+achieving Supply Chain Agility - Information System Integration in The Chinese Automotive Industry

Yi Wu
Achieving Supply
Chain Agility
Information System
Integration in the
Chinese Automotive
Industry
Achieving Supply Chain Agility
Yi Wu
Achieving Supply
Chain Agility
Information System Integration in the
Chinese Automotive Industry
Yi Wu
Beijing, China
ISBN 978-3-319-98439-1 ISBN 978-3-319-98440-7 (eBook)

https://doi.org/10.1007/978-3-319-98440-7
Library of Congress Control Number: 2018950559
© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature
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Contents
1 Introduction: The Phenomenon of Supply Chain Agility 1
2 IS-Enabled Supply Chain Agility 11
3 Chinese Automotive Supply Chain Management 67
4 Case Studies: Supply Chain A 91
5 Case Analysis-Supply Chain B 139
6 Comparative Analysis of Cases 179
7 Survey Study 197
8 Concluding Comments 227
Index 235
v
List of Figures
Fig. 2.1 Supply chain applications 36

Fig. 2.2 Integrated Supply Chain 38
Fig. 2.3 Framework 49
Fig. 4.1 The information flow from orders to manufacturing
to logistics with Company A1 94
Fig. 4.2 Company A1 communications with suppliers and car dealers 95
Fig. 4.3 Information flow from orders to manufacturing
Fig. 4.4 Communication with suppliers and customers from
Company A2 108
Fig. 4.5 Information flows across from orders to manufacturing
Fig. 4.6 Communication with customers and suppliers from
Company A3 118
Fig. 4.7 The role of IS integration in achieving supply chain agility
from supply chain A 131
Fig. 5.1 Information flow from logistics, procurement
and manufacturing with Company B1 141
Company B1 142
vii
viii
List of Figures
Fig. 5.3 Information flow from orders to manufacturing to logistics

with Company B2 149
Company B2 150
Fig. 5.5 Information flow across procurement, manufacturing
and logistics with Company B3 157
Fig. 5.6 Communication with suppliers and customers from
Company B3 158
from supply chain B 172
Fig. 6.1 A revised conceptual model 192
Fig. 6.2 The role of IS integration in achieving supply chain agility 192
Fig. 7.1 Critical factors of IS integration 202
Fig. 7.2 Revised framework on IS integration 205
Fig. 7.3 Results of an alternative model 205
Fig. 7.4 Results 217
Fig. 8.1 Proposed model 230
List of Tables
Table 2.1 Themes identified from literature 48

Table 3.1 The participating companies 79
Table 3.2 Construct measurement 83
Table 4.1 Position of participating companies in supply chains 93
Table 4.2 Critical successful factor of IS integration
from supply chain A 123
Table 4.3 Customer sensitivity case analysis of supply chain A 125
Table 4.4 Process integration case analysis of supply chain A 126
Table 4.5 Network integration case analysis of supply chain A 128
Table 4.6 Virtual integration case analysis of supply chain A 129
Table 5.1 Critical successful factor of IS integration of supply chain B 165
Table 5.2 Customer sensitivity case analysis display of supply chain B 166
Table 5.3 Process integration case analysis of supply chain B 168
Table 5.4 Network integration case analysis of supply chain B 169
Table 5.5 Virtual integration case analysis display of supply chain B 171
Table 7.1 IS survey questions and descriptive statistics 199
Table 7.2 Results of measurement validation of IS integration 199
Table 7.3 Factor correlation of IS integration part 201
Table 7.4 Four dimensions of supply chain agility factor loadings 207
Table 7.5 Survey questions and descriptive statistics of IS
integration and supply chain agility 210
ix
x
List of Tables
Table 7.6 Assessment of discriminant validity 212

Table 7.7 Analysis of the measurement model 213
Table 7.8 Results of measurement validation of IS integration
and supply chain agility 216
1
Introduction: The Phenomenon of Supply
Chain Agility
1.1 The Rise of Industry 4.0

Business complexity and requirements have been increasing in the
manufacturing industry through intense competition, a turbulent
market environment, increased demand for customised products, and
shortened product life cycles. These challenges have been met with a
range of production strategies, most recently with the development of
Industry 4.0.
The concept was first proposed by Kagermann et al. (referenced
by Stock and Seliger 2016) and published by the German National
Academy of Science and Engineering in 2013. The concepts and topics
were further developed by Public Private Partnership and promoted by
the Industrial Internet Consortium (Stock and Seliger 2016). Industry
3.0 focuses on process automation on an individual basis; whereas
Industry 4.0 digitises and integrates end-to-end processes with its sup-
ply chain partners. It is based on smart factories, smart products and
smart services through technologies including the Internet of Things
(IoT) and the Internet of Services (IoS) (Lasi et al. 2014).
© The Author(s) 2019 1

Y. Wu, Achieving Supply Chain Agility,
https://doi.org/10.1007/978-3-319-98440-7_1
2
Y. Wu
Industry 4.0 is a technology-based strategy introducing the concept

of integrated industry (Brettel et al. 2014), relying on information
which is both highly integrated and available across the entire product
life cycle (Stock and Seliger 2016). Its roll-out has significant impacts
on how supply chains are managed (Alicke et al. 2017). Facilitated by
Information Systems (IS), Industry 4.0 relies on an information-heavy
system of agility. This is because organisations with agile supply chains
can better respond to uncertainties and changes since they are better
able to synchronise supply with demand through high responsiveness
along the supply chain and convert changes into business opportunities
(Swafford et al. 2008). Such synchronisation requires integration across
a firm’s internal business units as well as its external suppliers and cus-
tomers (Chiang et al. 2012).
1.2 IS-Integrated Supply Chain Agility

Effective coordination of all the participant companies across the sup-
ply chain shortens product life cycle and reduces product costs (Levary
2000), as demand and supply fluctuate more rapidly than previously in
the current fickle business environment. With the current view of the
unit of competition as a supply network, supply chain agility is becom-
ing a focal area (Ismail and Sharifi 2006). IS plays an important role
in Supply Chain Management (SCM), as an enabler in achieving sup-
ply chain agility (Gunasekaran and Ngai 2004; Power et al. 2001; Yusuf
et al. 2004), but the way IS integration improves operational perfor-
mance is poorly understood (Fawcett and Magnan 2002; Mabert et al.
2003).
1.2.1 Supply Chain Agility
In order to survive in a modern business environment, enterprises have

explored innovative technologies and business strategies to sustain a
competitive advantage, as well as trying to build stronger relation-
ships with suppliers and customers to improve quality and flexibility in
1 Introduction: The Phenomenon of Supply Chain Agility
3
meeting increasing requirements (Boone et al. 2007; Tse et al. 2016).

The linkage of firms with their suppliers will rely more on the supply
chain, especially when product manufacturing is complicated and is
heavily dependent on supply chains, such as in the automotive indus-
try. Therefore, the unit of competition is moving from individual com-
panies to supply chains (Lambert and Cooper 2000; Quinn 1999;
Venkatesan 1992).
Manufacturers face increasing customer requirements in product cus-
tomisation, quality improvement and fast responsiveness (Lee 2004). To
meet these, enterprises are aligning with their suppliers and customers
to streamline operations in order to reduce production cost, shorten
manufacturing time and lower inventory level through integrating
and synchronising various operational processes (Chan and Qi 2003).
Furthermore, the ability to manage market changes, in a manner that
responds to customer requirements but at an acceptable cost, has been
termed supply chain agility (Christopher 2000). Developing an agile
supply chain is now a major focus of many leading organisations (Fisher
1997). Manufacturing firms as wide-ranging as raw materials suppliers,
manufacturers and retailers may need to be involved in the process of
achieving an agile supply chain. In fact, agile supply chains have gained
significant attentions from both academics and practitioners in recent
years (Christopher 2000; Naylor et al. 1999; Power et al. 2001).
Overall, supply chain agility requires coordination and integration
across individual firm functions. Research results support the notion
that integration between firms improves individual firm performance
(Frohlich and Westbrook 2002; Johnson 1999; Lee et al. 1997; Sanders
2007). Sanders (2007) highlights that successful firms have close col-
laboration with their partners, enabling real-time information trans-
fer across supply chains as well as coordinated inventory management.
This means that products can be delivered quickly and reliably (Lee et al.
1997). Hence, Devaraj et al. (2007) conclude that the dimensions of
performance related to aspects of delivery timing, cost and quality dis-
covered by the customer have a strong relationship with supplier integra-
tion. In addition to such operational advantages, supply chain agility also
improves customer responsiveness (Lee 2004) and flexibility (Goldman
et al. 1995) by incorporating both (Reichhart and Holweg 2007).
4
Y. Wu
1.2.2 IS Integration
A key characteristic of supply chain agility is the instant availability of

information to manage an ‘on demand’ business operation (Auramo
et al. 2005; Yusuf et al. 2004). Supply chain agility can be hampered
by fragmented, incompetent IS systems (Barua et al. 2004; Ngai et al.
2011). There is evidence that lack of information sharing and sparse
information prohibit supply chain coordination and lead to greater
operational inefficiencies (Patnayakuni et al. 2006). Studies have shown
that the development of IS, which enables information flow and coor-
dination activities, has rapidly reshaped business processes over the
last decades. Supply chain agility, founded on the various integrations
between supply chain partners, has been especially affected (Christopher
2005; van Hoek and Chong 2001; Sanders 2007).
A well-integrated IS is much more than just individual physical
components. It not only requires standards for the integration of data,
application and processes to be implemented in order to facilitate the
smooth flow of information, physical resource and financial data (Ngai
et al. 2011), but also needs well-integrated SCM-related applications to
enable consistent and real-time transfer of information across partners
(Rai et al. 2006). Hence, data consistency and cross-functional appli-
cation integration are important to IS integration (Rai et al. 2006).
Without data consistency such as common data definitions, there are
significant problems in large distributed systems (Pitoura and Bhargava
1999). In addition, cross-functional SCM application systems inte-
gration enables the connection with various functional units of sup-
ply chain and facilitates the management of cross-functional process
dependencies in supply chains (Rai et al. 2002).
1.3 The Issues

Effective management across the supply chain can help improve firms’
operational performance and sustain their competitive advantages
(Boone et al. 2007; Levary 2000; van Hoek et al. 2001; Wang et al.
5
2006). With the unit of competition moving from individual firms to

a supply network, supply chain agility has attracted significant attention
from both academics and practitioners in recent years. Additionally,
supply chain agility has been shown to have a positive impact on perfor-
mance (Christopher 2005; Ngai et al. 2011; Tse et al. 2016; Yusuf et al.
2004).
Research suggests that integrating all levels of analysis should lead
to increased performance (Pagell 2004). IS integration is identified as
an enabler in achieving supply chain integration (Gunasekaran and
Ngai 2004; Ngai et al. 2011; Swafford et al. 2008; Yusuf et al. 2004).
But many studies have focused on functional units or connection with
partners, or specific technologies, such as Enterprise Resource Planning
(ERP) systems (Allen 2008), e-business technologies (Devaraj et al.
2007; Johnson et al. 2007; Sanders 2007) and e-procurement applica-
tions (Pearcy and Giunipero 2008). Therefore the mechanism of how
IS integration might affect supply chain agility is not clear (Fawcett and
Magnan 2002). Despite the development of Information Technology
(IT) for collaboration and the take-up of ERP systems (Mabert et al.
2003), research within IS has primarily focused on the manner in which
IT is used within the organisational context. Deeper insight into the
relationship between IS integration and supply chain agility would be
gained by focusing on both research streams. The goal of this book is
therefore to advance knowledge on how IS integration contributes to
supply chain agility, and to develop a framework to illustrate how to
achieve supply chain agility enabled by IS integration specifically to
answer two key questions:
1. What are the IS integration factors that influence supply chain

agility?
2. What is the role of IS integration in the context of supply chain
agility?
6
Y. Wu
1.4 Chapter Outline

The book is structured as follows. Chapter 2 presents the existing liter-
ature and highlights the themes relating to supply chain agility and IS
integration. It explores the relationship between IS integration, supply
chain agility and operational performance and identifies the gap in the
literature. This chapter concludes with a proposed conceptual frame-
work, drawn from the literature.
Chapter 3 presents the macro-picture of the Chinese automo-
tive industry and discusses the development of SCM and IS within
this specific context. It also outlines the methods applied in this book
(Chapters 4–7).
Chapters 4 and 5 offer detailed discussion of two supply chains, con-
taining six firms in total with two Original Equipment Manufacturers
(OEM) and four first tier suppliers. The purpose of the case studies is to
explore how IS integration impacts the agility of supply chains, and to
investigate what the operational impacts of IS-integrated supply chain
agility are.
Chapter 6 recaps case studies and discusses the similarities and differ-
ences among the two supply chains. The chapter explores in more depth
the key issues emerging from the cases.
Chapter 7 presents survey analysis to buttress the argument on the
critical factors of IS integration and the role of IS integration in the
context of supply chain agility.
Chapter 8 concludes the book by reviewing case studies and survey
results. By synchronising interview findings and survey results, a frame-
work is proposed as a guideline to achieve an efficient agile supply chain
enabled by IS integration.
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2
IS-Enabled Supply Chain Agility
This chapter gives an overview of the current research on Industry 4.0,

agile capabilities of the supply chain and IS integration. It also inves-
tigates the role of IS in SCM, more specifically supply chain agility.
The findings and results reported in the relevant research streams are
discussed and applied to IS integration in the context of supply chain
agility.
The main aim of this chapter is to consider research and studies that
focus on (1) IS integration, including the technical development and
the theory of integration process; (2) SCM, specifically agility, including
the theoretical background of agile supply chains and approaches taken
to achieve agility; and (3) the actual IS application and issues in SCM
in the real world. Sections 2.1 and 2.2 discuss the rise of Industry 4.0,
the importance of supply chain agility, including the development of
the concept, the definition of supply chain agility and the relationship
between supply chain agility and operational performance. Section 2.3
focuses on the overview of IS integration and its relationship to oper-
ational performance. Section 2.4 presents an integrated view of the
relationship among IS integration, supply chain agility and operational
performance and Sect. 2.5 presents the conceptual model drawn from

https://doi.org/10.1007/978-3-319-98440-7_2
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Y. Wu
the current studies to illustrate the relationship among IS integration,

supply chain agility and operational performance.
2.1 From SCM to Supply Chain Agility

2.1.1 New Business Landscapes
Companies in today’s competitive and changing business environment

are constantly in search of ways to improve competitiveness. In particu-
lar, they are looking for ways to combat two specific challenges: time-
based competition and rapid technological advancement (Swafford et al.
2006).
• Time-based competition for individualised products
Increasing market demand, global market fragmentation and competi-

tion and increasing business complexity present challenges to companies
(Hitt et al. 1998; Hofmann and Rüsch 2017; Miemczyk and Howard
2008). Customers are increasingly time-conscious and demand more
individualised products. Existing methods and practices consequently
find it difficult to keep up with the increasing demand for flexibility,
adaptability, stability and sustainability (Hofmann and Rüsch 2017).
• Rapid technological advancement
At the same time, the competitive landscape is also driven by technol-

ogy innovation (Fawcett et al. 2008; Lasi et al. 2014); especially the
advances in IT which can provide companies with an ‘informational
rich, computation rich and communication rich business environ-
ment’ (Hitt et al. 1998). IS systems reshape industrial structures and
the nature of the linkages within and between organisations (Howard
2005). They can also help to integrate supply chain partners. Networks
of suppliers can work together on product design since customer
demands can be linked directly to suppliers so that they can react in
2 IS-Enabled Supply Chain Agility
13
real time. This indicates that such IS integration brings the digital com-
putation and physical processes together (Akanmu and Anumba 2015).
In the context of manufacturing industry, this means the information
related to the physical shop floor is highly synchronised with the digital
computation space (Lee et al. 2015).
In short, facing two simultaneous challenges, firms are striving to sus-
tain their competitiveness. It seems that the traditional supply chains
are not well suited to handle the increasing customer requirements and
business complexity, even though SCM has been regarded as one of the
most prominent strategies for doing this (Elmuti et al. 2008). SCM
consists of individual functional entities with commitments to provide
related resources and information to final products and services and to
achieve the objectives of efficient management of suppliers as well as
the flow of parts (Lau and Lee 2000). Hence, utilising SCM enables
businesses to ‘efficiently manage suppliers, manufacturers, warehouses
and stores so that merchandise is produced and distributed in the right
quantities, to the right location and at the right time in order to mini-
mise system-wide costs while satisfying service level requirements of the
customers in the entire supply chain’ (Mehta 2004).
The supply chain today is still comprised of various discrete steps
taken through marketing, product design and development, manufac-
turing and distribution to the end customers (Schrauf and Berttram
2016). That is, in many cases, manufacturing operations are independ-
ent from end customer orders and from marketing. The end user order
information is often treated as confidential to the upstream of supply
chains. Such fragmented supply chains lack transparency and one firm
in the supply chains cannot understand what others are doing.
However, rapid technological development has started to bring down
the walls across the supply chains and integrate it into a more inte-
grated system. Against this backdrop, the most recent development
of Industry 4.0 will facilitate the transformation of traditional supply
chains towards a more connected, integrated, efficient and agile system
which will also be customer oriented. Industry 4.0 is a technology-
based strategy introducing the concept of integrated industry, relying
14
Y. Wu
on information which is both highly integrated and available across the

entire product life cycle. Germany launched Industry 4.0 initiative in
2011 to bring a fully integrated industry. Since then Industry 4.0 has
attracted growing attentions. The benefits could be manifold, from real-
time coordination, flexible mass production to value chain optimisation
and the creation of a new business model (Brettel et al. 2014). Stock
and Seliger (2016) summarise three perspectives of Industry 4.0 which
are ‘(1) horizontal integration across the entire value creation network,
(2) end-to-end engineering across the entire product life cycle, as well
as (3) vertical integration and networked manufacturing systems’. These
three dimensions outline the importance of integration within and
across organisations as well as the digitisation throughout all processes
for an entire product life cycle. However, organisations have not yet
moved from conventional marketing and traditional business processes
to content marketing and cyber-physical integrated business processes,
partly because IT, in particular Internet-based technologies, are still
developing and are at the introduction stage (Roblek et al. 2016). Their
roll-out has significant implications for how supply chains are managed.
Meanwhile, it also brings the discussion of IS-integrated SCM which
could facilitate the implementation and expansion of Industry 4.0.
2.1.2 SCM to Supply Chain Agility
The foundation of SCM started from Forrester’s research (1961, cited

in Sanders 2007) on system dynamics which argues that the value crea-
tion process should not be limited to individual firms, instead the value
creation process should extend the boundary of firms and integrate
business processes within firms and among partners (Sanders 2007).
Quinn (1997) views the supply chain as a sequence of approaches and
practices to move goods from the stage of raw materials to finished
products to end-users. As Tan (2001) notes, researchers have conceptu-
alised SCM from different perspectives. Tan et al. (1998) suggest that
15
a firm’s practice of SCM is influenced by the extent of involvement of

its suppliers. Dong et al. (2001) propose that SCM includes supplier
management and coordination by using Electronic Data Interchange
(EDI)1 to work together to improve the overall process. Others consider
SCM from the perspective of logistics and transportation functions,
defining it as management of material, information and financial flow
across the chain (Copacino 1997; Rai et al. 2006). Many researchers
focus on SCM from the perspective of integrating process across the
supply chain. Jayaram et al. (2010) define the supply chain integration
as the extent to which an organisation connects with its upstream and
downstream partners. Frohlich and Westbrook (2001) take SCM as the
activities that manufacturing firms apply to integrate with suppliers and
customers, such as sharing production plans, joint network and shared
knowledge of inventory. Van der Vaart and van Donk (2008) noted that
SCM can cover a wide range of practices, such as sharing of operational
information to strategic activities.
Acknowledging the fast-changing and turbulent business environ-
ment, SCM has moved away from traditional command and control,
vertical hierarchy-based organisations into ones structured around pro-
cesses rather than functional or product units (van Hoek et al. 2001).
The impact of such changes has been that the traditional vertical inte-
gration is replaced by horizontal integration to sustain competitive-
ness in the new business environment. Operations move away from
mass marketing towards mass customisation which aims at combining
the efficiency of mass production with the capability of customisation
of products and services. While firms move towards mass customisa-
tion, they have to learn how to cope with shortening response times
and increasing product variety (Goldman et al. 1995; van Hoek et al.
2001), where agility is introduced as an approach focusing on thriv-
ing in an unpredictable environment (Dubey and Gunasekaran 2014).
Supply chain business practices should be designed for the dynamics
1EDIs are ‘co-operative inter-organisational systems that allow trading partners to exchange struc-
tured business information electronically between separate computer applications’ (Lacovon et al.
1995).
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Y. Wu
of the operating environment, not for steady sets of conditions

(Mohammed et al. 2008), and supply chain agility is able to sense and
respond quickly, facilitating ‘rapid adaptation to changes’ (Kidd 2000).
‘Agility tends to become both a desirable trait and a managerial practice’
(Brusset 2016).
2.2 Supply Chain Agility

This section begins by exploring the definition of agility and the differ-
ences between agility and leanness. It then moves on to the definition
of agility in the setting of supply chains and the four dimensions iden-
tified from the literature. Section 2.2.3 explains the differences between
supply chain agility and supply chain responsiveness and flexibility. The
last section discusses the relationship between supply chain agility and
operation performance.
2.2.1 Agility and Leanness
Agility is considered one of the basic characteristics needed for a supply

chain to survive in current volatile markets (Braunscheidel and Suresh
2009). It is a comprehensive response capability to sense and respond to
the challenges posed by a business environment dominated by changes
and uncertainties (Li et al. 2009a). Several studies have attempted to
provide a conceptual definition of agility (Swafford et al. 2006). Sharifi
and Zhang (1999) define it as ‘the ability to cope with unexpected chal-
lenges, to survive unprecedented threats of business environment, and
to take advantage of changes as opportunities’. Narasimhan et al. (2006)
also use uncertainties and fast-changing markets in their agility defini-
tion. The production is deemed to be agile if it can efficiently change
its operation in order to respond to changes. The definitions are simi-
lar to Goldman et al. (1995) who provide one of the most referenced
definition of agility stressing the capability of businesses to thrive in
circumstances in which unforeseen changes occur and a fast response is
required.
17
Goldman et al. (1995) define agility as ‘the ability to thrive in a com-

petitive environment of continually and unpredictably changing mar-
ket opportunities’. Specifically, four basic dimensions are categorised
by Goldman et al. (1995). The definition gives the basic conceptual
overview of agility and its related factors, stressing the need to respond
to changes and exploit them as opportunities (Sharifi and Zhang
1999). Briefly, the four dimensions of agile competition are as follows
(Goldman et al. 1995).
• First is enriching the customers. Products and services are custom-

ised and are perceived to be individual-based solutions. They can be
priced based on the value of the solutions provided. This situation
requires a re-conceptualisation of what the company can really offer
and what the products are.
• Second is cooperating to enhance competitiveness. Cooperation is
an agile competitor’s operational strategy of choice. Products are able
to be launched to markets rapidly and as cost-effectively as possible.
One way of doing this is utilising and maximising resources by devel-
oping cross-functional teams, reengineering and partnership to lever-
age resources through cooperation.
• Third is mastering change and uncertainty. The agile compa-
ny’s structure is flexible enough to allow rapid reconfiguration of
resources and to support multiple, concurrent processes to meet dif-
ferent requirements from different customer opportunities.
• Fourth is leveraging the impact of people and information. In an
agile competitive environment, information is the differentiator
between companies, as knowledge-based products provide great
potential for individualisation.
The concept of agility originated in manufacturing, with the majority

of scholarly studies focusing on the manufacturing industry (Gligor and
Holcomb 2012; Gligor et al. 2015; Paulraj and Chen 2007). In the case
of the automotive industry, agile manufacturing can be implemented
in order to maximise the value of the equipment and reduce the cost
invested into the equipment over a long period (Elkins et al. 2004).
Agility is accomplished by integrating available resources, technology,
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Y. Wu
people and organisations into coordinated systems which are capable

of achieving short product development cycle times and responding
quickly to any change (Cheng et al. 1998). Cheng’s investigation sug-
gests that the success of agility hinges on the application of new tech-
nology, which supports and speeds up information flow in the product
development cycle.
In most industries, both demand and supply fluctuate more rapidly
than they used to do. The majority of supply chains cope by playing
speed against costs, but agile ones can manage both by responding
quickly and cost-efficiently (Lee 2004). For example, Zara’s per-
formance to overcome the uncertainties of the fast fashion indus-
try through agility has become well-known (Zhelyazkov 2011) and it
became a successful brand in European supply chains through building
up agility. The process of agile design has been developed at product
pipelines. When designers spot potential trends, they are able to order
fabrics with shorter lead times than their competitors. This could give
them an earlier start since fabric suppliers need the longest lead times.
On the other hand, the finalising of the design and manufacturing of
the products only starts after they get reliable information from distrib-
utors. It allows them to meet customer tastes and reduce the number of
items going to discount (Lee 2004).
Agility should not be confused with ‘leanness’. Leanness, traced back
to the Toyota Production System, refers to a move to a ‘Just-In-Time’
(JIT) environment that promotes lean manufacturing in order to mini-
mise component inventory and work-in-progress (Womack et al. 1990).
The essential component of leanness is the efficient use of the resources
through minimisation of waste (Narasimhan et al. 2006). Narasimhan
et al. (2006) give the definition of leanness, which is ‘product is lean
if it is accomplished with minimal waste due to unneeded operations,
inefficient operations or excessive buffering in operations’. Studies
from Hopp and Spearman (2004) identify modes of waste reduction,
including obvious waste such as excessive set-up times, reworking and
the ‘less obvious’ waster associated with variability, such as process time
and delivery time. Lean operations eliminate such wastage to lower
the cost. Lean manufacturing focuses on the areas of cost efficiency,
19
greater resource productivity and utilisation and lower inventories and

throughput time. Several practices and techniques associated with lean
manufacturing are identified as follows:
• JIT flow/continuous flow production (White et al. 1999);

