Customization and real time information access in integrated eBusiness supply chain relationships

• Published date: 01 November 2007
• Date: 01 November 2007
• DOI: http://doi.org/10.1016/j.jom.2007.03.001
• Author: Richard Klein

Customization and real time information access in integrated

eBusiness supply chain relationships

Richard Klein

Department of Management, College of Business and Behavior Sciences, Clemson University,

101 Sirrine Hall, Box 341305, Clemson, South Carolina 29634-1305, USA

Available online 7 March 2007

Abstract

eBusiness enabled information systems and technology have proliferated with the diffusion and technological advances of the

Internet. This research examines supply chain management relationships between service providers and clients, focusing on the

performance impacts of (1) the level of customization implemented by clients using vendor provided eBusiness solutions and (2) the

subsequent real time access achieved with respect to operational information maintained by vendors. The study also focuses on the

impacts of the provider’s information exchange behavior and both parties’ level of trust. Using dyadic data collected from a logistics

services provider and 91 clients, findings show that the level of customization and real time information access has a direct positive

impact on performance outcomes realized by both. Additionally, results demonstrate that provider’s level of trust in the client

positively influences their information exchange behavior, and in turn, information exchange behavior positively impacts client

customizations.

#2007 Elsevier B.V. All rights reserved.

Keywords: Customization; Dyadic data; eBusiness; Integration; Logistics management; Outsourcing; Supply chain management

1. Introduction

Researchers note that supply chain management will

play an ever increasing role in the growing digital

economy (Gavirneni et al., 1999; Swaminathan and

Tayur, 2003). Beyond the pure sales and transaction

opportunities that emerged in the 1990s with the

Internet, businesses have innovatively employed tech-

nological advances to redefine relationships, share

processes, and collaborate (Wladawsky-Berger, 2000).

In meeting organizational supply chain needs, firms

enter into business relationships in an effort to facilitate

functions beyond their capabilities or outside core

competencies (Leonard-Barton, 1992). Effective supply

chain management requires the integration of activities,

functions, and systems (Vickery et al., 2003). Here,

integration between service providers and clients

constitutes a key strategic initiative (Reck, 1988;

Morris and Calantone, 1991; Ragatz et al., 1997).

Prior work finds supply chain integration strategies

impact diversification and firm performance (Narasim-

han and Kim, 2002), while electronic integration of

procurement functions benefits both suppliers and

customers (Mukhopadhyay and Kekre, 2002).

The current study focuses on the varying levels of

application customization implemented by clients in

facilitating recurring interactions employing outsource

supply chain service providers’ eBusiness solutions.

Customizations of such applications result in asset

specific investments (Williamson, 1989) on the part of

the client. Additionally, the extent to which clients

www.elsevier.com/locate/jom

Journal of Operations Management 25 (2007) 1366–1381

E-mail address: rklein@CLEMSON.edu.

0272-6963/$ – see front matter #2007 Elsevier B.V. All rights reserved.

doi:10.1016/j.jom.2007.03.001

achieve real time, or direct, access to information

maintained by service providers constitutes a goal of

customization efforts (Brynjolfsson and Hitt, 2000),

efficiently and economically attainable through newly

developed Internet-based technologies. Accordingly,

this research seeks to understand the role of customiza-

tion and real time information access in implementing

service providers’ eBusiness solutions.

Recognizing the importance of fostering environ-

ments that support client investments in customizing

applications with business partners (Hill and Scudder,

2002), this research also examines the role of trust and

service providers’ information/knowledge exchanges

behavior in shaping client customization efforts.

Borrowing from transaction cost theory, Dyer and

Singh (1998) relational view of the firm suggests that

effective governance and knowledge exchange play

crucial roles in the evolution of any inter-organizational

relationship where partners engage in mutually bene-

ficial initiatives.

The balance of this manuscript proceeds in the

following order. The next section discusses eBusiness

solutions, followed by a review of the theoretical

foundations of the study and relevant background

literature specific to proposed research hypotheses. The

next section details the research design, including

measurement development, conduct of the empirical

survey, and reviewof sample data. Finally, the results of

the analysis are presented and discussed. The paper then

concludes with a review of the research, study

limitations, and future research directions.

2. eBusiness solutions

In integrating vendors’ logistics capabilities, client

firms require information specific to inventory levels

and physical flows to maximize their ability to serve

their own customers (Stein, 1998; Walker et al., 2000).

Such initiatives also afford clients the opportunity to

avail themselves of previously unused information held

by vendors, often used to develop value-added products

and services to strengthen their own client relationships

(Gulati and Kletter, 2005). Vendors likewise utilize

information specific to client requirements for global

optimization of plans and adaptive execution of

processes. Clients integrating logistics applications

enable vendors to plan capacities for peak periods

and exhibit requisite scalability of operations. As

shipments seasonally spike, anticipation of the exact

timing and extent of such activities constitute invaluable

operational necessities.

In filling these needs, dominant service providers,

such as large logistics vendors, often take advantage of

their centrality within the industry to influence assets,

information, and status (Gnyawali and Madhavan,

2001). Centrality provides the vendor with the power

to offer services in specified formats, realizing of

economies of scale, while clients may assume a

disproportionate amount of the effort to integrate

sourced services with their own assets. This situation

also allows these same vendor firms to achieve growth

through the replication of technology and solutions

subject to imitation (Kogut and Zander, 1992). Hence,

within the logistics industry, dominant vendors strive to

develop repeatable eBusiness solutions, employing

advances in Internet-based technologies.

Whereas vendors may take advantage of economies

of scale with respect to eBusiness solutions offered to

clients for customization, the current study seeks to

explore potential benefits derived from customization

within the context of individual client/vendor relation-

ships. In conjunction with customization, organiza-

tional ability to access timely, if not real time,

information has emerged as a strategic initiative

(Gavirneni et al., 1999; Cachon and Fisher, 2000; Chen

et al., 2000; Lee et al., 2000; Germain et al., 2001)in

resolving persistent supply chain challenges like the

bullwhip effect (Kahn, 1987; Lee et al., 1997; Kotabe

et al., 2003) and poor customer service (Shin et al.,

2000; Vickery et al., 2003). Rather than examine

previously studied vendor outcomes the current work

focuses on the seldom studied relationship as the unit of

analysis. Here, this research explores whether both

parties within the relationship, client and vendor, derive

benefits from client customizations and real time

information access through vendors’ eBusiness solu-

tions.

3. Prior research and hypotheses

3.1. Theoretical foundation

Coase (1937) advanced the notion of the ‘‘firm’’ as a

core economic entity, and Williamson (1975) used this

work as a catalyst for focusing economic theory on the

‘‘transaction’’ or basic unit of exchange. Borrowing

from the perspective that the course of employment

yields ‘‘idiosyncratic’’ human capital (Marshall, 1961),

theory advanced that in meeting transactional needs,

firms invest in assets specific to exchange fulfillment

(Williamson, 1989). Asset specificity dictates that a

tangible, or intangible, asset holds value within a

specific domain or environment and loses some or all of

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1367