supply chain management practices on performance of SMEs. Industrial Management & Data Systems, 107(1), doi: / Lee, C. W., Kwon, I.-W. G., & Severance, D. (2007). Relationship between supply chain performance and degree of linkage among supplier, internal integration, and customer. Supply Chain Management: An International Journal, 12(6), doi: / Li, S., Ragu-Nathan, B., Ragu-Nathan, T. S., & Subba Rao, S. (2006). The impact of supply chain management practices on competitive advantage and organizational performance. Omega, 34(2), doi: /j.omega Moshkdanian, F., & Author, C. (2013). Impact of supply chain integration on the performance of Bahman group, Omain, S. Z., Bakar, A., Hamid, A., Rahman, A., & Rahim, A. (2010). Supply Chain Management Practices in Malaysia Palm Oil Industry, (December), Pettersson, A. I., & Segerstedt, A. (2013). To Evaluate Cost Savings in a Supply Chain : Two Examples from Ericsson in the Telecom Industry, 6(3), Prajogo, D. (2012). Supply Chain Integration and Performance: The effect long term relationship, information technology and sharing and logistics integration. International Journal of Production Economics, 135(1). Report, I. P. (2007). Industry Performance Report Sezen, B. (2008). Relative effects of design, integration and information sharing on supply chain performance. Supply Chain Management: An International Journal, 13(3), doi: / Sukati, I., Abu, P., Abdul, B., Prof, A., & Baharun, R. (n.d.). A STUDY OF SUPPLY CHAIN MANAGEMENT PRACTICES : AN EMPIRICAL INVESTIGATION ON CONSUMER GOODS INDUSTRY IN MALAYSIA. Dr. Huam Hon Tat Faculty of Management and Human Resource Development Universiti Teknologi Malaysia Fazila Said Malaysia Nuclear Agency 2., 2(17), Sundram, V. P. K., Ibrahim, A. R., & Govindaraju, V. G. R. C. (2011). Supply chain management practices in the electronics industry in Malaysia: Consequences for supply chain performance. Benchmarking: An International Journal, 18(6), doi: / Tan, C. L. (2012). The Effect of Service Supply Chain Management Practices on the Public Healthcare Organizational Performance, 3(16),

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