• equipment management (Narasimhan et al. 2006);
• various quality control practices such as total quality management
(Brown and Mitchell 1991);
• pull production, such as Kanban (Anand and Kodali 2008; Brown
and Mitchell 1991);
• total productive maintenance (Demeter and Matyusz 2011);
• small lot size (Bayou and de-Korvin 2008).
On the other hand, agility originated in the early 1990s in the manu-
facturing sector as a strategy to respond to market changes (Goldman
et al. 1991). Agility conveys the ability to efficiently change operating
states in response to changing market conditions (Goldman et al. 1995;
Kasarda and Rondinelli 1998). It is often viewed as the capability to
sense and respond to changes in a timely manner (DeGroote and Marx
2013). Agile manufacturing emphasises performance improvement in
the area of responsiveness, product customisation, shortened new prod-
uct development lead time, reduced system changeover time and cost
and efficiency of scaling up and down of operations (Narasimhan et al.
2006). Practices and approaches related to agility contain:
• advanced manufacturing technologies (Brown and Bessant 2003);

• IT integrated in manufacturing, product design and development
(Swafford et al. 2008);
• suppliers alliances and customer sensing (Prince and Kay 2003);
• speed in customer service improvement (Swafford et al. 2008); and
• collaborative planning (Agarwal et al. 2006).
To this extent, the emphasis from leanness and agility is different in

that waste control is for leanness and responsiveness and customization
are for agility. In addition, Christopher and Towill (2000) assert that
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Y. Wu
quality, service level and lead time are market qualifiers for leanness;
while cost is the market winner. On the other hand, Mason-Jones
et al. (2000) identify service level as the market winner for agile man-
ufacturing firms while cost, quality and lead time are qualifiers. Hence,
these two concepts address the same set of competitive advantages, but
focus on different areas. That is, leanness prioritises cost whereas agility
focuses on service and customer responsiveness.
A case study by McCullen and Towill (2001) implies that agile man-
ufacturing can be a precursor to lean manufacturing. Shah and Ward
(2003) propose agile manufacturing as a component of their JIT
practice. But some research, e.g. Harrison (1997) and Goldsby and
García-Dastugue (2003) believe that these two paradigms are distinct
concepts. On the other hand, Jin-Hai et al. (2003) take leanness as a
precursor to agility. Harmozi (2001) contends that world-class perfor-
mance is achieved as firms progress from lean to agile manufacturing,
while Katayama and Bennett (1999) and Sharp et al. (1999) identify
leanness as ‘fundamental’ to agility. But Narasimhan et al. (2006) argue
that many companies that adopt lean manufacturing as a business prac-
tice are anything but agile and that the pursuit of leanness might not
promote agility. There is thus continued debate as to which paradigm
precedes the other.
A paradoxical situation has been encountered in the automotive
industry where manufacturing processes are extremely efficient, with
manufacturing lead times typically down to less than twelve hours. But
the inventory of finished cars can reach as high as a couple of months
of sales, and still customers have to wait for weeks to get the car of their
choices. In this context, a main issue in SCM is achieving effectiveness
which is ‘the ability to respond rapidly to meet the precise needs of an
often fragmented market’ (Christopher 2005). Agility stresses short-
time response to changes in volume and variety (Christopher 2000)
and can be characterised as the capability to respond to a new auto-
mobile industry market where demand is less predictable, the require-
ment for variety is high and volume at the individual stock keeping
unit is low (Victor and Boyton 1998). The discussion from Victor and
Boyton (1998) suggests that lean manufacturing and agile manufactur-
ing are distinct, yet overlapping paradigms. They are not totally separate
21
concepts and it is recognised that supply chains need to encompass both

(Christopher and Towill 2000).
2.2.2 Enablers of Supply Chain Agility
Agility is often presented as a concept with close links to the man-

ufacturing environment. In the context of SCM, agility focuses on
‘customer responsiveness’ (Christopher and Towill 2000). The origin
of supply chain agility as a concept lies in flexible manufacturing sys-
tems (Aitken et al. 2002). Initially, manufacturing flexibility enabled
rapid changes, such as reduced set-up times, and consequently, a greater
responsiveness to changes in product volume and variety; later this
concept spread to the wider business context (Christopher and Towill
2000).
Currently, there are few studies providing a formal definition of
supply chain agility (Li et al. 2008; Swafford et al. 2006). Yusuf et al.
(2004) define supply chain agility as a measure of how good the sup-
ply chain integration is from suppliers to customers in order to achieve
greater customer satisfaction and master changes and uncertainties.
Prater et al. (2001) claim that ‘the degree to which a firm’s supply chain
is agile is determined by how its physical components (sourcing, man-
ufacturing and delivery) are configured to incorporate speed and flex-
ibility’. Highsmith (2004) regards supply chain agility as the ability
to detect and respond to changes in order to profit in a fast-changing
market. Swafford et al. (2006) view supply chain agility as ‘an externally
focused capability that is derived from flexibilities in the supply chain
processes, which in turn are viewed as internally focused competen-
cies’. Ngai et al. (2011) view supply chain agility as ‘capability of supply
chain functions to provide a strategic advantage by converting unex-
pected market uncertainties, as well as potential and actual disruptions,
into competitive opportunities by assembling requisite assets, knowl-
edge and relationships with speed and surprise’. Research also discusses
frameworks of supply chain agility similar to the ones presented for
agile manufacturing. Bal et al. (1999) propose a virtual teaming model
in agile supply chains. Tolone (2000) uses the approach of real-time
22
Y. Wu
and asynchronous collaborative technology to improve agility in supply

chains. The research carried out by Baker (2008) explores the distribu-
tion centres for agile supply chains. A general interpretation is the sup-
ply chain’s capability to react fast to market changes. This book defines
supply chain agility as the supply chain’s capability to respond rapidly to
customer changes and market uncertainties.
Frameworks have been developed in order to achieve supply chain
agility. One of the most cited framework is from van Hoek et al.
(2001). They present a framework for agility in the context of the
supply chain by adapting the four dimensions of agility proposed by
Goldman et al. (1995) to the supply chain setting. These four dimen-
sions entail ‘enriching the customer, cooperating to enhance competi-
tiveness, organising to master change and leveraging the impact of
information and people’. This framework integrates existing supply
chain techniques and principles into a comprehensive approach (Jin
et al. 2005; van Hoek et al. 2001), and stresses the two main factors
which are responding to changes and exploiting changes (Sharifi and
Zhang 1999) in the context of supply chains. It emphasises dealing with
customer demand, flexible assemble-to-order systems, creating virtual
supply chains and greater use of IT tools (Hines et al. 2004), leading
to the focus of the supply chain as a single entry to compete (Stevenson
and Spring 2007).
Furthermore, Aitken et al. (2002) propose a three-level framework
that brings together principal, programmes and actions that contrib-
ute to agility. Level 1 presents the key principle level, such as the rapid
replenishment of the manufacturing process. Level 2 identifies indi-
vidual programmes, such as lean production, agile supply and organ-
isational agility, which have to be implemented in order for Level 1
principles to be achieved. Finally, Level 3 specifies individual actions
to be taken to support Level 2, such as waste elimination, visibility of
real demand and economies of scale. This framework ‘explores ways in
which hybrid strategies can be developed to create cost-effective sup-
ply chains’ (Christopher and Towill 2000). It is an organisational-wide
model with the focus on logistics and manufacturing (Aitken et al.
2002). Swafford et al. (2006) develop a value chain agility framework.
23
Within the framework, flexibility within product development, pro-

curement, manufacturing and distribution impacts supply chain agility
and ultimately performance with the facilitation of IT tools. Flexibility
has two dimensions of range and adaptability. However, this framework
focuses on intra-firm abilities of the business unit within a firm rather
than the entire supply chains, because Swafford et al. (2006) argue that
value chain agility does not explicitly include the ability of external
firms. The following paragraphs give a detailed description of the frame-
work developed by van Hoek et al. (2001).
• Customer sensitivity
Supply chain agility emphasises the ability to react to changes effec-

tively and efficiently through mass customisation (Sanchez and Nahi
2001) and meeting unique requirements from customers as a source
of competitive advantages (Gligor et al. 2015; Mason-Jones and Towill
1999; Ismail and Sharifi 2006). One key characteristic of an agile
supply chain is that it treats customers as individuals (Agarwal et al.
2006; Sharp et al. 1999). Another characteristic is executing customer
demands with short lead time, which requires an agile supply chain
capable of reading and responding to demands in a timely manner
(Lee 2004). Thus organisations should be demand-driven rather than
forecast-driven because businesses driven by forecast pay less atten-
tion to the feedback from the marketplace of real customer require-
ments (Cheng et al. 1998; Collin and Lorenzin 2006). IT facilitates
the movement towards demand-driven strategy and manufacturing,
as it captures data on demand so that firms can hear the voice of the
market (Christopher 2005). In addition, information visibility realises
the capability for high-volume production on a Build-to-Order (BTO),
which is a response to customer sensitivity. BTO takes the individual-
ised requirements and conveys the demands with particular product fea-
tures into the physical manufacturing process (Goldman et al. 1995).
For example, BMW allows customers to make changes to their vehicles
within six days of final assembly, including a complete change in colour
(Gunasekaran and Ngai 2005).
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Y. Wu
• Process integration
Process integration is concerned with mastering uncertainty and change

to achieve an immediate response (van Hoek et al. 2001). Yusuf et al.
(2004) argue that agile supply chains should have adaptive capabilities
to be able to respond to changes. That is, resources can be allocated flex-
ibly throughout the supply chain to respond to different objectives in
the process of product manufacturing (Gunasekaran 1998; Stavrulaki
and Davis 2010). Moreover, the organisational structure should be
flexible and dynamic to respond to changes and uncertainties and to
support concurrent rather than serial business operations to meet the
requirements of different customers (Goldman et al. 1995).
One enabler of achieving process integration is implementing enter-
prise-wide information integration to create open information envi-
ronment (Goldman et al. 1995). Chrysler is a good example that has
derived significant benefits from de-centralising the managerial hierar-
chy (Goldman et al. 1995). Firms should also align with partners across
the supply chain to share and link resources, including technologies and
information. This form of cooperation in the supply chain becomes
prevalent because each firm can focus on its core competencies and out-
source other activities (Christopher 2005). Furthermore, along with
process integration comes joint strategy, buyer-supplier term, informa-
tion transparency and even open-book accounting (Christopher 2000).
• Network integration
Network integration refers to cooperating by competing through ‘fluid’

clusters of network associates rather than a fixed long-term relationships
(van Hoek et al. 2001). In today’s challenging markets, the sustainable
advantage lies in being capable of making use of the strengths of part-
ners and aligning supply and demand under the organisation’s appro-
priate cost control (Barve 2010). Firms build up close relationships with
suppliers and encourage the involvement of suppliers in their business
processes, such as joint product development, collaborative planning pro-
cesses, common systems or vendor management inventory (Agarwal et al.
2006; Bal et al. 1999; Frohlich and Westbrook 2001; Xu et al. 2003;
25
Yusuf et al. 2004). The study carried out by Yu et al. (2013) suggests
that supplier integration is significantly related to financial performance,
including growth in sales and profits and return on investment. However,
the cooperation process must be supported by investment in Information
Communication and Technologies (ICT) to share and synchronise infor-
mation. Such exchanged information could be production process, cus-
tomer information or marketing information (Li and Lin 2006).
• Virtual integration
Virtual integration refers to leveraging information along the supply

chain. It emphasises the importance of information, especially informa-
tion sharing and exchange, to realise information visibility (van Hoek
et al. 2001). Virtual integration assists the realisation of real-time asyn-
chronous coordination of inter-firm planning and execution in supply
networks (Bal et al. 1999; Collin and Lorenzin 2006; Jin et al. 2005).
By leveraging the impact of information, firms are able to capture and
process massive amount of data to coordinate with supply chain part-
ners (Vickery et al. 2010). One technology that is widely used in man-
ufacturing companies is ERP which enables firms to coordinate their
supply chain operations (Wailgum 2008). The supply chain also moves
from an inventory-based to an information-based model. For example,
traditional logistic systems are based on inventory. Conventional logis-
tics systems seek to identify optimal quantities by calculating complex
formulae to support the inventory-based business model (Christopher
2000). However, with technology development, while firms are able to
access demands through shared information, the premises on which these
formulae are based no longer hold. EDI enables partners in the supply
chain to act upon the same data rather than the distorted information
that is transferred from one firm to the other (Christopher 2000, 2005).
2.2.3 Flexible, Responsive and Agile Supply Chains
Flexibility is the ability to change with little penalty in time, effort,

cost or performance (Upton 1994). It is also regarded as the ability of
a system or technology to adjust to changes in its internal or external
26
Y. Wu
environment (Das 1996). In manufacturing environments, manufac-

turing flexibility has been interpreted as process flexibility to be able to
produce and deliver products to the market in different ways (Ramesesh
and Jayakumar 1991). From the perspective of supply chains, this flexi-
bility means the capability of the network to provide a mix of products
based on customers’ requirements. Flexible supply chains have the capa-
bility to improve market responsiveness to meet uncertain demand and
to accommodate such changes quickly (Mohammed et al. 2008).
With regard to responsiveness in manufacturing, an analysis of
input-output is used to evaluate this process where customer orders are
treated as inputs and delivered products are outputs (Kramer and De
Smit 1977). This approach is then translated into a comparison between
the production system’s response time and the customers’ willingness to
wait (Mather 1988). For the customers who are willing to wait, BTO
is recommended to deliver customer’s requirements. For the customers
who are not willing to wait, build to forecast has been applied. Holweg
(2005) further defines responsiveness as ‘the ability to react purposefully
and within an appropriate time-scale to customer demand or changes
in the marketplace, to bring about or maintain competitive advantage’.
In the wider supply chain context, Gunasekaran et al. (2008) define a
responsive supply chain as ‘a network of firms that is capable of creat-
ing wealth for its stakeholders in a competitive environment by reacting
quickly and cost-effectively to changing market requirements’. The defi-
nitions indicate in order to meet high demand uncertainties, a respon-
sive supply chain requires a high level of interaction within and across
firms based on their core competencies and on leveraging information
in the most cost-effective way. The latest discussion by Roh et al. (2014)
further stresses the focus of responsive supply chains on the market as a
core factor in supply chain processes. Roh et al. (2014) define a respon-
sive supply chain strategy as ‘a strategic determination of major cus-
tomer requirements in terms of range, frequency and innovativeness of
product offerings’.
Agile manufacturing and supply chains have been recognised as a
key area of manufacturing strategy and operations (Mohammed et al.
2008), and the need for undertaking intensified global competition,
reduced lead time and diversification of demand and new technologies
27
(Nagel and Dove 1991). The agility of a supply chain is the ability to
be flexible and to respond to and create opportunities in a turbulent
market environment driven by (i) individualised customer requirements
cost-effectively and rapidly; and (ii) unpredictable sources of supply
(Mohammed et al. 2008; Roh et al. 2014). Supply chain agility signi-
fies the capacity to respond rapidly to changes in market and customer
demand; and to minimise supply disruptions by sharing information
across the supply chain (Goldsby et al. 2006; Roh et al. 2014). Hence,
these three types of supply chains are not completely separate defini-
tions. The discussion of using agility as an appropriate way to achieve
responsiveness and flexibility has received some attention over recent
years (Holweg 2005; Mohammed et al. 2008; Naylor et al. 1999).
Based on the discussion, supply chain agility embraces both flexible and
responsive supply chains.
2.2.4 Supply Chain Agility vs. Small Batches
Hahn and Niebmann (2001) argue that production can flow piece by
piece from the pull of customer orders. They also propose that batch
size should be as small as possible to achieve a competitive advantage
of customer responsiveness. van Hoek and Chong (2001) suggest that
the small volumes are a result of customisation and rapid responsive-
ness. Small batches or one-piece flow productions represent a new oper-
ation process compared with the traditional model structured around
large batches and standardisation. What, then, are the differences
between small batches and supply chain agility, since both of them can
be responsive and flexible?
Small batches are still batch processes and modularity is applied at
the product and process level (van Hoek and Chong 2001), but such
processes, especially one piece of flow, can be conducted accord-
ing to the pull of customer orders (Hahn and Niebmann 2001).
Consequently, pull systems are usually applied. The pull system indi-
cates that ‘a workstation requires work from the previous station only
when it is required, one of the fundamental principles of JIT planning
and control’ (Slack et al. 2007). In a pull system, a preceding machine
28
Y. Wu
produces parts only after it receives a request from the succeeding

machine (Venkatesh et al. 1996). While the orders drive final assembly,
component parts must be available for them to be pulled from inter-
nal inventory of outside suppliers (Hopp and Spearman 2004). Hence
small batches focus on operation processes primarily within individual
companies.
Supply chain agility not only stresses customer responsiveness, but
also embraces market changes and uncertainties as business oppor-
tunities (Christopher 2005). Supply chain agility is not an operations
paradigm on its own, but rather a concept that can rest at the core of
various operations strategies (Reichhart and Holweg 2007), such as lean
production, mass customisation and BTO manufacturing (Goldman
et al. 1995; Gunasekaran and Ngai 2005; van Hoek et al. 2001).
Furthermore, according to the definition of supply chain agility, it
focuses on various integration processes both internally and externally
and collaboration with partners to achieve an agile supply chain.
2.2.5 Supply Chain Agility and Operational Performance
As discussed before, customer responsiveness is regarded as key to suc-

cess in today’s market (Gligor et al. 2015; van Hoek and Chong 2001).
Agility is all about creating that responsiveness (van Hoek et al. 2001)
and often tied closely to the effectiveness of SCM (Lee 2004; Li et al.
2009b). Hence, one primary target of achieving supply chain agil-
ity is to respond to customers quickly (Lee 2004), which means that
supply chains should be customer-oriented rather than forecast-driven
(Reichhart and Holweg 2007). Another target of supply chain agil-
ity is to re-configure all resources rapidly enough to master changes
and uncertainties (Goldman et al. 1995). In a wider context, agility
embraces both responsiveness and flexibility in manufacturing opera-
tions, organisations and supply chains as a key tenet of a firm’s com-
petitiveness (Reichhart and Holweg 2007). Supply chain agility is
not only for large corporations, but also for any-scale firms without
high investment requirements (Yusuf et al. 2014). Drawing on a sam-
ple of 88-supply chain managers within the UK oil and gas industry,
29
Yusuf et al. (2014) find that supply chain agility has a positive impact
on several aspects of business performance, including turnover, cus-
tomer loyalty and market share in the oil and gas industry.
Supply chain agility also requires collaboration and coordination
across individual firm functions and throughout supply chains with
suppliers and customers, leading to superior performance (Frohlich and
Westbrook 2001; Gligor et al. 2015; Kim 2009; Swafford et al. 2008).
Existing research supports the view that integration between firms
improves firm performance (Flynn et al. 2010; Frohlich and Westbrook
2001; Johnson 1999; Li et al. 2009b; Narasimhan and Das 2001).
Sanders (2007) stresses that successful firms have tight collaboration
with their partners, enabling real-time information to be transferred
across supply chains as well as coordinated inventory management. In
consequence, products can be delivered quickly and reliably (Lee et al.
1997). With the study of 214 manufacturing firms in China, Yu et al.
(2013) suggest international integration significantly influences cus-
tomer integration and supplier integration. Lack of coordination has
been demonstrated to create bullwhip effects,2 resulting in superfluous
inventory or lack of stock (Lee and Billington 1992). Steerman (2003)
shows that the collaboration between Sears and Michelin, using collab-
orative planning, forecasting and replenishment, has resulted in a 25%
reduction in inventories for both companies. Based on data from 57
first tier automotive suppliers. Elmuti et al. (2008) argue for significant
and substantial improvement in overall performance as a result of inte-
gration and coordination of the internal functions within the firm and
effectively linking them with their external suppliers. They also state
that sharing information through new technologies is a key contributor
to the success SCM.
2The bullwhip effect is ‘the tendency of supply chains to amplify relatively small changes at the
demand side of a supply chain such that the disruption at the supply end of the chain is much
greater’ (Slack et al. 2007).
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Y. Wu
SCM takes a systematic view with regard to all activities and func-
tions that are required to bring a product or service to market. This
view indicates that the value creation process extends beyond the firm
boundaries, and involves integrating with suppliers, manufacturers and
customers (Tan et al. 1998), so that the supply chain can be managed
as a single entity or one complete system (Sanders 2008). Many studies
tend to focus on integration from one side of the supply chain, with
the result that there is little confirmatory evidence provided on simul-
taneous consideration of the supply and demand side collaboration
and integration (Sanders 2007). Frohlich and Westbrook (2001) indi-
cate that better performance can be achieved when the firm coordinates
with both customers and suppliers than with partners only from one
side. In their later research in 2002, they distinguish web-based demand
chain integration from supply chain integration, and report that man-
ufacturing and services firms adopting both demand and supply inte-
gration have the highest operational performance in terms of delivery,
transaction costs and inventory turnover. Gligor et al. (2015), however,
claim that there is no direct relationship between supply chain agility
and firms’ financial performance through the analysis of secondary data.
Rosenzweig et al.’s (2003) study of 238 consumer products that compa-
nies dominate in the market reports that no empirical evidence has been
identified to support a direct effect between supply chain integration
and sales or customer satisfaction. Instead, their research found that the
benefits of integration should be first translated into operational capa-
bilities, such as flexibility, quality, reliability and cost. In other words,
these operational performances are acting as a mediating factor between
supply chain integration and business performance.
2.3 IS Integration

This section focuses on IS integration in the context of supply chains
and explores the dimensions or factors of IS integration, including data
consistency in Sect. 2.3.1.1 and cross-functional SCM application inte-
gration in Sect. 2.3.1.2.
31
2.3.1 Dimensions of IS Integration
Industry 4.0 is about companies orienting manufacturing processes to

customers through digitisation such as e-commerce and digital mar-
keting. Ultimately, it would be expanded to the entire supply chain
through (i) the implementation of a wide range of technologies;
and (ii) the vertical integration of various functions across the supply
chains from suppliers to end-users (Schrauf and Berttram 2016). All
together, they are realising the digitisation of services and products
with the full integration across supply chains, transforming the tradi-
tional vertical integration into a horizontal one. The transformation is
driven by new technologies such as 3D printing, big data analytics, the
cloud and the IoT. One key characteristic of this is the instant avail-
ability of information to manage an ‘on demand’ business operation.
IS integration provides the basis for information sharing and exchange
in organisations (Auramo et al. 2005; Yusuf et al. 2004). There is evi-
dence that lack of information sharing and sparse information prohibits
supply chain coordination and leads to greater operational inefficiencies
(Patnayakuni et al. 2006). Swafford et al. (2008) find ‘a domino effect
among IT integration, supply chain flexibility, supply chain agility and
competitive business performance’.
Viewed from the perspective of resource-based theory, firms should
develop the capabilities to acquire, integrate, re-configure and release
resources that are embedded in their social, structural and cultural con-
texts. Developing these capabilities is a long-term process and requires
firms to make a series of linked strategic decisions related to IS resources
(Barua et al. 2004; Rai et al. 2006). Without IT support, the infor-
mation and resource flow could be much slower than required to ena-
ble timely response (Ngai et al. 2011). IS could enhance supply chain
through (1) mobile and wireless technologies; (2) network and integra-
tion technologies; and (3) business process reengineering, process autoro-
tation and supply chain system redesign (Ngai et al. 2011). However,
IS resources cannot by themselves create sustained performance or
values for a firm (Powell and Dent-Micallef 1997). Therefore, it is
important for companies to integrate resources and embed them with
organisational processes and knowledge resources (Barua et al. 2004;
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Y. Wu
Denolf et al. 2015; Sambamurthy et al. 2003) when considering opera-

tions and workflow coordination. A considerable number of papers have
addressed one or more issues related to IS in SCM (van Donk 2008).
However, most of the research considers only specific aspects of IS,
for example, the use of inter-organisational IS (Da Silveira and Cagliano
2006; Lu et al. 2006); the use of EDI (Hill and Scudder 2002), the
implementation of ERP (Allen 2008), the design of collaborative plan-
ning, forecasting and replenishment (Danese 2007) and critical success
factor for implementing supply chain IS (Denolf et al. 2015).
The importance of communication and information sharing is
considered by many researchers (Galliers 2003; Kotzab et al. 2003).
Independent and state-sponsored bodies encourage the application of
digital data and emphasise the importance of standardisation for data
exchange and information sharing (Lauer 2000). The Toyota Motor
Corporation designed their ‘open business environment’ based on the
principles of information sharing and exchange through system inte-
gration to further develop collaborative activities with their partners
(Kuroiwa 1999). Another example is United Parcel Service which has
changed its service into ‘synchronised commerce’ by re-defining and
re-structuring its IS. The IS enables data connectivity with customers’
applications and provides real-time information of the inventory either
stored or in-transit. This visibility can improve their inventory manage-
ment, asset efficiencies and market responsiveness (Rai et al. 2006). A
more recent study calculates that companies with highly digitised sup-
ply chains and operations could expect to have 4.1% efficiency gains
on an annual basis, and revenue would be increased by 2.9% annually
(Schrauf and Berttram 2016).
A well-integrated IS is much more than just its individual physical
components. It requires standards for the integration of data, applica-
tion and processes to be implemented in order for a smooth informa-
tion flow and for real-time connectivity among distributed applications
to be achieved (Ross 2003). That is, an integrated IS is capable of pro-
viding and realising the consistent, efficient, transparent and real-time
information transfer between SCM-related applications and appropriate
parties (Pearcy and Giunipero 2008; Rai et al. 2006). Hence, according
33
to the literature, IS integration is defined as the extent to which IS

have been established for the consistent and high-speed transfer of
supply chain-related information within and across firms. The litera-
ture indicates that there are two key dimensions: data consistency and
cross-function SCM application integration (Ngai et al. 2011; Pitoura
and Bhargava 1999; Rai et al. 2006; Scavardra et al. 2005).
2.3.1.1 Data Consistency
Data consistency is ‘the degree to which common data definition and

consistency in stored data have been established across a focal firm’s
supply chain’ (Rai et al. 2006). Especially in the era of big data, firms
are rushing to embrace new technologies such as cloud computing,
mobility technology and enhanced analytics. Bad data becomes com-
monplace. Thus, sound data and information integration are critical for
realising data value. However, it is difficult to realise data consistency
in distributed systems and fragmented systems across organisational
boundaries (Pitoura and Bhargava 1999; Rai et al. 2006), such as sup-
ply chains. The basis of SCM is the exchange of accurate, complete and
consistent data about products and transactions between business part-
ners (Nakatani et al. 2006). A recent survey conducted by Friedman
and Judah (2013) shows that the poor quality data costs organisations
they surveyed on average of USD 14 million a year.
Each organisation, regardless of the manufacturer or distributor,
maintains its own version of data about the items it handles; sometimes
even departments of individual organisations have their own formats.
This leads to the danger of data inconsistency if appropriate care is not
taken (Nakatani et al. 2006), especially when organisations have het-
erogeneous databases. A central database may help to limit problems.
Furthermore, data consistency can be implemented through common
data definitions for key entities, such as products, suppliers or custom-
ers. For example, EDI sets up a form of collaborative, communication
sharing, technical and business data (Jayaram et al. 2000) and the data
should have common definitions (Muller and Seuring 2007). Koh et al.
(2011) also suggest the necessity of establishing information standards,
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Y. Wu
for example, the format of the exchanged information when imple-

menting IS integration across supply chains.
Automatic data capture systems can be applied to capture and trans-
fer data automatically to facilitate data consistency (Rai et al. 2006).
For example, Radio Frequency Identification Technology (RFID) has
become popular to capture and store data automatically and has been
adopted to track inventories within a supply chain at the item level to
minimise operating costs, thus helping to reduce channel volumes and
enhance forecast and planning capability (D’Avanzo et al. 2004). RFID
enables data to be transmitted by a portable device, which is a tag. Such
transmitted data may provide identification or location information or
specify about the products’ price, quantity, purchase date and so on to
improve the traceability (Mondragon et al. 2006). In the automotive
industry, RFID systems are able to track work-in-progress and inven-
tories, to reduce the lead times of information transfer and to increase
the visibility of the supply chain. In terms of cost cutting, RFID reduces
labour costs and the study (Schneider 2003) indicates that many retail-
ers are very interested in turning their supply chains into an RFID-
dependent business as long as it is cost-efficient.
2.3.1.2 Cross-Functional SCM Application System Integration
Cross-functional SCM application system integration is ‘the degree of

real-time communication of a focal firm’s function-specific SCM appli-
cations with each other and related to ERP’ (Rai et al. 2006). Within
organisations, ERP provides an integrated solution that can synchro-
nise the various transactions across departments and facilitate internal
integration by linking function-specific applications to ERP (Scavardra
et al. 2005). Palaniswamy and Frank (2000) investigate the performance
of five manufacturing firms and find that all the companies benefit from
better cross-functional integration. Similar results are also presented
by Maiga et al. (2015). But some ERP projects take over ten years
before becoming operational; the automotive industry is a good exam-
ple of applying ERP, for instance, General Motors’ Material for Global
Optimisation (Howard 2005).
35
McKinsey (2002) outlines a common perspective of system appli-

cations that are regarded as the core operations across organisations
through connecting to the backbone system ERP. Firms use:
• Sales and distribution: Customer Relationship Management (CRM),

Electronic Point of Sale (EPOS), customer configurable websites and
online catalogue to interact with sales;
• Procurement and supply: EDI, web EDI, forecasting systems,
Sequences In-Line Supply (SILS) or e-marketplace to communicate
with suppliers;
• Product development: Computer Aided Design (CAD), Computer
Aided Engineer (CAE), Product Data Management (PDM), Digital
Mock-up (DMU) and computer simulation for organisations’ prod-
uct development; and
• Manufacturing and logistics: Manufacturing Execution Systems
(MES), Quality Management System (QMS), SILS and Electronic
Kanban for their manufacturing logistics processes.
Such connectivity enables the management of cross-functional process

dependencies across supply chains (Rai et al. 2002, 2006).
On the other hand, SCM has been heavily impacted by the develop-
ment of technologies. Technologies range from personal digital commu-
nication such as emails, to data exchange such as server, to data transfer
with customers and suppliers such as EDI, to Internet-based integration
(Kehoe and Boughton 2001; Ngai et al. 2011). With every step of the
technology development, the supply chain has become oriented towards
responsiveness and agility to meet the customer demands. This has been
greatly facilitated by IS through the development of
• Bill of Material (BOM) to meet the needs across the departments,

• Purchasing such as e-commerce to communicate with suppliers; and
• Planning and control such as demand planning, material require-
ments planning to have a common objective.
With the fully integrated IS, the firms are able to share business infor-
mation with appropriate parties in an efficient and timely manner. Such
36
Y. Wu
Personal Departmental Company Customers Suppliers Supply Chain Integration
-Messaging -BOM Puchasing Planning and Control

-Email -EDI -Supplier Management Systems -ERP
-Order Specifications -E-Commerce -Demand Planning
-Capacity Planning
-MES
Fig. 2.1 Supply chain applications.

Adapted from Browne et al. (1995) and Kehoe and Boughton (2001)
integration also reduced the time needed to share information and

knowledge (Pearcy and Giunipero 2008). Figure 2.1 also shows how
important it is for planning systems to have a common objective. MES3
integration is becoming important in the realisation of such operation
transparency among partners. Cross-functional integration leads to close
communication and collaboration not only among individuals but also
between function units such as manufacturing and purchasing (Maiga
et al. 2015).
Three perspectives of the integration of applications have been iden-
tified. These are planning applications, execution applications and their
connection with ERP systems, all of which together constitute the end-
to-end SCM (Kalakota and Robinson 1999). Planning applications
support planning for procurement, production, logistics and warehouse.
Execution applications realise order management, production, replen-
ishment and product development (Rai et al. 2006).
Integrated planning applications are able to collect and gener-
ate cross-functional information about the supply chain (Kalakota
and Robinson 1999) to achieve the optimal solution for overall
planning (Meyr et al. 2000; Stadtler 2005). A focal firm develops pro-
duction plans and daily schedules so that the rest of the supply chain
can react to its plans. An IS helps balance the focal and local (between
focal firms and the supply chain partners) planning (Muller and Seuring
2007). Although the supply chain is integrated, each company keeps a
3MES is applied to manage shop floor activities in a manufacturing plant (Kahl 1999). It forges a
link between business planning and management control system (Russell and Taylor 1998).
37
certain level of autonomy. Integrated planning applications provide an

opportunity for collaborative planning and control and good communi-
cation between partners to implement the interplant alignment between
sales and demand in the supply chain (Meyr et al. 2000).
Execution applications generate supply chain-wide visibility of man-
ufacturing processes and coordinate global execution (Rai et al. 2006).
For example, collaborative product commerce allows companies to
manage product information with suppliers through the Internet. It
helps a company to collaborate with product design and development
with its partners, and supply chain strategies (Prajogo and Olhager
2012) such as BTO. The technology is expected to coordinate and
control the supply, manufacturing and customer relationship virtually
and to enable a flexible product development process. An automotive
manufacturer is a good example. Collaborative product commerce can
complete a new design for new models of cars by bringing together all
components from suppliers electronically to visualise the assembly and
to create the best design (Mondragon et al. 2006). Finally, the connec-
tivity with ERP facilitates the coordination of supplier- and custom-
er-facing processes with internal integration and collaboration (Rai et al.
2006).
With Industry 4.0, the supply chain would fully leverage the bene-
fit from digitisation. Thus the planning and control would be an end-
to-end platform so that when customers make changes to their orders,
the planners can immediately evaluate the impact from the changes on
supplies of the raw materials, manufacturing capacity and its inven-
tory. Such changes and impacts would also be shared with other func-
tion units, suppliers, other partners, such as logistics providers and even
customers for confirmation and acceptance. Digitised procurement will
also change and transform supply chains as it affects not only first tier
suppliers, but also the end-to-end supply chains (Fig. 2.2). Industry 4.0
will ask firms to work more closely with their suppliers to improve plan-
ning and delivery, to better manage suppliers’ risks and to have a mutual
understanding of the business and customer expectation by using a vari-
ety of tools and technologies such as big data (Schrauf and Berttram
2016).
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Y. Wu
Personal Departmental Company Customers Suppliers Supply Chain Integration
-Messaging Planning and Control

-Email -Integrated Material Requirements Planning and ERP
-Real Time Production Planning, including MES
-Digital Supply Chain Segmentation after Customer Requirements
Procurement
-Supplyer Risk Management and Analysis
-Supplier Inegration into Planning and Development
-Big Data Analysis
Fig. 2.2 Integrated Supply Chain.

Adapted from Schrauf and Berttram (2016)
2.3.2 IS Integration and Operational Performance
Empirical research has examined the relationship between IS and firm per-
formance in the context of SCM. Three themes emerge from the research:
the impact of technologies (e.g. Auramo et al. 2005; DeGroote and Marx
2013; Levary 2000), the impact of information sharing (e.g. Li and Lin
2006; Yu et al. 2000) and the impact of IS integration (e.g. Elmuti et al.
2008; Ngai et al. 2011; Rai et al. 2006; Swafford et al. 2008).
• The impact of technologies
Auramo et al. (2005) examine technologies, including ERP, EDI,

Internet and third-party transaction hubs and their impacts on the
supply chain. The research has been carried out by interviews, and the
evidence indicates that the use of technologies improves the agility of
the supply network and information quality. Levary (2000) discusses
the role of IS in the supply chain as an enabler for network coordina-
tion. ERP is recommended for inter-organisational integration as it is a
modular system designed to support different functions. EDI is recom-
mended for intra-organisational integration by sharing data with part-
ners. This is supported by Akkermans et al.s’ research (2003), using an
exploratory case study in Delphi European Company to investigate the
impact of ERP on the supply chain. They also find that IS integration
makes a positive contribution to supply chain effectiveness. The survey
of 193 US manufacturing firms by DeGroote and Marx (2013) sug-
gests that IT improves the supply chain’s ability to respond to market by
improving the quality, accuracy and timeliness of the information. Such
39
enhanced supply chain agility consequently improves the firm’s sales,

market shares, profitability and customer satisfaction.
• The impact of information sharing
Information sharing has been recognised as valuable and beneficial in

the supply chain (Chen et al. 2000; Defarai et al. 2007; Yu et al. 2000).
A number of authors suggest that the close collaborative linkages ena-
bled by information sharing are critical to effective SCM (Barratt and
Oke 2007; Whipple et al. 2002). Dejonckheere et al. (2004) investigate
the impact of information enrichment on the bullwhip effect in supply
chains and they show that information sharing helps to reduce the bull-
whip effect significantly, especially at higher levels in the supply chain.
Zhou and Benton (2007) study the relationship between supply chain
practice and information sharing in manufacturing firms and argue that
effective information sharing significantly enhances supply chain prac-
tice. Both effective information sharing and effective supply chain prac-
tice are critical in achieving good supply chain performance. Li et al.
(2006) suggest information sharing enhances firm agility while improv-
ing the stability and performance of the whole supply chain, as timely
information sharing facilitates firms identifying disruptions on time.
Studies have suggested the need for firms to have visibility of various
aspects of their customers and suppliers operational activities, including:
(1) being able to see the ‘real demand’ (Croson and Donohue 2003);
(2) being able to see the inventory of customers (Petersen et al. 2005);
(3) being able to see the process, in other words, realising process visibil-
ity (Van der Zee and Van der Vorst 2005).
• The impact of IS integration
Several studies focus on the role of integration of IS in SCM. Wang

et al. (2006) indicate that virtual integration, enabled by IT, should be
an integral part of manufacturing firms’ SCM, and that IS integration
between a manufacturer and its suppliers can enhance supplier respon-
siveness and lead to great manufacturing flexibility. Rai et al. (2006)
study cross-functional SCM application system integration across sup-
ply chains and reveal that such integration results in significant and
40
Y. Wu
sustained firm performance gains, especially in operational excellence

and revenue growth. Frohlich (2002) suggests that supplier and cus-
tomer e-integration has a strong effect on business performance, by
increasing Internet sales revenue, and on operational performance, by
improving respondent perception of delivery times and inventory turn-
over. IS integration is shown to promote a higher level of organisational
integration, which leads to improved business performance (Swafford
et al. 2008; Vickery et al. 2003).
Reich et al. (1999) point out that most companies turn to new
technologies which allow them to become agile, and which provide
them with a competitive edge. However, not all the literature agrees
with this statement, as there is growing evidence to show that IS does
not always deliver expected benefits (Powell and Dent-Micallef 1997;
Tippins and Sohi 2003). Devaraj et al. (2007) show there is no direct
benefit of e-business technologies on performance. However, these tech-
nologies support supplier integration, which is found to impact posi-
tively on cost, quality, flexibility and delivery performance (Devaraj
et al. 2007). Dasgupta et al. (1999) argue that productivity in the ser-
vice and manufacturing sectors appears to lag as increased IS investment
occurs. It confirms the ‘productivity paradox’ that IS may have a neg-
ative effect on firms’ performance. A more recent survey of 263 mem-
ber firms of the Institute for Supply Management, carried out by Maiga
et al. (2015), shows that no significant direct effects of internal and
external IS integration on firm profitability are identified. Wen et al.
(1998) consider that the benefits of IT may be ‘qualitative, indirect and
diffuse’ and suggest that it may influence performance by impacting
relational outcomes.
The business strategy is responsible for setting up the objectives and
steps that affect business processes with the purpose of the growth of
the businesses. The business processes are supported by IS which pro-
vides hardware and applications to realise the business processes. A gap
between IS and values represents the difficulty managers face in justi-
fying the value from systems (Mondragon et al. 2004). Powell and
Dent-Micallef (1997) claim that although many companies adopt
new technologies, in particular, IS, to gain the competitive edge, the
41
technology itself is not sufficient because it can be purchased by any

organisation that has sufficient funds.
2.4 IS Integration: Platform for Supply

Chain Agility
Goldman et al. (1995) highlight that information is critical in the cre-
ation of agile enterprises. IS systems can be an enabler of agility by
differentiating digital economics from tradition economics of physical
components (Shapiro and Varian 1999). Sambamurthy et al. (2003) list
the differences as follows.
• Networks can be expanded to increase the number of customers

• Technologies help to reduce the marginal costs rapidly
• It allows ease of searching and product comparison, and enhances the
ability to combine digital products to create new value.
With the spread of digitisation within organisations as well as in

inter-organisational networks, these economics will influence the viabil-
ity of firms’ competitive actions (Sambamurthy et al. 2003). However,
literature on agility has been focused more on agile manufacturing and
the technical aspects of IS development. For example, virtual enterprises
formed by IS applications enable the realisation of agile manufacturing
in order to have a fast response to the changing markets (Sharp et al.
1999; Dowlatshahi and Cao 2006). Email systems, expert systems,
modelling and simulation systems are identified as requirements to
achieve agile enterprises (Gunneson 1997). Gunasekaran (1998) pro-
poses the benefits of IS to agile enterprises, including communication
agreements and software standardisation, enterprise-wide concurrent
operations that cover all the functions of the company. While these
works focus on the technical issue of systems design, Mondragon et al.
(2004) further explore the factors affecting the performance of IS sys-
tems in the agile manufacturing context, such as training of people in
the use of IT and ensuring the right attitude from people and employee
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Y. Wu
skills. Overby et al. (2006) deconstruct enterprise agility to illustrate

how IS supports sensing and responding complements enterprise agility.
Additionally, the sustainable business value of IS emerges mainly from
its integration with business strategies, organisational design and struc-
tures (Barua and Mukhopadhyay 2000; Wheeler 2002).
Extant studies suggest that the greater the degree of coupling or inte-
gration between the IS systems of trading parties, the greater the degree
of coordination and collaboration that can be achieved (Byrne and
Heavey 2006; Ngai et al. 2011; Swafford et al. 2008). In the context of
agile supply chains, IS integration facilitates the streamlining of work
processes and the building of inter-organisational relationships.
2.4.1 Customer Sensitivity and IS Integration
Customer sensitivity emphasises customer and market, including cus-

tomer-focused logistics and rapid response. It supports the custom-
ers’ processes in a way that is perceived by customers to be satisfactory
(Christopher 2005). IS integration within and among organisations
enables them to capture data on demand, leading to customer-focused
supply chains (Christopher 2000). For example, Cisco creates a digital
platform which connects the company with suppliers. It allows firms
across the supply chain to simultaneously access the same demand or
supply data and exploit time-based competition (Christopher 2005).
One important role of IS integration is monitoring customer needs
through applications such as CRM, or web services (Auramo et al.
2005; Muller and Seuring 2007). Agile supply chains are about the fast
response to customers’ changes and one prerequisite for meeting such
changes is to have a good understanding of customers and their needs.
IS systems are able to help firms capture, collect and store basic data
from customers, such as their preference on products, their frequency
of purchases and how much they spend so that the firms have a bet-
ter understanding of customer behaviour (McGaughey 1999). Ford
Motor Company applied online conferences and emails to let custom-
ers interact with product designers working on the Taurus automobile
(McGaughey 1999). The company used these to collaborate with its
43
customers in product design and development. The collaborative prod-

uct development helped Ford to achieve a tighter coupling with its
customers. Furthermore, integrating IS from manufacturing to procure-
ment, and sharing such information with its partners gave Ford com-
petitive advantages by improving the ability to make changes on the
basis of market signals, which is responsiveness (Catalan and Kotzab
2003). Because firms gain competitive advantages through fast delivery
and product variety rather than price only (Lee and Billington 1992),
IS integration may have a strong impact on responsiveness through the
approach of customer sensitivity.
Literature has various definitions and descriptions of responsiveness.
McCutcheon et al. (1994) regard responsiveness as equal to the delivery
lead time for a certain product. Holweg (2005) uses a similar defini-
tion and argues that responsiveness is ‘the ability of the manufacturing
system or organisation to adapt to changes and requests in the market-
place’. Both authors agree that responsiveness signifies (1) the ability to
respond to changes in products and services, (2) the ability to respond
to the process of demand uncertainties from either upstream or down-
stream (Lee and Billington 1992).
2.4.2 Process Integration and IS Integration
One characteristic of agile supply chains is thriving on changes and

uncertainties (Agarwal et al. 2006; Ngai et al. 2011). As any part of
the environment changes, the firm should be sufficiently flexible to
change its human and technical systems to respond (McGaughey 1999).
Process integration places emphasis on self-management teams instead
of standardisation so that core modules of products can be delegated
within networks of agile competitors (van Hoek et al. 2001). Therefore,
a close relationship is inevitable among legally dependent but opera-
tionally interdependent parties such as various suppliers, manufactur-
ers and customers (Ngai et al. 2011; Yusuf et al. 2004). Organisations
using IS can re-organise and re-configure human systems and technical
systems as needed to take advantages of changes (McGaughey 1999).
For example, Taiwan Semiconductor Manufacturing Company gave
44
Y. Wu
suppliers proprietary tools and product requirements’ data so that they

can execute changes accurately (Lee 2004).
This form of cooperation allows companies to focus on their core
competencies (Christopher 2005). While IS integration facilitates the
communication and real-time connectivity among companies, they
are much more likely to increase product variety and improve the abil-
ity to handle orders with special customer requirements. Meanwhile,
the availability of real-time demand data improves company vol-
ume flexibility—that is, increasing or reducing production based on
demands. Hence, two types of flexibility are derived from the impact
of IS integration in process integration, although Slack (1987) identi-
fies four types of flexibility, which are product, mix, volume and deliv-
ery. Flexibility is another important operational dimension which can
improve the company’s competitiveness (Martinez and Perez 2005), and
in the context of the supply chain, it is a significant measure of perfor-
mance (Reichhart and Holweg 2007; Swafford et al. 2008).
Three motivations have been identified when firms adopt new tech-
nologies. First is the initial stage of striving for agility, which seeks to
lower costs and to improve working efficiency by applying IS in the
business (van Hoek 2001). Second, IS integration is of great impor-
tance in enhancing agility because it changes patterns of interaction,
work processes and social organisations by providing an informational
rich and communicational rich environment (Mondragon et al. 2006).
Finally, IS facilitates interpersonal communications and encourages the
development of new patterns of relationships (McGaughey 1999).
2.4.3 Network Integration and IS Integration
There is a growing recognition that individual companies need to oper-

ate in networks where partners have close and committed partnerships
and shared targets to survive in competitive markets. Therefore, it is
critical to leverage the strengths and competencies of partners to realise
fast responsiveness to market requirements (Christopher 2000). This is
called network competition where profits will go to the organisations
that have better coordination with partners. For example, in the
45
automotive industry, first tier suppliers are involved in the design of

car components, and at the same time, automotive companies help to
improve suppliers’ manufacturing processes and technology adoption
(Martinez and Perez 2005). Cooperation is also necessary within an
organisation as a means of synchronising many people and organisa-
tional sub-units that play a role in bringing about the actions required
to continually meet ever-changing customer needs (McGaughey 1999).
Good communication is a key to realise inter- and intra-organisational
cooperation (Sheu et al. 2006). IS integration facilitates the implemen-
tation of communication by synchronising information across supply
chains within real time.
Integrating functional-specific applications with a backbone ERP
system supports the sharing of corporate data across departmental
barriers and makes information available within the firm by intranet
(McGaughey 1999). Many SCM IS tools have emerged and are widely
adopted. In Zhou and Benton (2007)’s research, the applications that
are adopted to communicate with partner firms have been categorised
into three groups. The first category is supply chain execution, focus-
ing on short-term daily activities such as warehouse and transportation
management. The second category is planning applications for medium
to long-term activities and the third category is supply chain execution
management, bridging the first two categories as a supporting tool.
Business systems and processes are integrated, yet organisational rela-
tionships are still dynamic (Zhou and Benton 2007).
As Christopher (2000) discusses, in today’s challenging global mar-
kets, the route to sustainable advantages for a firm lies in being able to
make most use of the competencies from network partners, and then
focus on improving their own competencies. Preiss et al. (1996) state
that networks of companies can take advantage of business opportuni-
ties greater than the sum of the contributors’ capabilities. IS integration
enhances dependability among partners by providing interactive and
closed relationships from sharing information. The integrated IS is also
able to link all partners for the purpose of taking advantages of business
opportunities beyond the reach of any one firm acting alone.
Extant literature is concerned with dependability among partners.
For example, Narasimhan and Jayaram (1998) evaluate dependability
46
Y. Wu
in suppliers’ performance, such as delivery speed and reliability. Ismail

and Sharifi (2006) take dependability as the flexibility of a company to
utilise specialist players, therefore encouraging the company to cooper-
ate with others in the supply chain to form an integrated network. The
book regards dependability as the coordination of a firm with its part-
ners, using the partners’ strengths and focusing on the firm’s core com-
petencies (Gunasekaran et al. 2008).
2.4.4 Virtual Integration and IS Integration
Supply chain agility takes more than advanced technology (Christopher

2005). It requires that companies should ‘leverage the impact of infor-
mation and people on operations’ (DeVor et al. 1997). That is, the com-
pany encourages the free flow of information and exchange of ideas i.e.
collaborative organisational work (Christopher 2000). Integrating IS
leverages the value of information because it spans internal and external
organisational boundaries, making it possible to provide the informa-
tion that is needed. IS integration also provides the pipeline for data
flow from any machine or any computer, internal and external sources
such as factory shop floors, stores, warehouse, engineering, accounting,
customers and suppliers (Dess et al. 1995; Gunasekaran et al. 2008);
and supports the flow of physical resources and cash (Ngai et al. 2011).
Through IS integration, the entire corporate database can be made
available to the departments. Moreover, IS-integrated communica-
tion applications could facilitate the exchange of external information
to support coordinated actions (Chakravarty et al. 2017). However,
Fawcett et al. (2007) suggest that the investment in IT would not
succeed to deliver expected benefits without the willingness to share
information.
Cross-functional IS integration entails the exchange of informa-
tion within organisations and the acquisition of information across
the organisations (Yu et al. 2013); thus it facilitates information gath-
ering and dissemination. Information acquisition and dissemination
are two important attributes of organisational learning (Tippins and
Sohi 2003). Given the complex and often dynamic nature of SCM,
47
organisational learning has been presented as one key dimension of

sustaining competitive advantages for firms (Hult et al. 2000; Yu et al.
2013) and information acquisition and dissemination allows members
across the supply chain to share their interpretations to achieve consen-
sus understanding (Kohil et al. 1993). For example, Bierly et al. (2007)
identify that firms can improve their product design and innovation by
gathering feedback from their customers.
Operational performance has been explored and measured in
numerous ways (DeGroote and Marx 2013; Gunasekaran et al. 2008;
Narasimhan and Das 1999; Prajogo and Olhager 2012; Sanders 2007).
The measurement usually includes quality, dependability, respon-
siveness/speed, cost and flexibility (Slack et al. 2007). In addition,
innovation and organisational learning have become added dimen-
sions (Fitzgerald et al. 1991; Neely et al. 1995; Yu et al. 2013). Some
researchers have suggested that manufacturers tend to simultaneously
pursue multiple performance objectives rather than purely focusing
on one measure (Roth and Miller 1990; Sanders 2007). Following the
approach of multiple performance objectives, taken in previous research
(Devaraj et al. 2007; Narasimhan and Das 2001; Sanders 2007), and
according to the discussion of the relationship between IS integra-
tion and four dimensions of supply chain agility, the book focuses on
responsiveness, flexibility, dependability and organisational learning of
operational performance (information dissemination and acquisition).
2.5 Framework
The book focuses on how IS integration contributes to the achievement
of greater agility, with the exploration of the important factors of IS
integration in achieving agile capabilities in supply chains. Furthermore,
this book is not only concerned with the impact of IS on supply
chain agility, but also investigates the role of IS in the dimensions of
agile capabilities across supply chains. IS integration is important to
supply chain agility and IS-enabled supply chain agility improves oper-
ational performance. More specifically, the book proposes that IS inte-
gration impacts the four dimensions of supply chain agility, which are
48
Y. Wu
Table 2.1 Themes identified from literature
IS integration Data consistency

Cross-functional SCM application integration
Supply chain agility Customer sensitivity
Process integration
Network integration
Virtual integration
Operational performance Responsiveness
Dependability
Flexibility
Information dissemination/acquisition (organisa-
tional learning)
customer sensitivity, process integration, network integration and vir-

tual integration. The literature identifies the potential dimensions of IS
integration, supply chain agility and operational performance, listed in
Table 2.1.
For exploring IS integration in the context of supply chain agility,
firstly, customer sensitivity supports business processes in a way that is
perceived by customers to be satisfied. Customer sensitivity emphasises
fast response to customer requirements (Christopher 2005). IS inte-
gration within and among organisations enables them to capture data
on demand, leading to customer-focused supply chains and achieving
greater responsiveness (Christopher 2000). Secondly, one characteris-
tic of agile supply chains is that they thrive on change and uncertainty,
which is stressed by process integration (Agarwal et al. 2006). IS inte-
gration provides real-time information to reflect changes, including cus-
tomer orders or market changes so that product and volume flexibility
can be improved. Thirdly, cooperation is necessary within an organ-
isation as a means of synchronising many people and organisational
sub-units that play a role in bringing about the actions required to
continually meet ever-changing customer needs (McGaughey 1999) so
that firms can focus on their own competences and share resources with
their partners. IS integration facilitates the implementation of commu-
nication by synchronising information across supply chains within real
time. Fourthly, virtual integration facilitates the process of achieving
greater agility by encouraging the free flow of information and exchange
49
Supply Chain Agility Operational Performance
Customer Sensitivity Responsiveness
IS integration Process Integration Dependability

- Data consistency
- Cross-functional application
system integration
Network Integration Flexibility
Organisational Learning
Virtual Integration - Information acquisition
- Information dissemination
Fig. 2.3 Framework
of ideas, such as collaborative organisational work. System integration

leverages the value of information because it spans internal and exter-
nal organisational boundaries, making it possible to provide the infor-
mation that is needed (McGaughey 1999). Based on discussions of the
relationships of IS integration, supply chain agility and operational
performance, a framework is developed. Figure 2.3 illustrates the
dimensions of agile supply chain and the impact of IS integration on
agility in automotive industry supply chains, drawn from the review of
literatures.
2.6 Conclusions
Past research stresses the importance of IS in managing supply chains.
IS integration plays an important role in SCM, as an enabler in achiev-
ing supply chain integration and agility (Gunasekaran and Ngai 2005,
Power et al. 2001; Sanders 2007; Yusuf et al. 2004). Many studies are
concerned with the impact of IS on SCM, such as productivity, prof-
itability and cost reduction (Auramo et al. 2005; DeGroote and Marx
2013; Gunasekaran and Ngai 2004; Maiga et al. 2015). However,
knowledge of IS integration in supply chain agility is not well advanced
(Fawcett and Magnan 2002) with a particular lack of research into how
IS integration may affect supply chain agility, despite the development
50
Y. Wu
of IT for collaboration and the take-up of ERP systems (Denolf et al.

2015; Mabert et al. 2003). Two factors have been identified from the
literature: data consistency and cross-functional SCM application
integration.
Meanwhile, supply chain agility as an approach to rapidly respond
to a fast-changing business environment has attracted significant atten-
tion from both academics and practitioners in recent years (Elkins et al.
2004; Gligor et al. 2015; Ismail and Sharifi 2006; Ngai et al. 2011;
Swafford et al. 2006). Existing literature has shown that agile supply
chains can be realised through enriching customers, cooperating with
partners, mastering uncertainties and leveraging the impact of informa-
tion and people (Goldman et al. 1995; van Hoek et al. 2001).
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3
Chinese Automotive Supply Chain
Management
Chapter 2 addressed the dimensions and the possible relationship

between IS integration, supply chain agility and operational perfor-
mance, as well as offering a framework to interpret these relationships.
This chapter describes SCM and IS integration in the automotive
industry, especially in China, including the drivers of industry devel-
opment, the status quo and IS applications in the automotive supply
chain. This chapter also sets the empirical context for the case studies in
following chapters.
3.1 Empirical World: The Automotive Industry

The automotive industry is characterised by complexity, uncertainty and
heterogeneity (Xu et al. 2003). The automotive supply chain is enor-
mous in size, with a single vehicle requiring tens of thousands of auto
parts provided by various manufacturing companies and channelled
into the final Original Equipment Manufacturing (OEM) for assem-
bly. Furthermore, the components are expected to arrive at OEM at the

https://doi.org/10.1007/978-3-319-98440-7_3
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right time in the right quantity so that the final assembly can be done
efficiently. Helper (1991) argues that the extreme complexity and long
lead times of automobile manufacture and the automakers’ use of an
extremely adversarial supplier relations strategy have made the business
more turbulent than other industries. Therefore, the automotive indus-
try is heavily dependent on the whole supply chain, as a single man-
ufacturing enterprise alone may find it difficult to respond rapidly to
changing market requirements due to limited resource and time. Hence,
supply chain agility is becoming a key weapon within the automotive
industry because automotive firms collaborate with each other and
industrial partners to jointly develop and produce vehicles or assemble
them, which enable firms to remain competitive through sharing costs,
capital expenditure resources, as well as leveraging economics of scale in
production costs (PWC 2007). Thus the whole supply chain can act as
a main contributor to the performance of the overall industry (Jin et al.
2005; Xu et al. 2003).
3.1.1 The Automotive Industry Supply Chain
Many factors influence decisions made in the automotive industry. For

example, consumer preferences determine vehicle styles, features and
performance standards. Government trade, safety and environmen-
tal regulations establish requirements for modernisation and change in
design and production (Veloso and Kumar 2002). All OEMs are con-
stantly under pressure to identify consumer preferences or new market
segments and to gain market share. The capability of automobile man-
ufacturers to quickly respond to these pressures determines their future
development. In the following paragraphs, some critical issues and chal-
lenges are reviewed to show the general business environment of the
automotive industry.
According to Dicken (2013), 90% of the current automotive produc-
tion comes from North America, Europe and East Asia. The financial
crisis in 2008/2009 hurt automotive production in developed econo-
mies, but emerging markets such as Brazil, China, India and Russia saw
continued growth. Car sales have experienced a similar pattern, with a
3 Chinese Automotive Supply Chain Management
69
slowing demand from developed markets. By the end of 2016, US sales

had returned to pre-crisis levels, but EU sales remained below what they
were in 2008 (Macquarie Research 2017). As for the emerging markets,
the sale of 3.6 million automotive in 2012 made Brazil the fifth largest
automotive sales market in the world. But due to political, social and
economic factors, 2016 was the third consecutive year of decline for
the Brazilian automotive market (PWC 2016a). But the overall perfor-
mance of the automotive industry was strong in 2016 with 88.1 mil-
lion automotive sales, 4.8% increase from 2015 (Macquarie Research,
2017). That was the fastest annual rate of growth since 2013. In terms
of the sub-markets, China contributed 13% Year on Year (YoY) increase,
followed by the EU with 7% annual growth rate. On the other hand,
Brazil and Russia witnessed a sales decrease, with 20% and 11%, respec-
tively. US light vehicle sales remain relatively stable, up 0.4%, whereas
Japan fell 2% due to the continuously adverse effects of the VAT
increase in April 2014. The profit margins for OEMs and their suppli-
ers hit a 10-year high (Parkin et al. 2017). The global sales of passenger
cars and light commercial vehicles increased 2.4% in 2017, according to
JATO Dynamics (2018) based on their data from 52 markets.
According to the survey carried out by McKinsey (2017), executives
are much more optimistic about the global economy than they were in
2016, but respondents are not convinced that conditions will be substan-
tially better. The survey also identified the concerns of change in trade
policy, geopolitical turmoil and regional shifts from mature to emerg-
ing markets. Thus companies are facing a business environment that is
becoming more complicated to adapt to than before. The research by
Parkin et al. (2017) shows the average annual rates of return of automak-
ers over the past five years is well below that of S&P 500 and Dow Johns
Industrial Average. This has been problems to the automotive industry
and it made the investment to this industry less attractive. Many OEMs
who survived from the credit crisis still reduce their operation costs. In
the meantime, they still try to remain their competitive advantages.
One of the main competitive factors is the pattern of demand for
new cars. New cars are introduced rapidly and customers and markets
are more fragmented and specialised than before (Sharp et al. 1999).
The demand for new vehicles has been growing on average 1% a year
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since the beginning of 2000 in Western Europe, Japan and the USA.
Global car sales were affected in 2008 and 2009 by the financial cri-
sis, and the annual growth rates were −4.1% and −0.9%, respectively
according to Macquarie Research (2017). However, car sales picked up
again after 2010 when the macroeconomy began to recover. The num-
ber of vehicle models for sale in the US market has increased by 91%
from 1980 to 1999, up to 1,050 different models in 2000 (Veloso and
Kumar 2002). With numerous options to choose from, customers show
great interest in personalised vehicles, calling for a more intimate com-
munication and interaction between automakers and their upstream
partners.
While consumers’ expectations around the world are certainly steer-
ing the overall direction of the industry, government regulation has
also been playing an important role. Safety standards were established
decades ago and regulations for mandatory devices such as airbags were
enacted (Veloso and Kumar 2002). The other area that government
focuses on is environmental damage. Laws to regulate emissions and
fuel economy have been enacted in many countries. For instance, an
emissions target for light commercial vehicle in Europe would be 147
g/km in 2020, a reduction of 16% from 175 g/km applied in 2017
(ICCT 2014). The regulation has certainly affected product develop-
ment as well as industry development. Honda was one of the first auto-
makers to adopt Continuously Variable Transmissions (CVTs) that are
capable of adjusting gear ration constantly to optimise performance and
improve fuel efficiency. There is a possibility that the current US admin-
istration may relax existing environmental regulations to lower the costs
associated with tightened emissions standards. But it is uncertain how
much impact the federal US regulations would make if individual US
states continue to have strict standards (Parkin et al. 2017).
The other factor that determines the evolution of the automotive
industry is technology. Advanced technologies have been applied to a
wide range of car manufacturing to improve vehicle performance and
vehicle safety and to reduce environmental pollution. Technologies also
reshape vehicles’ structural development (Veloso and Kumar 2002).
Connected and intelligent cars that cover autonomous driving, vehicle
safety, environmental impact, entertainment, and vehicle mobility will
71
lead the trend of the automotive industry. Hirsh et al.’s recent study
(2016) finds that 58% of new car buyers would change a brand if the
car they were considering did not offer the technology they required.
Similarly, 48% of car buyers would change a car if the technology was
not user-friendly.
OEMs and suppliers would reserve the capitals and resources for
either acquiring or developing new technologies to meet customer
requirements. As a result, a few mergers and acquisitions in the automo-
tive industry have sought to expand and boost its in-house technologi-
cal capabilities. For example, ZF Group, a German transmission maker,
acquired TRW for its sensor and electronics technology for USD 12.4
billion in 2015. The technology has been regarded as key to the future
development of autonomous vehicles, fuel efficiency and advanced
safety features (Walsh, 2015). ZF Group also acquired 40% equity stake
in Ibeo Automotive Systems GmbH, a Hamburg-based company and a
market leader in lidar sensor technology and developing environmental
recognition software (Auto news press, 2016).
IS and the Internet influence the way of doing business. New tech-
nologies such as web service and wireless applications are fundamentally
reforming the process of automobile design, manufacturing and mar-
keting and facilitating collaboration with partners. Technological inno-
vation is believed to be the key to building competitive advantage as
well as to helping reduce costs and set new product standards (Veloso
and Kumar 2002). As von Heynitz and Gross (2006) suggest, the basis
of future competition will be technology and innovation. In addition,
technology also restructures the way of doing business among suppliers
and OEMs, as nowadays 70–80% of the total value is created by suppli-
ers (Harrison and van Hoek 2008). For example, Ford, General Motors
and Renault Daimler Chrysler have combined their e-commerce initi-
atives, and encourage their first tier suppliers to use the site to do busi-
ness with second tier suppliers. Public marketplaces such as Covisint
and SupplyOn, OEM-specific online market such as Volkswagen Group
Supply.com and Toyota’s WARP were created with their suppliers in the
expectation that a high volume of information could be exchanged, and
commodities purchased through such channels (Maurer et al. 2004).
However, the technology adoption pace was much slower than expected
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due to (i) the unsuitability of auto components for online bidding and
(ii) limited IS compatibility between OEMs and suppliers (Maurer et al.
2004).
Despite of the diversity of models and advancement of technology,
the car industry is still driven by cost-reduction. Firms face continuous
price pressure from the market (D’Alessandro and Baveja 2000). One
example from McKinsey (2012) shows that the Toyota Camry in the
North American market has added at least USD 1,400 of new contents
over the past decades, which include traction control, truck lights, sta-
bility control and speed-sensitive-sound-volume control. However, the
retail price for the base model has dropped about 1% a year. In the
Chinese auto market, Volkswagen cut prices on selected models by
5–8% in 2015; General Motors cut prices on 40 models by a similar
amount; Ford also announced that it would cover the registration tax
for all sales, equivalent to a 10% cut.
Auto-manufacturers try to reduce prices from suppliers and they buy
as many parts as possible in low-cost countries by pushing the same
policy on global suppliers such as Bosch, who buy thousands of parts
for the large pre-assemble modules they deliver to automotive assem-
bly lines. The cost savings can be as much as 25% (Bergmann et al.
2004). Suppliers are also playing an important role in accommodating
new content and reducing the cost of the existing components so that
the end products are at a price customers are willing to pay. Hence,
increasing auto sales requires meeting all the new challenges, which are
(i) turbulent markets in terms of product mix and product volume, (ii)
government regulations such as environmental and safety issues, (iii)
production cost control, and (iv) product availability.
3.1.2 Chinese Automotive Industry Development
The 1990s witnessed the transformation of the emerging markets such

as China and India. PWC (2017) estimates that global light vehicle
assembly will grow from 84.1 million units in 2013 to 113.0 million
units by 2023 with a Compounded Annual Growth Rate (CAGR) of
3%. The majority of this growth will likely come from a large number
73
of emerging markets such as China, Russia, Thailand, India and Brazil.

Although Brazil has experienced consecutive years of contraction since
2012 with over 3.5 million in new car sales, it still believes there has
significant room for recovery after its economic recession and political
volatility. India has seen moderate growth after the financial crisis, with
a temporary setback in Q4 2016 due to the cancellation of several circu-
lating rupee notes.
China has remained the world’s largest market for the automotive
industry, accounting for 30% of global automotive sales. It has also
been the largest automotive production country since 2009 (EU SME
Centre 2015), against a backdrop of stagnant European auto sales and
a US recovery. The 10-year CAGR was 11.4% from 2004 to 2014. The
sales were accelerated towards the end of 2016 with double-digit growth
and the cancellation of the tax incentives for small engine cars. The sales
of passenger vehicles in the auto market have become significant over
the past two decades. It accounted for 83% of the total vehicle sales in
2014 from 30.6% in 2001. Foreign players show their interest in this
market through working with local partners to enter the market and
secure growth in domestic markets due to cultural or legal issues, as cul-
ture used to be a barrier to enter the Chinese market (von Heynitz and
Gross 2006). Although there are 76 OEM groups, 184 vehicle assem-
blers, and more than 1000 tuning operations in China (PWC 2016b),
the production is dominated by three large firms (CAAM 2017). The
three dominant corporate groups are FAW, Dongfeng, and Shanghai
Automotive Industry Corporation (SAIC), accounting for 49.6% of
passengers’ car manufacturing in H1 2017.
The Chinese automotive market has also gone through a fundamen-
tal shift over the past decade. The market for private cars has grown
considerably from around 10 million units in 2009 to 20 million in
2014. Meanwhile, the expansion of the private car market has created
great opportunities for automakers. This emerging market demands
that cars meet international standards and retail at a low cost, which
forces automakers to provide their customers with a competitive price
and attractive product in order to survive in the industry (Thru 2006).
The agile capability is becoming vital to supply chain operation in
74
Y. Wu
automotive industry and the awareness of the importance of supply

chain agility is increasing (Chen 2004).
This highly competitive environment challenges Chinese supply
firms. In the initial stage of automotive sector growth, the firms had
protection from the government as the Joint Venture (JV) assembly
plants had no choice but to use local suppliers and it was a requirement
of increasing local content rate,1 as well as help to leverage local firms’
capability. At the second stage, more suppliers have been set up and
new rules had been created by OEMs to have a wider range of selec-
tion, forcing supply firms to compete on their merits. For example,
if a supplier does not meet the requirements of quality, price and ser-
vices, the assembly can import the necessary components (CCID 2007;
Thru 2006).
3.1.3 Shanghai Automotive Industry Development
When the automotive industry was officially confirmed as a pil-

lar industry in 1986, the focus was on passenger car development.
However, the existing facilities were not equipped with the neces-
sary technologies and skills to meet the market demands of passenger
cars, as the automotive sector was centrally controlled by the govern-
ment with the focus on the truck development in 1960s and 1970s.
The government initiated a long-term programme to introduce tech-
nologies, advanced manufacturing and the skills needed through
global cooperation. Shanghai Volkswagen was among the first few JV.2
It used to dominate over 50% of the market share of passenger cars in
China, and played a significant role in their development.
1Local content rate refers to the percentage of a product that is manufactured within all of China
(Thru 2006). Local content policy indicates that the local content rate must be 40% for OEMs in
the first year of production, and increasing to 60–80% in the second and third year of production
(Gao 2002).
2Beijing Jeep was the first JV by Beijing Automobile Works and American Motors in 1983;
Shanghai Volkswagen was established in the same year by SAIC and Volkswagen; then
Guangzhou with Peugeot in 1985, followed by FAW-Volkswagen and FAW Peugeot Citroen in
1990 (Xie and Wu 1997).
75
When Shanghai Volkswagen was formed as a JV by Volkswagen and

SAIC, the German partner had little intention to speeding up the local-
isation process, although in the long term localisation would be impor-
tant to reduce costs. The priority was the quality at the initial stage, and
for the sake of reputation, no part was localised before quality could be
ensured. Volkswagen preferred to do business with pre-existing suppliers
for financial reasons as international suppliers could offer lower prices
for high volumes (Harwit 2001). The only sedan car manufactured in
Shanghai Volkswagen was Santana at the beginning of the business.
However, the Chinese government hoped that the auto sector would
drive growth in related industries, including steel, plastics and rub-
ber (Thru 2006). The interests of SAIC and the Chinese government
were to stimulate the local economy because the automobile indus-
try is a ‘pillar’ industry and plays a leading role in the city’s efforts to
restructure and upgrade its industrial infrastructure. Suppliers needed
to upgrade parts design, as well as the technology to meet Shanghai
Volkswagen requirements and to improve the quality of Shanghai’s sup-
ply base. With government investment and capital accumulation, firms
imported equipment from abroad, trained their employees and licensed
advanced technology. Local supply firms were upgraded to a level that
would enable them to form linkages with Shanghai Volkswagen manu-
facturing requirements. The domestic content rate of Santana increased
from 2.7% in 1987 to 92.9% in 1997. Shanghai Volkswagen’s supply
base was almost exclusively within Shanghai (Thru 2006), though it has
also helped to transform the neighbouring provinces of Zhejiang and
Jiangsu into major bases of component production (Marukawa 2006).
Shanghai Volkswagen’s success has greatly promoted the growth of
the Chinese car-making industry. While expanding its production scale,
Shanghai Volkswagen started the Santana localisation endeavour to
develop the Chinese parts supply industry. This grand trans-regional,
interdepartmental, cross-industry and systematic project has helped
a large number of local suppliers achieve their technical advancement,
thus laying a solid foundation for manufacturing parts and components
up to an international standard. Volkswagen-accepted parts makers are
now accepted by other carmakers as their parts suppliers, and some of
them have become suppliers for global sourcing manufacturers.
76
Y. Wu
There is little doubt that Shanghai has the strongest supply network
in China and rapidly rising local content rate was a key factor in the
success of Shanghai Volkswagen (Thru 2006). With the increase of local
content, production volumes could increase dramatically as there was
less restriction on auto parts supply. As a consequence, the relationship
between local content and production was a virtuous circle. That is,
Shanghai Volkswagen increased production and allowed local suppliers
to achieve economies of scale. In 1996, Shanghai Volkswagen remained
the dominant market leader with 52% of the sedan cars sold in China
produced by Shanghai Volkswagen (Du Pont 2000).
Shanghai succeeded in the initial stage of auto sector development,
with a product that was based on 1970s technology. The time China
was voted into WTO was a new stage of auto sector development.
Tariffs on imported cars were lowered by 75%, and the level of market
competition increased dramatically with the entrance of Honda, Fiat,
Toyota, etc. These newly created JVs were delivering the latest models
to attract customers. Shanghai Volkswagen then introduced Passat in
1999, Polo in 2001 and a full range of models to compete. Later, in
2005, Shanghai Volkswagen brought a new brand of Skoda into China
and invested in its operation to compete and retain market share.
3.1.4 IS in Automotive Industry
SCM is of great importance to the automotive industry, but advanced

technology is also a key (Mondragon et al. 2004). IS is regarded as
an enabler to achieve competitive advantages and realise inter-organi-
sational collaboration (Li et al. 2009; Vickery et al. 2010). The influ-
ence of IS is well documented in product and service sector operations
where the potential benefits are a reduction in inventory and transaction
costs and the ability to exploit opportunities in markets. Research has
also been carried out through a range of industries. For example, the
airplane industry develops tactical and strategic management, together
with extranets for communicating with partners to support B2B rela-
tionship (Buhalis 2004). The findings from Sigala’s research on hotel
sectors (2003) indicate that the productivity gains from the system
77
networking and informational capabilities, rather than system invest-

ment only. Others focus on the determinants of technology adoption
(Hollenstein 2004) and the role of IT in structural change and regional
economics (Laursen 2004). While IS is often used interchangeably
with IT, it reflects the growth in computer applications which support
and realise information exchange at all levels within and across firms
(Howard 2005).
The origin of IS in the automotive industry begins with the adoption
of EDI in the 1960s and 1970s to replace the traditional paper-based
manner to exchange orders and information. EDI is the technology that
is used to communicate within and across organisations electronically
on a standardised basis of a fixed-format document with predefined
data and information field (Harrison and van Hoek 2008; Threlkel
and Kavan 1999). It represents a pattern of the communication across
organisation boundaries by applying a transaction processing system
(Swatman and Swatman 1992). The industry experienced various sys-
tems along with the technology development from basic data processing
to electronic business, although the data processing era brought many
disappointments on computer system failure, including the cost of sys-
tems, outdated concepts of technology, and the problems of manage-
ment involvement, the users’ attitude and the experience of computing
across firms (Earl 1989).
Later, with the introduction of Material Resource Planning (MRP),
a modular based system, firms leveraged the impact of information, but
as ‘stand-alone’ systems that supported only localised functional require-
ments and followed the hierarchical structures based on the principles
of organisation planning and structures. It was the similar situation with
the vehicle MES that produces daily manufacturing schedules, and as
an isolated technology, the system approaches to shop floor operations
without linking to production control or plant workstations (Howard
2005). Growing recognition of the problems relating to communica-
tion, information sharing and system integration in 1980s led to initi-
atives across the world by the automotive industry action groups in the
United States, the Ministry of International Trade and Industry in Japan
and the Odette Committee in Europe, encouraging the use of digital
data and emphasising the importance of standardising methods of data
78
Y. Wu
exchange and clarification over the critical issues on e-business (Lauer

2000).
To sum up, the automotive industry has been selected to address the
issues of supply chain agility and IS integration for a number of rea-
sons. First, the automotive industry addresses the growing need for
agile capability in the complex business environment in order to react
quickly and cost-effectively to a changing market (Elmoselhy 2013). In
the Internet-based business era, automotive companies—both OEMs
and suppliers—take the lead on the adoption of new and innovative
technologies (Hertwig 2012). Automotive products are heavily depend-
ent on the overall supply chain performance, and the automotive supply
chain is a massive network with high functional dependency. Therefore,
in such fast-changing markets with high competition, agility is critical
to achieve flexibility and fast market response.
Second, the automotive industry is also a technology intensive indus-
try in which IT plays an important role in achieving supply chain agil-
ity, which leads to competitive advantages (Chanaron and Nishimura
2006). The application of IT has reshaped the automotive manufac-
turing sector towards the goal of building vehicles to customer order
(Howard 2005).
Third, the automotive industry is of economic significance to many
countries and one of the largest manufacturing activities in the world
(Sanchez and Perez 2005). China is one of the largest markets for auto-
motive industry with a fast level of development. This emerging market
demands that automobiles be manufactured to international standards
at a low cost (Thru 2006).
In this sector, OEM, also called vehicle manufacturers, utilises a range
of customised IS systems to facilitate coordination and information
flow to enhance and optimise mass production and build-to-forecast
production systems (Gunasekaran 2005). The last decade has seen
increasing market-driven pressure and customer responsiveness, which
leads to an examination of the discrepancy between what the company
needs from IS systems and what IS systems can deliver (Holweg and Pil
2004). Holweg and Pil (2008) also identify key actors in the automo-
tive supply chains. The OEM is a main actor which is responsible for IS
architecture within its own organisation, and also dedicated to develop
79
the mode of interaction with first tier suppliers, the distribution centres
and car dealers.
3.2 Case Selection

The OEMs examined in this study had announced their inten-
tion to move to a more responsive, customer-focused strategy.
In addition, the focus is only on high-volume model passenger cars. The
goal is to present a detailed picture of how the firms in supply chains
integrate via IS to achieve greater agility, involving all tiers of supply
chains.
The first tier suppliers were selected based on two factors: First, they
had to have their manufacturing operations located close to the OEM
manufacturing facilities, so that they were able to deliver components
on a daily basis to the OEMs. Second, they had to have a digital com-
munication or IS integration with the OEMs. First tier suppliers were
recommended by the OEMs. Two OEMs and four first tier suppli-
ers were selected, comprising two supply chains shown in Table 3.1.
However, downstream actors such as third-party logistics or car deal-
ers are not included. This is because in the Chinese market car dealers
are part of an OEM’s marketing department. Third-party logistics take
orders from marketing departments to deliver vehicles to car dealers. IS
integration and information sharing is mostly carried out by an OEM’s
marketing department. Second, the case analysis focus is on informa-
tion flow rather than material flow.
Table 3.1 The participating companies

Position in the supply chain
Supply chain A Company A1 OEM
Company A2 First tier supplier
Company A3 First tier supplier
Supply chain B Company B1 OEM
Company B2 First tier supplier
Company B3 First tier supplier
80
Y. Wu
3.3 Data Interview and Survey

Two techniques were adopted to collect data: interviews and surveys.
The following section discusses the data collection process of each tech-
nique, including how the questions were developed, and where the data
was collected.
3.3.1 Interviews
Semi-structured, open-ended questions and face-to-face interviews3

were conducted in case studies through the participating firms. Some
interview questions were adapted from van Hoek et al. (2001) and
Mondragon et al. (2004). van Hoek et al. (2001) focus on the devel-
opment of supply chain agility, and the approaches to achieve such
agility. The questions designed by Mondragon et al. (2004) paid par-
ticular attention to IS applications in a manufacturing agility setting
and perceptions of applying IS. This study emphasises IS integration in
the context of supply chain agility, which involves two perspectives of
IS application. One is IS development, which concentrates on imple-
menting IS integration, and the other is from using IS which focuses on
applying IS to achieve greater agility.
Interview questions were designed to explore the phenomenon from
different perspectives and to ensure that the appropriate person pro-
vided perceptions for the study (Hufnagel and Conca 1994).
The interviews were conducted with senior managers in departments
related to IS, and supply chain related departments within the firms, as
a typical supply chain is a network of material, information and service
processing links with the characteristics of supply, transformation and
demand (Chen and Paulraj 2004). In each firm, interviews examined
3A semi-structured interview is that the researcher has an interview guide, but interviewees have ‘a
great deal of leeway in how to reply’. Questions may not follow the sequence listed in the guide.
Questions that are not on the list can also be asked as they pick up on the answers from inter-
viewees (Bryman 2001).
81
two directions—downstream to customers and upstream to suppliers

to investigate their perceptions of the approaches taken to achieve agile
supply chains and the stage of IS integration.
Forty-eight semi-structured interviews were conducted to collect
data, including six senior managers from IS departments, six IS pro-
fessionals, 28 senior managers from departments related to SCM, one
general manager, one deputy manager and two CEOs. Each inter-
view lasted upto one hour. Confidentiality of the participant firms was
assured. The interviews were taped with interviewees’ permission. In
order to minimise the bias of interpretation, a summary of the interview
was written up and passed back to interviewees in order to improve
the accuracy of the understanding of each interview and increase con-
struct validity, as recommended by Myers and Newman (2007) and
Yin (2003). Forty-five percent feedback was received. Follow-up emails
were also sent to interviewees for further clarification, especially for the
emerging issues identified from the case analysis.
Interview data analysis involves qualitative data techniques, suggested
by Miles and Huberman (1994) and Eisenhardt (1989). Analysis was
preceded by using coding techniques and sorting and refining themes
from data under the three subjects: IS integration, supply chain agility
including customer sensitivity, process integration, network integration
and virtual integration, and operational performance. All the coding
processes are conducted in the software Nvivo,4 a software to facilitate
qualitative analysis, as it can help to manage a large amount of quali-
tative data, and generate coding quickly using queries, and to link and
create relationships.
3.3.2 Survey
A survey was designed and distributed to the employees in the par-

ticipating companies asking them about their views on IS integration
and measuring their perceptions of IS-enabled supply chain agility
4Nvivo software can be found http://www.qsrinternational.com/products_nvivo.aspx.

82
Y. Wu
and operational performance. Hence the survey for the respondents

focused on the same issues and data that have been identified from
the literature. The respondents of the survey were assistant managers
or team leaders. Survey questions were developed under three main
constructs—IS integration, supply chain agility and operational per-
formance—to examine their relationships. Wherever possible, tested
questions were used from existing research and generally accepted
instrument construction guidelines were followed (Fox et al. 1988).
Two survey instruments were developed. The first instrument was
created to measure implementation factors for IS integration, and the
second to measure the status quo of agility and the impacts of IS in
agile supply chains. Data were collected from two types of respondents
at each participating organisation, one from IS department and one
from SCM-related departments. This approach ensured that the appro-
priate person provided perceptions for the study (Hufnagel and Conca
1994).
The study used five-point Likert type scales to answer the questions
of the causal relationship, for instance, what the impacts were and to
what degree the operational performance had been improved. There
are relevant examples in the IS and SCM field supporting the meth-
ods (DeGroote and Marx 2013; Mondragon et al. 2004; Prajogo and
Olhager 2012; Swafford et al. 2008). According to the literature, 14
indicators were developed to measure the four dimensions of supply
chain agility, and they were measured by five-point Likert scales in order
to keep the survey scale consistency. To ensure the minimal overlap
between constructs, as well as to ensure content and face validity, liter-
ature was reviewed to specify a set of items (Cronbach 1971; Kerlinger
1986).
IS integration, supply chain agility and operation performances have
been identified as latent constructs. Sub-latent constructs were identi-
fied based on the existing literature. Indicators of each sub-latent con-
struct were adopted from previous research, and they have been tested.
All items and its constructs are presented in Table 3.2.
83
Table 3.2 Construct measurement

Latent construct Sub-latent construct Indicators
IS integration Data consistency Automatic data capture systems are
used
Definitions of key data elements are
common across the supply chain
Same data stored in different data-
bases across the supply chain is
consistent
Cross-functional Supply chain planning applications
application Supply chain transaction applications
integration Supply chain applications with internal
applications
Supply chain Customer sensitivity Proactively seeking new emerging
agility markets
Customer treated individually
Mobility of resources to meet different
requirements
Being nimble its processes to achieve
different objectives within the same
facilities
Process integration Being cost-effective re-configure to
respond to new production model
Taking advantages of markets changes
as opportunities
Having adaptive capabilities to be able
to respond future changes
The ability to meet customer changes
as a source of competitive advantages
Network Suppliers’ involvement in the business
integration Fast response to changes in supply
Fast response to variations in demand
Leveraging information to understand
market and customer requirements
Virtual integration Leveraging information to master
organisational changes
Leveraging information to facilitate
collations with partners
(continued)
84
Y. Wu
Table 3.2 (continued)
Latent construct Sub-latent construct Indicators
Operational Responsiveness Response to changes in product and
performance service due to market uncertainty
Process demands from downstream
Process demands from upstream
Dependability Leverage partners’ capability
Focus of core competence
A single supplier for each sourced
product
Supplier-collaborative product design
Flexibility Ability to handle difficult or non-stand-
ard orders
Ability of increasing or decreasing
product effectively
Organisational Process of seeking useful information
learning Extent to which information is shared
across functional units
Correlation was applied to show the relationship between constructs.

Factor analysis helped to group indicators using SPSS.5 In particular, it
is used to categorise indicators for the four dimensions of supply chain
agility, customer sensitivity, process integration, network integration
and virtual integration. SEM was used to test the conceptual model.
3.4 Conclusions
This chapter reviews the development of SCM and IS integration in the
context of the automotive industry, specifically the Chinese automotive
industry. It is followed by the description of how the interviews and sur-
veys were carried out from the process of data collection and data analysis.
The next chapter will present the case study of two supply chains to
address and illustrate how IS impact supply chain agility and what are
the critical factors for IS integration.
5‘SPSS is a very widely used computer program designed to aid the statistical analysis of data,
particularly data collected in the course of research. It has become the ‘industry standard’ software
for data analysis’ (Brace et al. 2006). https://www.ibm.com/products/spss-statistics.
85
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4
Case Studies: Supply Chain A
This chapter and Chapter 5 present the empirical work of two supply
chains. The first purpose of the case studies is to illustrate how IS inte-
gration impacts the agility of supply chains, and to reflect the interview-
ees’ understandings of IS integration. The second purpose is to explore
what the operational impacts of IS-integrated supply chain agility are.
The study incorporates six case studies. Three cases illustrate one
supply chain, including one OEM and two first tier suppliers. The
analysis and discussion are based on individual companies, start-
ing with the description of the status quo of IS applications and
the problems the company met when integrating systems in order to
identify the critical factors of IS integration. The approach to achiev-
ing greater supply chain agility and the role of IS integration is then
discussed. Supply chain agility was defined in Chapter 2. It has four
dimensions. Customer sensitivity considers markets and custom-
ers in the supply chain. Process integration is concerned with mar-
keting uncertainty and changes internally to maximise immediate
response. Network integration focuses on cooperating with suppli-
ers to compete. Virtual integration relates to leveraging the impact of
information on supply chains, e.g. converting demand information

https://doi.org/10.1007/978-3-319-98440-7_4
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Y. Wu
immediately to new product development (Goldman et al. 1995; van

Hoek et al. 2001). Each company is analysed from the perspectives of
these four dimensions, and then the supply chain is analysed to deter-
mine the impact of IS integration in supply chain agility and the perfor-
mance consequences of IS integration.
Section 4.1 gives a brief introduction to the participating companies
and their roles in the supply chains. Section 4.2 starts the analysis of
Company A1 with the background of the IS structure and IS systems
applied to SCM-related departments and the factors influencing IS
integration. Then the analysis moves to the IS integration in the context
of supply chain agility, focusing on the role of IS integration in each
dimension of supply chain agility and the practices taken to achieve
supply chain agility and its operational performance. It is followed by
the analysis of Company A2 and Company A3 in Sects. 4.3 and 4.4
respectively with the same structure as Sect. 4.2. Section 4.5 discusses
the findings from each company, and incorporates the findings from
the perspective of a holistic supply chain. This chapter concludes with a
summary of the findings of supply chain A in Sect. 4.6.
4.1 Background of the Supply Chains

Six companies participated in the case studies, ranging from OEMs to
first tier suppliers, presented in Table 4.1.
4.2 Company A1, Supply Chain A

The company is a JV between a Chinese company and a foreign com-
pany with the production of a wide range of car models.
4 Case Studies: Supply Chain A
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Table 4.1 Position of participating companies in supply chains

OEM 1st Tier supplier Company description
Supply chain A Company A1 A JV of automotive
manufacturer
Company A2 A JV, producing harness
Company A3 A SME, manufacturing
stampling parts
Supply chain B Company B1 A JV of automotive
manufacturer
Company B2 A JV of producing seating
systems
Company B3 A Wolly Owned Foreign
Company (WOFE), produc-
ing injection mouldings
4.2.1.1 IS Applications
The annual IS budget is based on the previous year’s budget rather than
the percentage of annual turnover. This is perceived to negatively affect
the performance of the IS department. The budget is allocated approxi-
mately 30% to planning system development, 30% to execution system
development such as data warehouse and scheduling, 30% to mainte-
nance and 10% to training.
The company applies SAP1 to integrate the information needs of the
entire enterprise, and is establishing electronic interactions with its cus-
tomers and suppliers. It uses commercial off-the-shelf applications for
cross-functional systems development with modifications, and designs
function-specific applications based on departments’ requests. However,
the IS manager states that it is difficult to make modifications to current
1SAP AG is the largest European software enterprise with headquarters in Germany. It focuses on
ERP and the company’s main product is SAP ERP. It is one of the most popular ERP systems in
Chinese automotive industry (Peng 2006).
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Y. Wu
IS to accommodate unique requirements. The company has many leg-

acy systems which slow the integration process.
Figure 4.1 describes the information flow from orders to finished
products between the marketing department, the manufacturing
department and the procurement departments. The marketing depart-
ment collects orders from car dealers through Dealer Management
Systems (DMS), an extended IS system to the marketing department.
Production planning teams run Advanced Planning Systems (APS),
and convert plans into production orders which are shared with other
departments through SAP. Hence, customer orders in the marketing
department are not shared with other departments. The procurement
department runs MRP to manage component suppliers, and send out
orders through the web portal. The manufacturing department runs
MES to produce daily production schedule, and transfer hourly manu-
facturing data to JIT suppliers through web EDI.
Car
dealers MES JIT
suppliers
Marketing Weekly plan BOM
Raw
material
inventory
Production planning MRP
SAP Shop floor inventory bar
code scan
Finance
Production control
Engineering etc
Raw material
Short term plan requirements
Suppliers
Fig. 4.1 The information flow from orders to manufacturing to logistics with

Company A1
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4.2.1.2 Communication with Customers and Suppliers
Company A1 provides DMS to interact with car dealers. DMS is

linked to IS systems in the marketing department. The IS department
provides the technology and maintenance. Orders containing the
data, including car model, quantity, and delivery time are transferred
every two weeks from car dealers to the marketing department so that
an updated short-term production plan can be developed. The OEM
publishes the company’s policy, notices and invoices to car dealers
through DMS.
Several approaches are applied to enable electronic communication
with suppliers. All technology is provided by Company A1. Suppliers
abroad are connected through web EDI to facilitate the process of
invoice, payment and advanced shipping notification. Domestic suppli-
ers who account for the majority of auto-parts supplied (Procurement
manager, Company A1) can access a web portal that has been built by
Company A1, publishing general information, notices, bidding, long
term and short-term production plans, and annual forecasts. Each sup-
plier can sign in to access its personalised information. Web EDI is
adopted to communicate from the OEM to the suppliers who provide
JIT delivery or sequence-in-line delivery by synchronising real-time
manufacturing information from the OEM to the suppliers. Traditional
ways of using email and telephone are applied as well for additional
clarification. Figure 4.2 shows the communication between Company
A1 and its partners through the supply chain. There is no communica-
tion between the OEM and second tier suppliers.
2nd Tier 1st Tier Car

Company A1
Suppliers Suppliers Dealers
Portal DMS
WebEDI System
Email
Telephone
Instant Messengers
Fig. 4.2 Company A1 communications with suppliers and car dealers

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Y. Wu
4.2.1.3 Critical Factors of IS Integration
Effective information sharing including information content is known

to significantly enhance effective supply chain practice (Lee et al. 2000;
Swafford et al. 2008; Prajogo and Olhager 2012; Zhou and Benton 2007),
and the existing literature identifies data consistency and cross-functional
application integration as important for realising IS integration (Maiga
et al. 2015; Nakatani et al. 2006; Rai et al. 2006). The IS manager at
Company A1 confirmed data consistency as a basic requirement for IS
integration, especially key data definitions such as customers’ ID or vehi-
cle ID. For example, the OEM shares vehicle ID with its suppliers and car
dealers to achieve mutual understanding of a vehicle’s specification. The
finding supports that data should be consistent across a focal firm’s supply
chain (Rai et al. 2006). In terms of cross-functional application integration,
the IS manager expressed a willingness to have fully integrated IS, but the
company had not achieved it yet due to various constraints such as tech-
nical difficulties and return on investment concerns. As discussed in the
study by Fawcett et al. (2007), IS compatibility of the collaborating part-
ners is an important factor for successful implementation of IS integration.
Besides these two factors, the IS manager stated that IS integration
with the suppliers first requires identification of what information is
shared and to which level information is exchanged, as well as what
technology is needed. He believed that determining the degree of infor-
mation sharing should be taken as a first step towards IS integration.
However, the literature on IS integration and SCM does not take infor-
mation sharing as an issue. Rather, the focus is on integrating partners
electronically (Johnson et al. 2007; Mondragon et al. 2004; Sanders
2007). Thus, information sharing may need to be included in the inte-
gration of IS to achieve supply chain agility.
Both the procurement manager and the IS manager were concerned
that sometimes employees did not realise the importance of accurate
data and did not pay enough attention when they keyed in data; espe-
cially when there was no audit in the current systems. Data accuracy
might contribute to great IS integration. It is recognised as a founda-
tion for a smooth information flow in business processes (Seethamraju
2006). ‘We have to build up an agile supply chain in such a business
97
environment…Two things are of great importance to achieve such agil-

ity: first is smooth information flow that should not be stagnant at any
stage across the supply chain. Second is accurate information with con-
sensus from participants. This can only be realised by IS integration’
(Procurement manager, Company A1).
Having the right operational data helps to create an excellent backdrop
for business processes as well as working with external partners. A small
inaccuracy may lead to serious operational problems. For instance, if the IS
system does not have the correct operational data to feed into the planning
model, intra-enterprise planning becomes irrelevant, and the multi-enter-
prise collaborative planning is almost impossible in such a situation where
even basic operational data is not accurate and available (Seethamraju
2006). Sum et al. (1995) find that data accuracy is critical in affecting
operating efficiency and customer service. Gorla et al. (2010) also sup-
port that there is a significant correlation between information quality and
organisational impact, such as reduction of search costs, service/product
enhancement, market information support and internal organisational effi-
ciency. Data accuracy needs to be the responsibility of all departments who
rely on IS systems, not just the IS department (IS manager, Company A1).
This study acknowledges that IS integration requires data consist-
ency and cross-functional application integration, and shows additional
requirements for IS integration in the context of achieving supply chain
agility, in particular, data accuracy and information sharing. It also rec-
ognises the need for IS integration. Considering the current integration
level, there is still some way to go. Additionally, IS integration not only
demands input from employees, but also requires effort from suppliers.
The IS manager considered that such integration processes need cooper-
ation from all companies involved.
4.2.2.1 Manufacturing Environment
The company’s shop floors have semi-automated assembly lines. They

provide standard products with customer options by using large
manufacturing batches. Senior managers from the marketing and
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Y. Wu
procurement departments mentioned that business pressures from cus-

tomers and markets had led the company to move to customer-oriented
business processes. The company employed push systems at its incep-
tion. However, because of the competition from other manufacturing
plants as well as the fast development of domestic players, the company
battles to remain the market share. In such a competitive environment,
cost-effectiveness is the main driver among auto-manufacturers.
4.2.2.2 Customer Sensitivity
Customer sensitivity is the ability to understand customer requirements

and market trends (Goldman et al. 1995). This section explores how
customer sensitivity is achieved and considers the role of IS integra-
tion in the processes. At the beginning of the business, customer orders
were much more than the manufacturing capacity. Company A1 had
subsidiary companies, responsible for manufacturing and marketing.
The business was purely inventory-driven, as the manufacturing section
developed production plans and manufacturing schedules without con-
sidering what the market needed. Meanwhile, the subsidiary for market-
ing concentrated mainly on car sales. Because of the increase of market
competition from other automakers and the high demand for personal
automotives,2 the company started to integrate departments to ensure
better cooperation. Now, the production planning team in the market-
ing department collects all the marketing information and translates
it into production plans, with more focus on customer requirements.
The marketing department moved closer to manufacturing shop floors
to encourage physical communication with other departments and to
develop better control of logistics.
2In mid-1990, out of 1.2 MM total vehicle output, passenger cars were produced only 300,000
in total. The majority of the vehicle production was heavy trucks and buses. However, the pas-
senger car production was nearly 50% of total production in 2004 (Tang 2009). The control on
private purchase was only lifted in mid-1980s. By 2009, 61% of the total vehicle sold in China
represents passenger vehicles (Booz & Co 2009).
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Literature suggests that in an agile supply chain, organisations

should have the ability to hear the voice of the market and to respond
to it directly to satisfy their customers (Ismail and Sharifi 2006; Ngai
et al. 2011). The best way to achieve this is through BTO, where cus-
tomer orders are directly entered into manufacturing systems to trans-
late into production orders (Peng 2006). The manager claimed that
the company intended to move to customer-focused business pro-
cesses. In the shift to customer-focused processes, departments con-
centrated on what they did well. The manufacturing department only
focuses on assembling vehicles with right quantity and good quality.
The procurement department focuses on negotiating, selecting sup-
pliers and purchasing auto components. However, the departments
need more integration with the market and need a stronger sense of
market trends if they intend to be market sensitive. Managers in both
manufacturing and procurement departments identified that their cur-
rent focus was still to some extent inventory-driven taking account
the building constraints. ‘Now 80% to 90% production order or pro-
duction planning is based on customer requirements, but we have to
consider other factors, such as our sales strategy. In fact, the business
cannot be fully based on customer requirements or BTO manufactur-
ing, and it is impossible for us to satisfy all the market requirements.
However, our business now follows more from our customer needs’
(Marketing manager, Company A1).
When it comes to the role of IS integration, many function-specific
systems have recently been developed in the marketing department,
such as ‘CRM which had not been implemented before’ (Marketing
manager, Company A1), helping the marketing department manage
existing and potential customers. Other IS systems were developed
to assist market analysis and to predict market trends more accurately
Furthermore, integrating outbound logistics systems to DMS systems
improves tracking capability. Car dealers can not only track their orders,
but they can also use the transportation section to track cars in tran-
sit to car dealers to facilitate the transportation plans. ‘We group our
potential customers…and the data actually forecasts market and shows
market requirements…the logistics systems are important since they
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Y. Wu
provide real-time tracking, and all of the real time and accurate data
helps us to have a more accurate production plan’ (Marketing manager,
Company A1). Face-to-face communication, emails and meetings were
also identified by the procurement, marketing and transportation man-
agers as important enablers in understanding customer requirements
and clarifying problems.
The interviewees showed their willingness to connect to the mar-
ket and their eagerness to respond to real-time orders, but the reality
indicates that other factors also have to be considered in a manufac-
turing firm. For example, the manufacturing manager listed the issues
of maximising production capacity and optimising production runs in
achieving customer-focused processes, since the current manufactur-
ing practices in the automotive firms were still modularity-based mass
production rather than order-based manufacturing. Additionally, the
marketing manager indicated that although firms would like to have
information transparency, certain information interesting to other
departments was classified as confidential. ‘We are trying to build a cus-
tomer-driven supply chain;… As a result, our business [manufacturing,
logistics and procurement] starts with production plans, not the real
customer orders…We would like to take further steps to fully integrate
with our marketing…When they [the marketing department] have a
new marketing strategy or promotion, they [marketing department] can
know better the status quo of material supply if we are fully integrated’
These findings support the notion that customer sensitivity is impor-
tant as defined in the model, providing further information on the
approaches used to achieve customer sensitivity, especially, BTO manu-
facturing. However, considering building constraints such as production
capacity and cost-effectiveness, the firm still puts heavy weight on build
to stock. Moreover, the importance of IS integration is addressed in the
field of customer sensitivity, showing how it has an important impact
on accuracy of forecasts and managing customer relations. The study
has also identified other factors that influence customer sensitivity, such
as face-to-face communication.
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4.2.2.3 Process Integration
Process integration focuses on mastering changes and uncertainties

(Christopher 2005). It requires that an organisation’s structure should be
flexible enough to allow rapid re-configuration of human and physical
resources (Goldman et al. 1995). IS plays an essential role in business
process re-engineering for business process automation and for how it
supports the function of redesigned business processes (Davenport et al.
1990; Ngai et al. 2011). The literature suggests that firms should be able
to re-structure rapidly to respond to changes. IS realises information
transparency to assist in mastering these changes (Christopher 2005).
The company has made changes to its business structure over the
last few years in response to market changes to improve flexibility. It
recognises the need to continue the change process into the future
(Procurement manager, Company A1). Davenport et al. (1990) claim
that business processes can be transformed using IS and organisations
that use IS to redesign boundary-cross, customer-driven processes can
benefit enormously. Interviewees confirmed Davenport et al.’s ideas
(1990) and indicated that IS integration facilitates business process opti-
misation. For example, the marketing approach has been completely
changed from push to pull due to IS. ‘Now we need to collect market
data first and then we produce production plans with the balance of
production capacity; before we planned first and tried to sell as many
as possible… IS, integrated with other departments operationalises and
computerises such changes’ (Marketing manager, Company A1).
In responding to changes and uncertainties, IS integration plays an
important role in the automation of business processes and the reali-
sation of information visibility. The procurement manager explained
that IS integration helps synchronise with real-time information
and informs their suppliers instantly. Although literature proposes
improved product and volume flexibility from IS integration in mas-
tering changes, the interviewees had different opinions. The IS system
processing time is fixed and no change can be made during the pro-
cessing period. ‘Actually it prevents us from responsiveness. We cannot
change anything, and it could be much easier to do changes manually’
(Manufacturing manager, Company A1).
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Y. Wu
To rapidly respond to changes in achieving process integration, inter-

viewees also recognised that other factors, such as users’ attitude, skills,
and sufficient IS systems needed to be included. Furthermore, in the
process of achieving great process integration, IS design was discussed
in order to balance IS integration with the extent of the product/volume
flexibility. ‘However flexible you want to be, one pre-requisite is your IS
system design. The processing time is much shorter in our second shop
floor… compared with other shop floors…[the other shop floors have]
two weeks processing time, but material configuration is more accurate
than the one in second shop floor, but less flexible…on the other hand,
it [second shop-floor] ends up with extra material left, so it is not really
lean’ (Manufacturing manager, Company A1).
Overall, the findings indicate the importance of process integration
in achieving greater supply chain agility and confirm the role of IS
integration in mastering changes and uncertainty. However, while the
existing literature stresses improved flexibility from IS in process inte-
gration, the findings indicate that IS integration may not necessarily
improve flexibility; rather, it facilitates information visibility and process
automation.
4.2.2.4 Network Integration
Network integration means collaboration with suppliers and making

the best use of their strengths through integrating information across
the supply chain to achieve higher levels of agility (Agarwal et al. 2006;
Christopher 2005; Swafford et al. 2006).
All interviewees agreed that their suppliers play an important role
in their business. Company A1 has more than 4,000 types of materi-
als or components. The company works more closely with suppliers
than before, especially now most components or sub-assemblies are
outsourced to suppliers, rather than manufactured in-house. The sup-
pliers’ responsiveness, their preparation status and their manufacturing
situation can directly impact the manufacturing process, determining
whether Company A1 can meet the market requirements (Marketing
manager, Company A1).
103
The OEM categorises first tier suppliers into different groups: strate-
gic partnerships, tactical partnerships and one-off suppliers. It suggests
that different strategies should be implemented to collaborate with each
of these groups.
• Strategic partnership
Few suppliers are regarded as strategic partners. Usually suppliers in

this group have at least one common shareholder. The procurement
manager said ‘it is easier to work if both have a higher level of trust
and have a common interest’. Company A1 requires strategic partners
to have a better responsiveness, higher inventory with more competi-
tive price than tactical partners or one-off suppliers. The OEM works
with these suppliers in long-term relationships to improve their prod-
uct quality and responsiveness. The OEM is willing to collaborate with
suppliers that have shared targets and foc on long-term relationships
(Procurement manager, Company A1). ‘What we need is to evalu-
ate and optimise the overall supply chain process, from our suppliers
to our finished products, in order to leverage cost performance, rather
than cutting the price only from our suppliers’ (Marketing manager,
Company A1).
• Tactical partnership
The company chooses suppliers who supply the OEM abroad rather
than one-off suppliers, as the OEM believes such suppliers have the
necessary skills, techniques and collaboration experience. But the
company is stricter with contract terms and policies than the strategic
partners.
• One-off suppliers
The majority of the suppliers are one-off suppliers. They do not have
any long-term relationship with the OEM. No long-term shared objec-
tives have been established and the focus is on the current business. The
contract is much stricter on delivery time, inventory, price, responsive-
ness, and the logistics capabilities than the other two partnerships.
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Y. Wu
The procurement manager indicated that network integration has

been carried out mostly in the area of sub-assembly outsourcing.
Face-to-face conversations, meetings and phone calls are the primary
approaches to clarify problems in sub-assembly outsourcing with first
tier suppliers such as Company A2 and Company A3.
Furthermore, the manufacturing manager explained that the shop
floor works more closely with suppliers than before as many sup-
pliers provide JIT delivery or sequence-in-line delivery to the shop
floor. Real-time daily manufacturing schedules have been synchro-
nised with Company A2 through integrated IS, which facilitates faster
and more accurate communication than before the introduction of IS
(Manufacturing manager, Company A1). ‘You cannot work properly
without IS. Information transfer is much faster and it is easier for us to
manage suppliers from one platform. We feel more connected with our
suppliers’ (Procurement manager, Company A1).
Other operational benefits of IS integration in the context of network
integration were also identified through interviews. Greater informa-
tion transparency means that internal business operations become much
more efficient and cost-effective when the OEM works with Company
A2. The procurement manager stated that the OEM is keen to develop
more online collaboration with its first tier suppliers, such as online
order confirmation, manufacturing status, potential business opportuni-
ties, and suppliers’ production plans, so that the OEM could maximise
its resources and utilise integrated IS for better coordination.
First tier suppliers play a crucial part in the company’s business, and
IS integration enables the company to work more closely with them
through real-time communication and the realisation of informa-
tion visibility. If the network is to be truly agile, along with coopera-
tion with suppliers, a much higher level of synchronisation is required,
e.g. joint strategy determination, optimising the overall supply chain
resources and even open-book accounting (Christopher 2005). The lack
of mutual information may slow down the process of achieving agility
The interviews provide further evidence that IS integration facilitates
network integration among partners by improving information visibility
and work efficiency. It is especially important for the first tier suppliers
105
with JIT delivery, helping to reduce inventory and improving their

responsiveness. However, considering the recommendation by the liter-
ature that network integration should be carried out from joint strategy
determination or joint accounting, the case shows there is still way to go.
4.2.2.5 Virtual Integration
Virtual integration relates to leveraging information along the supply

tion sharing and exchange to realise information visibility (van Hoek
et al. 2001).
The procurement, marketing and manufacturing managers confirmed
the magnitude of information in the day-to-day operation of their
businesses. The OEM adopts ERP, integrated with function-specific
applications, to leverage the impact of information to achieve infor-
mation visibility. Currently the OEM is developing IS systems with an
advanced function to provide information for decision-making, such
as data mining. ‘Company A1 is under development of data mining
on its suppliers’ delivery modes including frequencies, the quantity at
each time and pace. Therefore, the ultimate objective is to optimise the
suppliers’ delivery to reduce cost, such as changing delivery frequency,
or using milk round collection. Then it cuts down the OEM’s cost
as well. Such IS systems contribute more than just showing the data.
Rather they can tell the firm what to do and indicate how to do it’
While the interviewees confirmed the necessity of leveraging the
impact of information, they also identified factors which affect the
achievement of virtual integration. First is to ensure that IS matches
both the business and IS strategies (IS manager, Company A1). Second
is that the system user has sufficient skills and knowledge to leverage
the impact of information in their functional areas. The company
provides training and seminars to instruct people how to use systems
and to interpret the data so that employees are able to use it correctly
(Transportation manager, Company A1). Third is that IS integration
sometimes requires a big investment, but that the company’s budget
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Y. Wu
is often limited. ‘We would like to adopt advanced technology for our
inbound logistics so that all the information related to that material can
be automatically stored into our systems. But can it really happen? The
reason why many manufacturing plants move to China is because of the
low labour cost. If we implement such expensive equipment, what is the
benefit of moving to China?’ (Marketing manager, Company A1).
Overall, the findings support the notion that information plays an
important role in achieving greater supply chain agility, and the inter-
viewees provide evidence on leveraging the role of IS in their businesses,
such as supporting decision-making, as proposed in the literature.
Consequently, information dissemination and acquisition have been
improved. Furthermore, the logistics manager explained that with IS
integration, his team was able to focus more on value-adding activities
than generating reports or correcting data. However, as discussed, other
factors should also be considered in the leveraging processes, including
the fit between IS and business support, proper knowledge and skills,
and the appropriate budget for IS development.
4.3 Company A2, 1st Tier Supplier, Supply

Chain A
Company A2, a first tier supplier, supplies auto-wire to the OEM
Company A1. It is a JV in China and provides more than 100 finished
goods.
IS professionals are responsible for IS system maintenance in the plant.

IS design and development is carried out by the IS department in its
headquarters, integrating and addressing the information needs of the
entire enterprise. The plant employs an ERP system, which includes
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Long term plan

Short term plan
Orders
Company A1 Web Portal
PC&L
Domestic
Production plan
suppliers
Forecast (short term plan)
Web EDI
Shop floor
BOM North
W American
eb suppliers
Po
rta
Web l
Finance Firm PO
EDI ERP
payment
MRP
European
suppliers
Raw material Bar scanner

inventory
Daily manufacturing
PC&L OPS schedule
MES, using Kanban

Raw material Finished goods
planning
Fig. 4.3 Information flow from orders to manufacturing to logistics with

Company A2
SAP R/33 applications, EDI with suppliers using EDIFACT,4 web

EDI and SAP R/3 KANBAN process. Figure 4.3 describes information
flow across the procurement, manufacturing and logistics departments.
Production planning teams in the Production Control and Logistics
department (PC&L) receive information from the OEM through a
web portal, including long/short-term plans and orders. The teams
are responsible for translating Company A1’s plans and orders into
the plant’s long/short-term production plans. Procurement teams explode
BOM and send the forecast and orders to their suppliers. Additionally,
PC&L receives daily manufacturing data from Company A1.
3SAP R/3 is the third version of SAP real-time data processing. Its new name is SAP ERP (www.
sap.com).
4EDIFACT is abbreviation for electronic data interchange for administration, commerce and
transport, an international EDI standard developed under United Nations.

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Y. Wu
A planning system is used to develop its daily manufacturing schedule

and raw material planning. MES in the manufacturing department exe-
cute daily manufacturing schedules. The shop floor uses a Kanban sys-
tem to pull material delivery from raw material inventory.
The plant provides auto wires to the OEM with JIT sequence-in-line
delivery. Three major approaches are used to communicate with the
OEM:
1. a web portal to access general information, including long and short-

term plans, forecasts, and orders;
2. web EDI to access daily manufacturing schedules from OEMs and
to connect with planning system to produce plant manufacturing
schedules; and
3. phone calls and emails to clarify or have a better understanding of
customer requirements.
The plant has different approaches to dealing with its suppliers depend-
ing upon their locations. Local suppliers are contacted through phone
calls, fax and emails. North American suppliers are contacted by web
EDI. European suppliers order through a web portal supporting online
communications, placing orders and online transaction, managed by a
third-party company. The communication is described in the Fig. 4.4.
There is no communication between Company A2 and car dealers or
end-users.
2nd Tier Car

Company A2 OEM Dealers
Suppliers
Web Portal Web Portal
EDI WebEDI
Email Email
Telephone Telephone
Instant Messengers
Fig. 4.4 Communication with suppliers and customers from Company A2

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The discussion in the earlier chapters identifies data consistency and

cross-functional application integration as important factors to achieve
integrated IS. The IS professional highlighted the importance of data
consistency and cross-functional application integration in the business,
which supports the existing theory. The plant applies only one database
for all systems to realise data consistency. Additionally, IS profession-
als mentioned that they are working on the integration of the finance
system into ERP so that shared data can be transferred automatically,
because it is more likely to be incorrect if data is input manually from
one IS system to the other.
Besides these two factors, the PC&L manager gave one example of
data inaccuracy to demonstrate the importance of data accuracy in IS
applications. ‘An employee entered 100 units of one type of material
into the system, which only had 10 actually. The consequence was that
they had to stop the line for a couple of hours to wait for materials.
After this incident, the plant started to populate data parameters to
inform where they are having any data that is not correct or complete’
(PC&L manager, Company A2).
This case acknowledges that IS integration requires data consistency
and cross-functional application integration, although the IS manager
concluded that there is some way to go to achieve cross-functional
application. In addition, the case highlights an additional requirement
of IS integration, which is data accuracy.
The shop floor in the plant manufactures standard products with cus-
tomer options by using large batch manufacturing. New products can
be developed according to customers’ specifications. Company A2 pro-
vides JIT delivery to its customers. The plant claims to be capable of
fast delivery and be flexible to volume changes. Customer service has
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Y. Wu
been ranked at the top in their business priorities. Company A2 man-

ages more than 100 second-tier suppliers. It does not require JIT deliv-
ery from its suppliers. The plant has warehouses for raw materials which
hold a 12-day inventory from suppliers abroad and a 3-day inventory
from domestic suppliers.
To satisfy its customers, practices have been carried out in the plant
to provide customer-focused service. The company set up ‘customer
business units’ in its marketing department. Each team deals with
specific customers in order to have a better and targeted understand-
ing of their requirements. For example, previously, every member in
the marketing department could contact the OEM, so sales were not
focused. With this new practice, only one team deals with the OEM
so that it can be specific and pertinent (Regional director, Company
A2). IS is important in maintaining customer relationships and real-
ising instant information exchange and synchronisation with its cus-
tomers for any product change required. Responsiveness has been
improved (Manufacturing manager, Company A2). ‘If you are talking
in a purely manufacturing environment, like our manufacturing plant,
they are connected with customers through either sales systems or other
customer data exchange so that we know their requirements…from
understanding the market and from an ability to respond to customer
changes, we do rely on lots of IS to tie us into our customers’ (General
Furthermore, the PC&L manager stressed the importance of satis-
fying customers by providing the right products in the right quantity,
of good quality and in the right place. The plant provides JIT delivery
which can only be realised through IS integration by accessing real-
time manufacturing data from the OEM. Additionally, BTO has been
adopted, even though BTO production accounted for less than 40% of
annual sales. Moreover, the PC&L manager confirmed the necessity of
IS integration in executing BTO, as it helps to synchronise data with
other departments instantly, although the products that use BTO have
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a relatively simple specification. IS integration is under construction to

realise IS-enabled BTO manufacturing to reduce inventory level and to
shorten response time.
While all the interviewees confirmed the role of IS integration in
the context of customer sensitivity, they also identified other factors
that facilitate maximising the values from IS integration and enrich-
ing customers. First, ‘the easiest way to understand your customers is
to make sure you have face-to-face communication with them’ (General
manager, Company A2). Through a series of case studies, Pagell (2004)
finds that although communication is a key enabler of integration, IS
by themselves does not play a role in integration. In fact, mechanisms
of actual face-to-face interaction were found in this study to be more
important than IS systems. Sander (2008) also proposes that the activ-
ities involving innovation and development of new ideas may require
face-to-face interaction. The findings also support Denolf et al.’s (2015)
contention that supply chain organisations need to have effective com-
munication in order to implement supply chain IS successfully.
Second, more information should be available across supply chains
(Regional director, Company A2), such as real-time end-user market
and demand data, as lack of information can lead to greater operational
inefficiency. ‘The lack of information from current markets leads to a
less accurate forecast which causes various forms of waste in the man-
ufacturing processes, including materials, time etc. It is difficult to be
lean, not to mention agility’ (Manufacturing manager, Company A2).
To summarise, this case provides evidence that customer sensitivity
is significant in the achievement of supply chain agility. In particular,
the case illustrates the approaches taken to achieve customer sensitiv-
ity. BTO has been emerging as a major operation strategy for enriching
customers (Gunasekaran 2005). IS facilitates the integration of custom-
ers and the study shows the importance of IS integration in the con-
text of customer sensitivity, but it is desirable for interviewees to have
more information such as an updated end-user market information and
orders across all departments. Additionally, face-to-face communication
is highlighted in the case as an enabler to reach an in-depth understand-
ing of customers.
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Y. Wu
The regional director, manufacturing and PC&L manager indicated

that it takes time for the plant to implement any major change, since
many factors including detailed plans, preparation, human resource
plans, machine status and space, have to be considered. The General
manager from Company A2 confirmed Devenport et al.’s (1990) claim
that business processes can be transformed using IS and organisations
that use IS to re-design customer-driven processes can benefit businesses
substantially. But IS systems play a supporting role in gathering infor-
mation or providing relevant information to facilitate manufacturing
process optimisation through analysing historical data. Furthermore,
IS integration helps to limit waiting waste, re-working waste, transition
waste and inventory wastes. ‘In order to satisfy customers, we are try-
ing to build up agile manufacturing. But this does not mean that the
manufacturing should not be lean. Waste control is critical for manu-
facturing companies. IS helps us to improve our waste control…in the
meantime, we need to balance our machine capacity, manpower, and
space’ (Manufacturing manager, Company A2).
One operational performance extensively discussed in the existing lit-
erature on IS integration in process integration is improved product and
volume flexibility. The PC&L manager agreed that IS integration allows
the plant to react rapidly to product and volume changes in customer
orders. He emphasised that timely data transfer can inform second tier
suppliers instantly whether they need more or less materials as well as
facilitate data gathering. ‘Those are areas where the IS systems and good
data can give you the ability to respond quickly. For example, we found
out that one of our suppliers went out of business. With an appropriate
IS system, we could respond very quickly by identifying an alternative
supplier, using the global database’ (General manager, Company A2).
On the other hand, IS integration seems to slow down process inte-
gration (PC&L manager, Company A2). For example, the plant was
separated into two individual plants, and now two plants provide the
auto parts to their assigned customers. ‘The most difficult part for us
was separating IS systems. We spent lots of time and put lots of effort
on IS systems…The first thing is to split the inventory. Some materials
113
are unique to one plant, but some are common. We spent some time
working out how to separate such common materials…’ (PC&L man-
ager, Company A2).
Furthermore, although the manufacturing manager claimed that IS
integration played a crucial role in the business, he was unsure that IS
integration supports product and volume flexibility. He claimed that if
changes were made during the IS system processing time, even if the
plant could receive customer changes instantly, the change could only
be made for the next processing time. Hence, it increases waiting time
for customers. Instead of facilitating mastering changes, it seems that IS
integration slows down business processes in responding to changes.
It has been noted that IS integration facilitates process integration
so that companies are flexible enough to react to any change. However,
this case provides more constraints that influence the extent of process
integration enabled by IS integration. For example, if the IS system is
developed for a one piece flow of manufacturing process, e.g. discrete
orders, then IS allows tremendous flexibility in manufacturing and a
very quick response. The downside would be a relatively high produc-
tion cost. In this plant, IS is designed to build the same part in large
batches, so the plant is not that flexible in handling changes. Hence, it
is beneficial to keep a balance between IS design and product and vol-
ume flexibility (General manager, Company A2).
Additionally, IS design should also fit the Chinese market. ‘The over-
all Chinese business environment is immature, and the market is still
developing. So the changes can be rapid and tremendous’ (PC&L man-
ager, Company A2). For example, the North American market in per-
sonal cars post the CAGR of approximate −1.1% from 2005 to 2016
and Chinese market had the CAGR of 17.9% in the same period.5 IS
design from the head office allows 10% changes. Thus, as the IS man-
ager indicated, sometimes the market changes are beyond IS systems’
limits and it is not possible to automatically change in IS. Consequently
the processing time is increased.
5TheCAGR numbers for personal car sales from 2005 to 2016 are provided by The International
Organization of Motor Vehicle Manufacturers (http://www.oica.net/category/sales-statistics/).
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Y. Wu
Process integration takes changes as business opportunities in organ-

isations (Goldman et al. 1995). However, the case shows that at the
organisational level, any change requires detailed preparation before
it can be executed and IS on its own is not sufficient to enforce such
changes. At the operational level, IS integration realises fast data transfer
among partners and waster control. The result indicates that IS should
be developed and customised for a specific context.
Generally, network integration focuses on cooperating with supply

chain partners. All interviewees affirmed the importance of suppliers
in the business, and competition is moving from individual compa-
nies to supply chains. The plant takes various approaches to collabo-
rate with suppliers to improve their common understanding of business
objectives.
• Outsourcing
One major collaboration approach is to outsource sub-assemblies to

its suppliers. It is a common practice in the firms studied to outsource
non-value-adding activities and to focus on its own core competence
(Childerhouse et al. 2003).
• Training
The plant invites its suppliers to visit the plant and provides training, as
well as building up a good network with suppliers.
• Sending professionals
The plant sends experts and professionals to suppliers’ sites, working

with them so that suppliers understand what is required or where the
problem is.
IS integration is widely applied for integrating and communicating
with suppliers. Especially considering there are fewer than 10 employees
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responsible for managing over 3,000 raw materials, the work cannot
be carried out without IS assistance. The PC&L manager stated that
integrated IS helps to update weekly production plans with more accu-
rate data to suppliers to reduce the chance of having significant order
changes for suppliers. Furthermore, he also commented that IS integra-
tion helps the PC&L department to realise information visibility with
its suppliers and consequently, suppliers’ response time can be short-
ened. The manufacturing and PC&L managers also identified other
enablers to facilitate network integration, such as face-to-face commu-
nication. It indicates that IS integration is necessary to transfer data,
but should be employed together with other enablers to implement
collaboration.
The findings indicate the important role of IS integration in net-
work integration. In particular, agility is network-based and the speed
of its partners’ response is dictated by the availability of the correct
information (Goldman et al. 1995), which can be realised through IS
integration. But the findings stress the importance of face-to-face com-
munication in working with partners.
The interviewees were aware of leveraging the impact of information

in their business by stressing the need for information-based busi-
ness processes and the importance of information visibility. By apply-
ing appropriate IS systems, the company is able to identify which
processes are profitable and which process has too much labour cost.
‘Now what we need is not only to provide separate data of our daily
business from different systems… What we are planning now is to link
our ERP [including finance and accounting] with the MES as well as
a system to monitor how much value has been created in each process’
(Manufacturing manager, Company A2).
While IS integration is critical to storing and providing information
(PC&L manager, Company A2), the interviewees also identified other
factors that impact on maximising information value. That is, people
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Y. Wu
should be knowledgeable and skilled to use IS correctly, supporting

Mondragon et al.’s findings (2004). They find that companies rely upon
non-IS attributes to improve the agility of their manufacturing opera-
tions including training of employees and employee skills. Denolf et al.
(2015) also identify the importance of teaching users how the system
works as several studies have revealed that employees prefer the status
quo and are reluctant to change when IS is implemented (Fawcett et al.
2008; Koh et al. 2011; Ngai and Gunasekaran 2004). The interview
discussion, supported by this study, can also be extended into a wider
context from manufacturing into supply chains. ‘We are actually expe-
riencing the problem with one of our plants… They did not keep their
eye on the data. Eventually the system literally died and they were run-
ning the business on Excel’ (General manager, Company A2).
To summarise, the findings confirm the important role of virtual
integration in supply chain agility, more specifically, information-led
business processes to achieve agility. Meanwhile, the findings show the
importance of IS integration in this business process by realising infor-
mation visibility and identifying profits of each process. Furthermore,
the case also provides other factors that facilitate virtual integration
achievement such as leveraging knowledge and skills.
4.4 Company A3, 1st Tier Supplier, Supply

Chain A
Company A3, is a local Small and Medium sized Enterprise (SME6).
The company is located close to the OEM Company A1. The company
supplies stamping and welding parts.
6The definition (manufacturing industry) small enterprise is (1) the number of employees < 300;
(2) annual revenue < RMB30m (£3.50m); (3) total asset < RMB40m (£4.67m); and the medium
size enterprise is (1) the number of employees 300–2000; (2) annual revenue RMB30m–300m
(£3.50m–35.0m); (3) total asset RMB40m–400m (£4.67m-46.7m) (state economic & trade
commission, 2003). Exchange rate of GBP: RMB is at 8.56 on 11 September 2017.
117
The company has six professionals taking responsibility for IS develop-

ment, but it does not have a specialised IS department. The IS application
was developed in-house based on MRP module, supporting BOM, assist-
ing production planning, manufacturing scheduling, and material inven-
tory. MRP is used to create orders and manage the raw material inventory.
The IS system is not integrated with manufacturing operations, finished
goods inventory and finance department. Figure 4.5 describes the basic IS
system structure across the marketing, manufacturing and logistics depart-
ments. Based on the information provided, the company translates the
orders into its own production schedules through IS planning systems.
The schedules are then executed by the manufacturing department.
Long term plan

Orders
web portal
Company A1 Long term
Production plan
Raw material production plan
inventory Production
schedule
BOM email
Material suppliers
MRP
orders
Raw material
inventory
Production Manufacturing Finished goods

schedule inventory
Fig. 4.5 Information flows across from orders to manufacturing to logistics with

Company A3
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Y. Wu
Company A3 has electronic communication with the OEM through

a web portal which shares the forecasts, long-term plans and general
information from the OEM. Company A3 can login to the web portal
to access relevant information.
The company normally uses emails and phone calls to communicate
with its suppliers and order raw materials, though it intends to establish
electronic interactions with suppliers in order to share more informa-
tion, such as manufacturing status or daily schedules. Figure 4.6 illus-
trates the way in which electronic communication functions.
The framework recognises data consistency and cross-functional appli-

cation integration as important factors to IS integration. The General
manager commented that all data formats and definitions must be
consistent within the firm, and all firms involved in the supply chain
should at least have a consensus understanding of the data exchanged.
He highlighted the importance of data consistency in IS integration
process.
Although interviewees understood the value of cross-functional appli-
cation integration in their businesses, they have not got it yet. One
possible explanation for this is the high implementation expense. The
company could not afford an advanced and fully integrated IS system,
because it is too expensive for a SME, although the General manager
revealed that the current business required an advanced and integrated
system.
2nd Tier Car

Company A3 OEM Dealers
Suppliers
Email Web Portal
Telephone Email
Telephone
Fig. 4.6 Communication with customers and suppliers from Company A3

119
The company manufactures standard products with customer options

in mass production. New product development is normally carried out
in collaboration with customers based on their product requirements.
In comparison with its competitors, Company A3’s competitive advan-
tages are product quality, together with their experienced manufactur-
ing skills and good reputation in business. Although government policy
influences markets and the business competition, such impact is not as
strong as before.
Because of fierce competition, the General manager was aware of the
need to have a customer-orientated business in order to survive in the
industry. The business should be driven by demands for high quality,
high performance, low cost customer-oriented product and service.
Furthermore, the interview with the CEO showed the need to expand
product selections to attract more customers. ‘The industry in stamping
and welding parts is really competitive because the entrance barriers to
the market are quite low. With sufficient financial support and proper
tools, you can start your business. We have to hold our existing market
share and try to explore new markets, such as providing sub-assembly
with high-tech products…We also need the Internet to advertise our-
selves’ (CEO, Company A3).
The managers were aware of the importance of customer-oriented

businesses, and the firm had obtained benefits with its integrated IS,
although the company has not been fully demand-driven. The benefits
are as follows. First, more information is available related to the OEM,
including barcodes for finished products, bidding for new product sup-
ply or any updated news from Company A1. The OEM has more accu-
rate short-term plans, which in turn helps the firm to develop better
production plans and minimise the bullwhip effect on the upstream
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Y. Wu
suppliers. However, the company still puts more weight on build

to inventory and focused on higher safety stock to satisfy the OEM’s
requirements in the event of the OEM’s last minute order change.
‘Company A1 could change their orders up to 30% occasionally, and
the lead time of certain materials is over three months’ (Manufacturing
manager, Company A3). Then it is likely that the supplier does not have
enough materials to meet OEM’s order.
Furthermore, when confirming the importance of integrating IS
systems, the General manager also identified other factors to facilitate
mutual understanding, in particular, face-to-face communication and
telephones, which are also discussed in the case analysis of Company A1
and Company A2.
To sum up, customer sensitivity is critical in achieving greater sup-
ply chain agility. The case shows that with limited IS integration, cus-
tomer sensitivity has not been extensively improved, but the company
still reaches certain level of customer sensitivity. It indicates that IS inte-
gration is necessary, but not sufficient on its own. With the IS applied
in the company, it improves information visibility and forecast accuracy.
The CEO claimed that in order to survive in the market, the company
has to be flexible to meet different requirements, and IS systems help
more on business process re-engineering. However, with the low level
of IS applications, the main approach to master order changes is still
based on safety stock, although literature proposes flexible process in
an organisation and end-customers’ orders should be broadcast to all
departments so that they can react simultaneously (Mondragon et al.
2004). Furthermore, the manufacturing manager of Company A3 was
unsure whether IS really helps to improve product and volume flex-
ibility. ‘If they actually order less then what they originally require, it
means we would have more stock which may be used later. But if they
order more than original orders at the last minutes, it is possible that
we cannot fully them supply since some materials have long lead times.
121
Therefore, what we did is to increase the safety stock’ (Manufacturing

To summarise, the case confirms the importance of process integra-
tion in achieving greater supply chain agility, but the role of IS inte-
gration in process integration is still unclear as the firm adopts build to
stock to master changes and uncertainties.
The General manager stressed the importance of working with his sup-
pliers, but he admitted that the cooperation with suppliers was limited.
The company contacts suppliers only when the product has quality
problems. More supplier relationship management was required, as
the General manager admitted. ‘We seldom collaborate with suppli-
ers to develop a new product together. Usually we outsource to them.’
(General manager, Company A3).
Overall, network integration is important in realising agility, and it
has been carried out mainly in the area of outsourcing. In particular,
network integration becomes weaker when it moves towards upstream.
The findings show that greater IS integration is required to achieve bet-
ter network integration.
IS system development was partially encouraged by the OEM,

Company A1. The OEM required the supplier Company A3 to have a
more advanced IS systems so that the two firms could set up electronic
communication.
The procurement manager claimed that IS integration helps com-
munication with Company A1, by facilitating information acquisition
and dissemination. Managers also listed other issues that could con-
tribute to improving virtual integration by giving an example of dif-
ficulty with prevailing IS applications. ‘We did not have any problem
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Y. Wu
in implementing IS systems in two warehouses, and they [employees]

adjusted quickly to the new working environment. But it did not hap-
pen on our shop floors. Team leaders did not know much of using sys-
tems, and resisted using it, partly because they were afraid somehow of
changing’ (General manager, Company A3).
The example demonstrates that virtual integration is important to
realise agility, highlighting the role of IS integration in such processes.
The company requires more advanced IS integration to support its busi-
nesses so that more operational performance can be achieved besides
information dissemination and acquisition. Furthermore, the findings
identify other factors that affect using IS in achieving virtual integra-
tion, such as employees’ knowledge and skills.
4.5 Summary of Supply Chain A Case Analysis

4.5.1 The Critical Factors of Implementing IS Integration
in the Context of Supply Chain Agility
Data consistency and cross-functional application integration are high-

lighted as important factors on IS integration in the context of supply
chain agility. Both of them have been confirmed by all cases. In par-
ticular, the common data definition is highlighted as one important
factor in achieving such data consistency because key data definition is
a foundation for a smooth information flow and helps to achieve the
common understanding of shared information. Rai et al. (2006) sug-
gest data consistency should be one facilitator of the integration pro-
cesses in SCM. Cross-functional application integration is highlighted,
but the case analysis shows that there is still a way to go to achieve full
integration.
Additionally, data accuracy and information sharing are recognised
as additional findings from the case analysis. Data accuracy is identi-
fied as an essential element in the three firms since a small inaccuracy
in data may lead to serious operational problems (Seethamraju 2006).
As information integration is the foundation of integrating processes
123
across the supply chain, companies must have access to accurate and
timely information (Koh et al. 2011), reflecting the status of their
supply chain by coordinating the flow of their product, information
and finance.
Another important finding from these cases is that the type of shared
information influences the overall business processes. One critical fac-
tor is to identify the level of information visibility with upstream and
downstream partners, as discussed by the manager of Company A1.
Barratt and Oke (2007) reveal that the outcome of information shar-
ing is information visibility which then leads to an improved opera-
tional performance of a supply chain. Devaraj et al. (2007) argue that
operational performance, which affects the customer perception of the
quality of the business relationship, can best be improved by sharing
production-related information, such as sales forecasts, master produc-
tion schedules, and inventory levels. The study by Disney and Towill
(2003) shows that vendor-managed inventory integration with suppliers
can reduce the bullwhip effect. Only the OEM discussed the level of
information sharing. This is probably because in the automotive sup-
ply chain, the OEM is a focal firm, playing a leading role and initiating
what information should be shared at which level. Table 4.2 shows the
findings of these three companies, listing all the critical factors identi-
fied from supply chain A cases.
Table 4.2 Critical successful factor of IS integration from supply chain A

Position in the supply chain Critical factors of IS integration
OEM 1st Tier supplier
Company A1 Level of information shared,
data consistency, data accuracy,
cross-functional application
integration
Company A2 Data consistency, data accuracy,
integration
Company A3 Data consistency, cross-func-
tional application integration
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Y. Wu
4.5.2 The Role of IS Integration in the Context

of Achieving Greater Supply Chain Agility
Table 4.3 presents the approaches taken by the three companies in

Supply Chain A in the context of achieving customer sensitivity, and
the role of IS integration in achieving customer sensitivity. The catego-
ries are defined first. Approaches indicate the practices each company
uses to achieve customer sensitivity. Technology-used indicates what
technology is adopted, where non-IS enabler shows other identified
issues that contribute to customer sensitivity.
Company A1 in this supply chain contacts car dealers by DMS sys-
tems. Because more information is accessible, IS integration helps the
OEM to create a more accurate forecast and improves CRM by storing
and providing personalised customer information.
Table 4.3 shows Company A2 has more advanced manufacturing and
delivering processes, and it has a more sophisticated integration than
Company A3, which enables the company to reduce its inventory level
and to improve its responsiveness. In Company A2, applying advanced
IS systems also facilitates the implementation of BTO process and JIT
delivery. Furthermore, although both firms, as first tier suppliers, benefit
from the OEM’s accurate forecasts, they are only connected to the OEM
rather than car dealers by web portal and emails, even though the litera-
ture highlights the advantages of responding to end-user markets simulta-
neously. This is because a great amount of information is usually regarded
as private or sensitive information e.g. current market, sales situation in
real time, which is traditionally not shared with anyone outside the firm.
In addition to technologies applied to customer sensitivity, it is noted
that there are also significant personal interactions between the OEM
and the suppliers, such as face-to-face communication, through coordi-
nators on site. This observation provides further evidence that although
digital communication is a key to realising integration, IS integration
itself is not sufficient and a mechanism of actual face-to-face communi-
cation has been found more important than IS. This supports the con-
clusions drawn by Barratt and Oke (2007) and Denolf et al. (2015).
Table 4.3 Customer sensitivity case analysis of supply chain A
Linkage Technology Non-IS enabler Approach Operational
used performance
Company Car dealers DMS Phone, fax Moving to customer-oriented Accurate forecast,
A1 process improved CRM
Company Company Web portal, Face-to-face JIT delivery, BTO manufacturing Accurate fore-
A2 A1 Web EDI, communication, cast, reduced
Email telephone inventory level,
responsiveness
Company Company Web portal, Face-to-face Build to inventory Increased infor-
A3 A1 Email communication, mation visibility,
telephone accurate forecast
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Y. Wu
Process integration was analysed within the organisations to investigate

how they responded to changes and uncertainties. The results are pre-
sented in Table 4.4.
As shown in Sects. 4.2.2.3 and 4.3.2.3, Company A1 and Company
A2 adopt ERP, integrated with function-specific applications. The IS
system assists optimising existing business processes and controlling
waste. Furthermore, because of increased information visibility, firms
are able to respond to real-time information such as order changes,
therefore responsiveness can be improved. Company A3 implements
MRP primarily to automate certain tasks. With the limited assistance
of IS, the manager admitted the company lacks the capability to have
a fast responsiveness to any change. It provides further evidence on the
role of IS in process integration.
Although Rai et al. (2006) propose that information flow integra-
tion has the largest effect on the formation of supply chain process
integration, the findings show that IS integration computerises process
changes, which to some extent prevents the company from product and
volume flexibility. It indicates that advanced IS systems are not necessar-
ily enablers to improve flexibility.
Table 4.4 Process integration case analysis of supply chain A

Linkage Technology Non-IS Approach Operational
used enabler performance
Company Internal ERP Preparation Business Business
A1 and coop- process process
eration redesign optimisa-
tion
Company Internal ERP Preparation Business Waste
A2 process control,
optimisa- improved
tion respon-
siveness
Company Internal MRP Increased N/A No impact
A3 safety identified
stock level
127
Network integration highlights the process of achieving greater collab-

oration with partners and the role of IS integration in the processes.
Results are presented in Table 4.5.
Evidence in Table 4.5 suggests that the higher the level of integration
with suppliers, the greater the potential benefits, which is supported
by Frohlich and Westbrook (2001) and Prajogo and Olhager (2012).
Sanders (2007) argues today’s most successful manufacturers have
tight relationships with their partners, enabling real-time information
to travel immediately up and down the supply chain and well coordi-
nated movement of inventories. IS integration enables an IS-based plat-
form to synchronise information instantly which facilitates information
acquisition.
Although many benefits have been recognised, the results show
that collaboration is limited to product development among these
three firms and it is mainly carried out as sub-assembly outsourcing.
However, Christopher (2005) suggests that in achieving greater network
collaboration, functional units should be coordinated to obtain the
required resources and activities from collaborating planning to joint
vendor management. It indicates that the companies have a way to go
to achieve network integration.
Furthermore, the case of Company A3 illustrates the imbalance of
power that exists between suppliers and customers, suggesting that sup-
pliers can be under great pressure to adopt technologies from the OEM.
The company views IS as a tool for improving operations, but has no
plan to further implementation.
Virtual integration investigates how to leverage impacts of information

and what the role of IS integration is. Results are presented in Table 4.6.
ERP, integrated with function-specific applications facilitates infor-
mation-based business processes and helps decision-making pro-
cesses, confirmed from the cases of Company A1 and Company A2.
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Table 4.5 Network integration case analysis of supply chain A

Y. Wu
Linkage Technology used Non-IS Approach Operational

enabler performance
Company A1 Company A2 Web portal, Web Phone, Email Product outsourcing Information
EDI transparency,
improved work
efficiency, reduced
inventory level,
responsiveness
Company A3 Web portal Phone, Email Product outsourcing Information trans-
parency, improved
work efficiency
Company A2 2nd tier Web EDI, Web phone, Email, Product outsourcing Information visi-
suppliers Portal face-to-face bility, improved
communcia- responsiveness
tion
Company A3 2nd tier N/A Phone, Email, Little collaboration No visible impact
suppliers face to face identified
communica-
tion
Table 4.6 Virtual integration case analysis of supply chain A
Linkage Technology used Non-IS enablers Approaches Operational
performance
Company A1 Internal ERP integrated with Business require- Decision-making Information acquisi-
function-specific ments, leveraging support tion/dissemination,
applications the knowledge of reduced cost, focus-
people ing on value-adding
processes
Company A2 Internal ERP integrated with leveraging the knowl- Information-based Information visi-
function-specific edge and skills of process bility, profits of
applications employees business processes
identification
Company A3 Internal MRP Leveraging the impact N/A Information
of knowledge acquisition/
dissemination
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Y. Wu
IS integration encourages information acquisition and dissemination,

and helps employees to access relevant data and to achieve consensus
understanding. The case studies shed lights on the role of IS in the cur-
rent businesses. Each firm views IS adoption and integration as tools
to reduce costs and to improve the accuracy of business processes. One
benefit identified from the OEM marketing manager is the opportunity
to shift human resources from transactional process to other value-add-
ing activities.
The knowledge and skills of IS are the enabler highlighted in the
interviews as important to achieve virtual integration. According to
Yusuf et al. (2004), employees are capable of taking initiatives to max-
imise the values from IS systems, when they are knowledgeable. The
firms provide training courses to enhance employees’ basic knowledge
of applying IS. However, fears of IS threatening employees’ jobs were
identified. Company A3 offers an example of how the employees’ res-
ervations about using IS systems prevented IS system implementation
and consequently slowed down the process of information visibility and
work efficiency.
The study shows a disparity in the process of leveraging informa-
tion between large firms and SMEs. Company A1 and Company A2
had more ambitious plans for stressing the role of information than
Company A3, which is quite cautious considering the price, holding
a ‘watching brief ’, reacting to customer demands only. It increases
the challenge of supply information integration, but according to
Harland et al. (2007), a dominant theme is that the purported ben-
efits to performance of supply chain integration and the achievement
of it occur when its application is fully integrated throughout the
supply chain.
The view of participating companies and data analysis suggest
that IS itself is not sufficient to achieve agility. In the manufacturing
environment, previous research (Mondragon et al. 2004) concludes
that agility is not a state that can be associated directly to IS integra-
tion. Instead, achieving agility requires two stages, shown in Fig. 4.7.
IS integration is better to be applied after first enablers have been
carried out.
131
Non IS enablers
IS design-
Chinese
market fit
Production
capacity Training of
balance employees
Face to face Right

communication attitude to
changes
Flexible IS integration
structure
Supply chain agility
Fig. 4.7 The role of IS integration in achieving supply chain agility from supply
chain A
4.5.2.5 Additional Insights from the Case Analysis
Following the four dimensions, the case study revealed additional

themes that do not fall directly within the four agile dimensions.
• Need for holistic thinking of supply chain
The three companies operate in connected links, but not as a whole,

although many interviewees mentioned the market competition moves
from individual companies to supply chains. Suppliers are encouraged
to be more involved in the OEM’s businesses, since the interviews pro-
vide evidence that few suppliers are strategic partners with Company
A1. Additionally, there is very little trust throughout the automotive
supply chain and relationships tend to be based on cost-reduction rather
than on value-adding (Childerhouse et al. 2003). The lack of a holistic
business process across supply chains results in isolated pockets of col-
laboration and isolated information flow (Howard 2005). It restricts the
operational performance values of IS integration.
• Greater information visibility
The findings show that information from end-customers is valuable

to other departments within the firm, but currently the extent of such
information sharing is limited. In order to be agile and to be responsive
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Y. Wu
to customer demands, supply chains have to have the capability to inte-

grate IS among partners, linking customers with production, connect-
ing front-end, customer-facing systems with back-end systems, and
broadcasting the information within functional area, across functional
area and across the firm’s boundaries to its partners (Howard 2005;
Wilkin and Chenhall 2010). However, as we illustrated, the informa-
tion from customer-facing systems is not shared with manufacturing or
procurement, which prevents data from being broadcast to all depart-
ments, let alone all tiers. The findings indicate that firms should have
greater information visibility in order to be capable of being custom-
er-responsive and flexible.
4.6 Conclusions
This chapter presents the analysis and discussions of the supply chain A
cases. Managerial practices and quotations from interviews illustrating
their perceptions and actual approaches were presented.
Firms are operating in connected links but not viewing them as a
holistic supply chain. Therefore, the supply chain requires greater agility.
As for IS integration, the results confirm the importance of data con-
sistency and cross-functional SCM application integration. Due to con-
straints such as costs and the difficulty of integrating various platforms,
cross-functional application integration requires more effort to integrate
IS systems to achieve supply chain agility. In addition, other factors are
identified that are critical to integrating IS, including data accuracy as a
foundation to provide accurate and correct data across the supply chain.
As for the achievement of customer sensitivity, DMS, web portal and
web EDI are widely adopted in order to achieve fast responses to custom-
ers. IS integration plays an important role in transferring real-time and
accurate information. BTO has been discussed and identified through
the interviews, but it is not commonly applied due to the consideration
of production capacity and cost issues in the manufacturing companies.
Face-to-face communication and all the old forms of communication are
still popular and useful to understand customers’ requirements.
133
Regarding process integration, the interviews revealed that ERP sys-

tems were implemented extensively to integrate the information needed
by the firm. Meanwhile, advanced IS applications help the company to
control waste, to optimise business processes, and to improve efficiency.
In relation to network integration, the operational consequence of
IS integration has been confirmed by the cases, which are providing
information visibility, working efficiency, and improved responsive-
ness. However, the level of IS integration becomes weaker from OEM
to first tier suppliers, as the collaboration has mostly been carried out in
product outsourcing. Moreover, face-to-face communication and other
forms of communication are essential in communicating with each
other.
Last, but not the least, virtual integration concentrates on leveraging
the impact of information. With appropriate IS applications, informa-
tion dissemination and acquisition can be achieved to facilitate employ-
ees’ common understanding of the same information, and the working
efficiency can be improved. On the other hand, such processes requires
the proper knowledge and skills from employees to execute the leverag-
ing procedure.
In the next chapter, the supply chain B case study will be presented
and discussed in the same structure as this chapter.
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5
Case Analysis-Supply Chain B
This chapter presents the case analysis of the second supply chain,
including one OEM and two first tier suppliers, with the same structure
of the case analysis in Chapter 4.
This chapter starts with Sect. 5.1, data analysis of Company B1
with the background of the IS structure and IS systems applied to
SCM-related departments and the factors influencing IS integration.
Then the analysis moves to the IS integration in the context of supply
chain agility. This is followed by the analysis of two first tier suppliers
in Sects. 5.2 and 5.3 respectively. Section 5.4 discusses the findings
from each company from the perspective of a holistic supply chain. The
chapter concludes with a summary of the findings of supply chain B
in Sect. 5.5.
5.1 Company B1, Supply Chain B

The company is a JV between a Chinese company and one foreign auto-
motive company.

https://doi.org/10.1007/978-3-319-98440-7_5
140
Y. Wu
The IS department has more than 30 employees responsible for system

development and maintenance. The annual IS budget is approximately
0.5% of the total annual turnover.
IS systems are developed jointly by the internal IS department and
external IT (IS manager, Company B1). The IS systems are developed
based on different platforms and linked by interfaces. The company
does not have an off-the-shelf ERP system as a backbone to integrate
departments and the information needs of the entire enterprise. The IS
systems in the OEM are process-based from marketing to manufactur-
ing, and the finance and human resource departments apply modules
from SAP ERP systems. The IS manager stated that it was quite difficult
to make modifications to current IS systems to accommodate require-
ments from individual departments.
Figure 5.1 describes the information flows across the marketing,
manufacturing and procurement departments. The marketing depart-
ment collects orders from car dealers through DMS systems, and pro-
duces forecasts. The planning teams create long/short-term production
plans as well as monthly production plans using APS. The manufactur-
ing department produces daily manufacturing schedules carried out by
Assembly Line Control (ALC). The material management team in the
procurement department runs Material Management System (MMS) to
explode BOM and sends orders to suppliers through a web portal to
prepare daily materials required on the shop floor.
Company B1 has a DMS system that links car dealers to its mar-
keting department. The company’s general policy and notices are
published to car dealers through DMS. Orders including car model,
quantity, delivery time and monthly sale forecast are gathered by the
5 Case Analysis-Supply Chain B
141
Car
dealers Marketing
Manufacturing Daily manufacturing

Long/short term Daily planning schedule
production plan
APS
Monthly plan
Manufacturing
JIT suppliers
Manufacturing
Shop floor
MM
BOM Raw material
inventory
Procurement
Raw material planning
Finance
Web portal
Material Management
Raw material
requirement
Suppliers
Fig. 5.1 Information flow from logistics, procurement and manufacturing with

Company B1
marketing department. The IS department provides technology and

system maintenance.
First tier suppliers are connected by a web portal, provided by the
OEM to share information such as long/short-term plans, forecasts,
and invoicing. Suppliers log in to access their personalised informa-
tion and confirm orders online. Company B1 is connected to its sup-
pliers with JIT delivery via a Virtual Private Network (VPN) to ensure
speed and stability. All the technology is provided by Company B1 and
first tier suppliers are required to have proper hardware to receive data.
Company B1 is neither responsible for suppliers’ internal system devel-
opment and management, nor helping with costs. Figure 5.2 presents
the communication with suppliers and customers. Company B1 con-
nects to first tier suppliers and customers only.
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Y. Wu
2nd Tier 1st Tier Car

Company B1
Suppliers Suppliers Dealers
VPN DMS
Email System
Telephone
Fig. 5.2 Communication with customers and suppliers from Company B1
Data consistency and cross-functional application integration are

important to integrate IS systems as highlighted in the earlier chapter.
The IS manager at Company B1 ranked data consistency as one of the
most important factors in IS integration, as it enables integration of
processes within the firm. Moreover, the IS manager expected to move
to cross-functional application integration in the business. By giving
the example of difficulties of synchronising data across different func-
tions by the IS manager, the finding demonstrates the importance of
having an integrated IS system within the firm so that the OEM is able
to share automatically synchronised data and bring fragmented business
processes into more integrated processes. ‘It was difficult to synchronise
data such as new products’ ID between the databases. We updated our
database from MMS… But the sales system did not update until the
second day. Our car dealers could not report to our sales system as the
new product ID was not there yet. In this case, we had to add it into the
sales system manually’ (IS manager, Company B1).
The case acknowledges the role of data consistency and cross-functional
application integration in IS integration as defined in the existing theory,
although there is still a way to go to achieve integrated IS in the firm.
The company’s shop floors have semi-automated assembly lines, pro-

viding large batch production of standard products with customer
options. The procurement and manufacturing managers explained that
143
product quality is important as a competitive advantage to compete

with other OEMs. Company B1 is under considerable business pressure
and must constantly introduce new products to survive in the indus-
try (Marketing manager, Company B1). The business is driven by high
quality, high performance and low cost customer-oriented products and
service.
Market sensitivity means that the supply chain is capable of read-

ing and responding to real demands, and should be demand-driven
rather than forecast-driven (Christopher 2005). The marketing man-
ager in Company B1 stressed the importance of a customer-focused
business process to compete in today’s market. More function-specific
applications are under development such as CRM in the marketing
department. In addition, the manufacturing and marketing managers
acknowledged BTO as an approach to enriching customers. The man-
ufacturing manager was keen to adopt the practice in manufacturing
processes. However, the company still builds stock to meet its customer
requirements in the manufacturing environment which is still cost-re-
duction driven and constrained by production capacity and machine
status. ‘The worst case is to stop the production line. It costs too much’
(Manufacturing manager, Company B1). The other common approach
is to recruit new car dealers to expand the market (Marketing manager,
Company B1).
IS integration provides an easier approach to communicating with
other departments, although the marketing manager felt that more
advanced IS systems were required. ‘IS integration does help us to
produce a more accurate demand forecast because we can get feed-
back directly from markets and more information is available for us’
(Marketing manager, Company B1).
Furthermore, IS integration improves work efficiency by automat-
ing reports and realising real-time information visibility. The marketing
manager gave an example of IS integration with the outbound logis-
tics teams. DMS facilitates traceability for the marketing department,
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Y. Wu
including tracking the cars in transit, or checking car dealers’ invento-

ries. He argued that such real-time information sharing improves work
efficiency and the employees are able to focus more on value-adding
activities. In an agile supply chain, IS plays an essential role in realis-
ing the sensing and responding capabilities of an organisation (Lin et al.
2006); and it is important to be able to integrate the information of
demand, scheduling, production and logistics to implement informa-
tion transparency (Li et al. 2009; Ngai et al. 2011) so that the supply
chain is a synchronised network. The procurement manager gave an
example to show that insufficient real-time marketing information can
slow down the response time to demonstrate the importance of IS inte-
gration in internal business processes. ‘If our manufacturing department
lacks one type of component, it means they cannot deliver on time. But
if they do not tell us about their problems, we assume that everything is
OK… until we do not get the vehicles. Then we log into their systems
[the manufacturing department] to check whether the orders are pro-
cessed. If not, we have to call them to find out the reasons’ (Marketing
manager, Company B1).
Other factors, contributing to achieving customer sensitivity, are also
identified from the interviews. Face-to-face communication and emails
are a preferred way of getting an in-depth understanding of customer
requirements.
To summarise, the case confirms the importance of customer sensi-
tivity in achieving greater agility, and illustrates the benefits of apply-
ing integrated IS with car dealers although the OEM puts more weight
on build-to-forecast, taking account of build constraints. The findings
also show that lack of information can lead to insufficient responsive-
ness. Moreover, other factors that contribute to achieving customer
sensitivity have been identified from this case, including face-to-face
communication.
Agile companies should be flexible to allow rapid reconfiguration of

resources as well as to support concurrent processes to meet customer
145
requirements (Goldman et al. 1995). IS is more than a useful tool in

supporting process reconfiguration, such as business process re-design
(Davenport and Short 1990; Ngai et al. 2011).
The company intends to develop flexible business processes to mas-
ter changes. But it is difficult in practice as the manufacturing manager
explained that in order to increase market share and boost manufactur-
ing capacity, Company B1 took approximately a year to evaluate the
plan before execution of the construction of a new shop floor, from
the perspectives of production capacity, feasibility, human resources,
machine status, and costs. Furthermore, other issues that needed to be
addressed included how to link it to the first shop floor and what IS
should be applied. The case shows that process integration encompasses
a spectrum of activities coordinated among departments that contribute
to coping with changes.
As for the role of IS integration in the processes, the marketing
manager explained that IS integration facilitates information transfer
among departments, but it does not help with product and volume flex-
ibility. Although IS seems to be particularly important when flexibility
is needed (Sanders and Premus 2002), this case shows that to certain
degree, it computerises business processes, and consequently IS integra-
tion prevents the business from being flexible. ‘If a customer wants to
change to a colour which is not held in current database, he needs to
wait until we update the database. It slows down the process. It is much
easier without IS in this case’ (Marketing manager, Company B1).
Interviewees also identified other factors that maximise the role of IS
integration in the context of process integration. First is the fit between
IS design and current market. The IS systems in the company are based
on the models from its headquarter where the market is mature and vol-
ume changes rarely go beyond 10%. The Chinese market is still devel-
oping, and the changes can be dramatic with more than 10% changes.
Consequently responding such changes is beyond current capabilities
Overall, the results confirm the importance of achieving process
integration in the context of supply chain agility. More specifically,
mastering changes requires coordination and preparation among depart-
ments in a manufacturing environment. IS integration helps to realise
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Y. Wu
real-time information visibility among departments and partners. But

it computerises new business processes. When product flexibility is
needed, IS integration does not necessarily improve product and vol-
ume flexibility.
Network integration means collaboration with suppliers and making

best use of their strengths through integrating information to achieve
higher levels of agility (Christopher 2005; Swafford et al. 2006). All
interviewees highlighted the importance of their suppliers in the busi-
ness. In particular, the OEM outsources many sub-assemblies to its
suppliers, rather than building in-house. The study supports the view
of Swafford et al. (2006) that network integration means leveraging
partners’ strengths through collaborating with them. Sub-assembly
outsourcing is a common way to work with the OEM’s suppliers.
Furthermore, as Swafford et al. (2006) explain, the selection of suppliers
is strongly influenced by the company’s culture. Company B1 chooses
closely or loosely connected groups of first tier suppliers rather than
worldwide selection, so that the firm can develop a trusted and close
relationship with its suppliers and cooperation which involves more
than just cost reduction.
In terms of IS integration, the materials management manager said
that the procurement function has been traditionally labour intensive,
and most procurement employees spend their time on non-value-add-
ing activities such as data entry and correcting paper-work errors.
Having integrated IS with its first tier suppliers, fast and accurate data
transfer allows the staff to have more time to focus on building stra-
tegic supplier relationships. Furthermore, the manager stressed that the
increase in information transparency between the OEM and its first tier
suppliers means that responsibility for some operations has been trans-
ferred from the firm to its suppliers.
Both the material management and IS managers identified other fac-
tors that influence network integration. They emphasised that responsi-
bility and effort should be from both sides, rather than the OEM only.
147
The case shows the imbalance in power between the OEM and its sup-
pliers that the suppliers are forced to adopt IS. The Company B1 has
many suppliers, but not everyone has the capability of integrating with
its IS systems. ‘Some even do not have any system. Now we are try-
ing to push our suppliers to adopt e-communication. It takes time for
some suppliers to adopt IS systems’ (Material management manager,
Company B1).
Additionally, the material management and marketing managers
mentioned that traditional forms of communication such as face-to-face
communication and emails are also needed to confirm in-depth under-
standing as well as to clarify ideas or misunderstanding.
Cooperation among companies is the key to the competitive advan-
tage offered by agility (Goldman et al. 1995), and is demonstrated by
this case. IS integration ensures the transfer of accurate data among
companies and enables employees to focus on value-adding activities.
Virtual integration relates to leveraging information along the supply

tion sharing and exchanging to realise information visibility (van Hoek
et al. 2001).
The senior managers in Company B1 acknowledged the significance
of information in their daily business. The marketing and procure-
ment managers stated that the current IS systems facilitated informa-
tion dissemination and acquisition, but they needed more advanced
and integrated IS systems to provide more information to help in deci-
sion-making. ‘We would like to have a more interactive communication
with our suppliers. That means we are able to know whether they can
meet our demands on time or not, or know their manufacturing sta-
tus. It helps us to develop a more accurate plan’ (Material management
The material management and marketing managers also iden-
tified other factors that are important in maximising IS values in the
context of virtual integration. Knowledge and skills are important in
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Y. Wu
understanding the meaning of information and maximising the value

of IS systems. Company B1 provides training to the employees on ‘how
to use systems and how to read data to add values to the processes’
Overall, the role of information is identified as important to the
OEM. With business growing, more advanced and integrated IS sys-
tems are required to support decision-making. By leveraging the impact
of information, knowledge is critical to assist employees in applying
appropriate IS systems and interpreting data.
5.2 Company B2, 1st Tier Supplier, Supply

Chain B
Company B2 is a JV, specialising in auto seating assembly.
The plant uses ERP systems to integrate all the required information,
and the IS department in the head office is responsible for IS design and
development. The company uses commercial off-the-shelf applications for
cross-functional systems development with modifications, and develops
function-specific applications based on the plant’s requirements. The cur-
rent approaches to communicating with its suppliers are emails mainly, as
the plant managers believed that they are cost-effective and flexible.
Figure 5.3 describes the information processes across the procure-
ment, manufacturing and logistics departments. The PC&L depart-
ment is responsible for procurement, and logistics. The manufacturing
department is responsible for assembling auto seating systems. The plant
produces its production plans based on the OEM’s weekly plans. The
plant provides hourly sequence-in-line delivery, so it receives Company
B1’s daily manufacturing schedules through EDI, and the production
planning team translates Company B1’s daily manufacturing schedules
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BOM
Company
B1 Email
Fax
Suppliers
MRP Material requirements
ERP
Shop floor
Finance
Daily
manufacturing
plan
Materials
Raw material inventory
IMS
PC&L
PC&L
MES
Material planning
Manufacturing
Cross-check
Shop floor
Fig. 5.3 Information flow from orders to manufacturing to logistics with

Company B2
into its own schedules. MES supports production processes, real-time

production control, as well as producing reports to ensure the quality
of production performance. The manufacturing process uses Kanban
to realise pull systems for materials delivery. Inventory Management
System (IMS) manages raw materials and finished goods.
5.2.1.2 Communications with Customers and Suppliers
The plant provides JIT and sequence-in-line delivery to the OEM. The
plant has three approaches to link with its customers: (1) a web portal
to access general information, including long- and short-term produc-
tion plans, weekly plans, general policy; (2) EDI to obtain the OEM
daily manufacturing schedules; (3) emails and telephone to communi-
cate for clarification.
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Y. Wu
Emails and telephone are the main channels for communicating with
Company B2’s suppliers. The IS department in the head office planned
to develop IS-enabled business processes with the plant’s suppliers, but
the plant claimed that it will keep emails to help mutual understand-
ing (PC&L manager, Company B2). Figure 5.4 describes the electronic
communications from Company B2.
Data consistency and cross-functional SCM application integration are

recognised as critical factors in IS integration (Rai et al. 2006). The IS
manager recognised that data consistency, especially the common data
definitions, is a foundation for information flows across departments,
as well as across the supply chain. In addition, he also confirmed that
cross-functional application integration is important, but it can be car-
ried out by web-based electronic communication to link inter-firm sup-
ply chain processes and to transform fragmented, silo-oriented supply
chain processes into integrated and coordinated supply chain processes.
Using web-based electronic connectivity is regarded as a cost-effective
way of improving the supply chain (PC&L manager, Company B2).
The results support Rai et al.’s research (2006), which suggests that data
consistency is more important in comparison to cross-functional inte-
gration, and shows the high degree of importance of data quality and
standards as facilitators of integration processes.
The IS manager recognised that reliability, in other words, stable soft-
ware, is of importance to support IS integration. The plant has many
IS systems in departments connected via interfaces, and some servers
are located locally and some are at the head office. Software stability
2nd Tier Car

Company B2 OEM Dealers
Suppliers
Email Web Portal
Telephone EDI
Fax Email
Telephone
Fig. 5.4 Communication with customers and suppliers from Company B2

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is critical to support smooth business processes. Selecting appropriate

applications is a challenging task for managers given the wide range
of fast-changing and pricy technologies (Sanders and Premus 2002).
Therefore, at the technology level, Markus (2000) identifies the use of
mature and appropriate technology as a critical factor for system inte-
gration. Denolf et al. (2015) further acknowledge the importance of
selecting reliable IS with agreed technology standards.
Overall, the interviews validate the existing theory, showing the
importance of data consistency and cross-functional application inte-
gration in integrating IS processes. In particular, the findings high-
light web-enabled application integration has a cost-effective approach
to achieve cross-functional application integration. Except the two
identified from the literature, the findings reveal that in achiev-
ing greater IS integration, IS reliability and stability needs to be
considered.
The plant manufactures standard products with customer options, and

provides sequence-in-line delivery to the OEM’s shop floor. It claims
to be good at providing products with good quality and superb perfor-
mance. Product flexibility improvement and cost reduction are the main
business priorities. Company B2 manages dozen of suppliers who are
located nearby, with 100% local content rate. It does not require JIT
delivery from its suppliers, and the plant has warehouses which hold
3-day raw material inventory.
The marketing department at Company B2’s head office is responsible

for expanding the market, targeting new customers, and maintaining
existing customers. Several approaches have been identified in order
to provide customer-focused services to the OEM. First, Company B2
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Y. Wu
provides a service-coordinator at Company B1’s shop floor to ‘final

check whether the sequence is correct, and to coordinate with the
Company B1’s employees. If any problem occurs, our coordinator can
tell us directly. It saves time in solving problems…we can get first-hand
feedback’ (Manufacturing manager, Company B2). Second, Company
B2 adopts BTO manufacturing processes, which has become a popu-
lar operations paradigm, to improve its responsiveness to its customer.
Company B2 creates its daily manufacturing schedule by combining the
OEM’s weekly plan and daily manufacturing schedule in order to make
continuous manufacturing and to achieve zero inventory of finished
goods.
The managers confirmed the role of IS integration in BTO imple-
mentation process. IS integration provides information transparency.
Well-designed IS systems seem to enhance the collaboration processes
with the OEM (PC&L manager, Company B2). IS integration is
essential to managing BTO because it is able to provide information
about the type of products required, the material availability, the man-
ufacturing process involved and the real-time tracking of the materi-
als/finished good entering and exiting the production lines (Lancioni
et al. 2000). ‘IS systems facilitate information sharing between the
OEM and us. In particular, we get the OEM’s daily manufacturing
schedule hourly…we only produce what our customer requires, and
cross check ID number when the product is off the assembly line…
and then we just deliver it to the OEM…it reduces inventory cost’
(PC&L manager, Company B2).
In achieving customer sensitivity, the managers also identified other
factors that contribute to having an in-depth understanding of custom-
ers and markets. Face-to-face communication was mentioned several
times by the manufacturing and PC&L managers. Good communica-
tion is a key enabler of customer sensitivity and mechanisms of actual
face-to-face interactions are found to be more important than digital
communication (Denolf et al. 2015). IS itself is only one aspect of a
more complex phenomena (Pagell 2004).
In addition, real-time market information should be available
across the supply chain. Otherwise such lack of information may lead
153
to greater operation inefficiency. In order to improve the responsive-

ness, the real-time manufacturing tracking and tracing are important
(Zhang et al. 2010). Zhang et al. (2015) extend the techniques of IoT
such as RFID and Auto-ID to manufacturing field in order to pro-
vide timely, accurate and consistent information during manufactur-
ing execution. ‘I want to have feedback directly from the market. It
will facilitate our forecasts and planning processes. But normally the
information is classified as confidential in the OEM. We can only get
its historical data. For example, we just got Company B1’s sales from
January to April [the interview was in July]. I can only know the past,
but not the current market…since Company B1 is still a focal firm
in the supply chain. Although it updates the long-term forecasts…
they are unreliable. Especially since we are doing BTO manufactur-
ing…I hope I can get as much marketing information [end-user mar-
keting] as possible to help us to analyse our business’ (PC&L manager,
Company B2).
To summarise, the interview findings provide solid evidence to
support the importance of customer sensitivity in achieving agility,
and show the benefits of IS integration in assisting the achievement
of customer sensitivity, including information visibility, improved
responsiveness and reduced inventory level. BTO has been stressed
as an appropriate approach to achieve IS-enabled customer sensi-
tivity. However, other factors have also been identified which con-
tribute to achieving greater customer sensitivity, such as face-to-face
communication.
The PC&L manager explained that currently the plant is trying to be

flexible to meet a fast-changing market. ‘The priority is to find a way to
survive in such a volatile market…it requires a flexible business process’
(PC&L manager, Company B2). Business process re-design was also
mentioned by the PC&L manager as a way to improve and optimise
manufacturing processes.
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Y. Wu
Barratt and Oke (2007) argue that having a high degree of visibil-
ity is key for any firm within a supply chain. Both manufacturing and
PC&L manager agreed that IS integration realises information visibil-
ity across the supply chain to provide notification of changes instantly.
However, the case shows that though IS integration is able to inform
changes, it is not necessary to facilitate dealing with changes. ‘Business
process re-design has been studied for quite a while…The Chinese mar-
ket is developing rapidly…The market changes fast… IS helps to trans-
fer information and to alert us to changes, but it computerises business
processes…so we find it is difficult to reflect such changes. Basically
what we need is to re-design our systems to fit new business processes.
It is not a good idea to rely too much on IS at this point’ (PC&L man-
ager, Company B2).
When it comes to product flexibility and volume flexibility, the inter-
viewees pointed out that IS integration does not always improve flex-
ibility, although the literature suggests IS integration facilitates firms
focusing on their own competencies (Martinez and Perez 2005). For
example, when the OEM changes its orders, the overall product status
needs to be revised including BOM etc. ‘If our database does not have
what the customer requires, our IS systems will slow down the process
as we need to create a new quote and update it step by step in the IS
systems’ (Manufacturing manager, Company B2).
Overall, the findings acknowledge the importance of process integra-
tion in achieving greater agility as discussed in the literature. However,
the role of IS integration in the findings is different from the theory.
That is, IS integration helps to transfer real-time information to notice
changes, but it does not play a critical role in mastering changes.
Generally, network integration focuses on cooperating with supply

chain partners. Suppliers play an important role in the plant’s busi-
ness. Collaboration with its suppliers is as follows (PC&L manager,
Company B2).
155
• Professionals on sites
The plant sends out professionals to work with its suppliers so that
they know what Company B2’s requirements are or what the prob-
lems are.
• Outsourcing
Another form of collaboration is sub-assembly outsourcing to suppli-
ers so that non-value-added activities can be removed from Company
B2’s business processes and its core competences can be more
focused.
As for the role of IS integration in the context of network integration,

Company B2 only uses emails, faxes or phone calls to work with its sup-
pliers. The PC&L manager explained the business does not require such
advanced and expensive systems and the current business is manageable
by hand. ‘…our first priority is cost reduction and fast responsiveness.
Hence, most suppliers are local firms. It is much easier to communicate
with them, and consequently improve responsiveness from our suppli-
ers. Because when Company B1 gives its weekly plans, it does not take
such a long time to pass the information to our suppliers. But it does
not matter whether we use emails or faxes to distribute it, because all are
convenient and cost-effective’ (PC&L manager, Company B2).
Takeishi (2002) argues that in the auto industry, supplier firms use
Internet features such as email and discussion forums, as well as face-to-
face communication, to understand details of customers’ requirements
not completely conveyed in formal documentation. However, visibil-
ity of relevant information throughout the supply chain is essential, as
managers in Company B2 observed.
The findings support the significance of network integration in
achieving greater agility. The plant uses traditional methods to commu-
nicate with its second tier suppliers, as the current business can be han-
dled by hand rather than advanced IS systems. The results indicate that
IS integration or IS applications should be used based on the business
requirements, and it is not a compulsory element in achieving network
integration.
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Y. Wu
Company B2’s managers confirmed the importance of information for

their business. For instance, manufacturing and outbound logistics are
based on Company B1’s daily manufacturing requirements to imple-
ment BTO and to provide sequence-in-line delivery. Virtual integra-
tion in the supply chain changes the traditional inventory-based supply
chain process to an information-based one.
When it comes to the role of IS integration in this process, Company
B2 has begun to realise benefits from IS-enabled communication with
Company B1 to support the OEM’s business, and with its head office
to support information visibility. Information dissemination and acqui-
sition have been identified as benefits for both the plant and its head-
quarters. Additionally, IS integration provides more on automating
tasks of information sharing and producing reports. ‘The IS systems …
are very important to the head office as we have several branches and
subsidiaries across China. It is difficult for the company if there is no
integrated IS between the head office and every plant. For example, the
head office could take at least a month to sum up monthly account-
ing, but because all the plants are linked via IS, the accounting depart-
ment needs fewer than ten days to send out reports now. Therefore, IS
integration within the organisation benefits information dissemination
or acquisition between plants and the head office’ (PC&L manager,
Company B2).
To summarise, the findings show the important role of virtual inte-
gration in the context of supply chain agility. IS integration facilitates
the leveraging process of the impact of information to realise virtual
integration, and it realises information visibility.
5.3 Company B3, 1st Tier Supplier, Supply

Chain B
The plant manufactures bumpers, rear shelves, and door trims. It pro-
vides JIT delivery to Company B1.
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One IS professional is responsible for hardware maintenance. IS design

and development has been carried out in the IS department in its head
office. The communication among departments is through hard-copy as
well as formal and informal meetings. Each department has its own IS
systems to run the business. IS integration among departments is under
discussion at the head office.
Figure 5.5 describes the IS flows across the materials management
and the manufacturing departments. The manufacturing department
creates long and short-term production plans as well as daily man-
ufacturing schedules. The department shares weekly manufacturing
schedules with the materials management department which sends out
Long/short
term production
plan
Long/Short term plan

Weekly plan
Company B1 Weekly
Manufacturing Planning
department system production
plan
Weekly
Shop floor Overseas
production
plan suppliers
Imported Imported
Material material material
management MM requirement material requirement
requirement Head office
department
system
Manufacturing daily planning
Local suppliers
Daily Raw material inventory
manufacturing
schedule
Shop floor
Finished good inventory
Fig. 5.5 Information flow across procurement, manufacturing and logistics with

Company B3
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Y. Wu
material orders to its suppliers. The plant plans to integrate all IS sys-
tems and to develop electronic connections with its suppliers (IS profes-
sional, Company B3).
The plant uses three approaches to contact its customers: (1) a web
portal to access general information, such as long and short-term pro-
duction plans, weekly orders; (2) VPN to link Company B1’s daily
manufacturing schedules to its outbound logistics for JIT delivery; (3)
telephones and emails for discussion.
Two methods are used to connect suppliers. Local suppliers are con-
tacted through emails, fax, telephone and sometimes even instant mes-
sengers. Overseas suppliers are contacted through its head office abroad.
The plant transmits orders through web EDI to the procurement
department at the head office responsible for placing orders to the sup-
pliers abroad. Figure 5.6 presents the ways of communication between
Company B3 and its partners.
Data consistency and cross-functional SCM application integration are

recognised as important factors in IS integration. The IS professional
confirmed the importance of data consistency in the daily business.
Both the IS professional and materials management manager men-
tioned their intention of integrating IS systems across departments,
as they have submitted the proposal. Their responses illustrate that
cross-functional application integration is important to the business,
which facilitates business processes.
2nd Tier Car

Company B3 OEM Dealers
Suppliers
WebEDI Web Portal
Email VPN
Telephone Email
Telephone
Fig. 5.6 Communication with suppliers and customers from Company B3

159
Additionally, the IS professional emphasises that data accuracy is

important because all data are shared through hard-copy. It is more
likely to provide incorrect data which leads to great operational prob-
lems. Thus caution should be exercised in the fragmented IS systems
environment as inaccurate data may cause loses in business processes.
‘We do not use a central database. Therefore, each time we have to
re-key the data physically when we get it from other departments.
It is more likely to make mistakes’ (Material management manager,
Company B3).
The findings support the notion that data consistency and cross-func-
tional SCM application integration are important to IS integration.
Although the plant has some way to go to realise SCM application inte-
gration, the IS manager is keen to integrate IS systems among depart-
ments. Furthermore, the findings also identify data accuracy as a critical
element to IS integration.
The branch has one shop floor that manufactures in mass production.
New products would be developed according to Company B1’s speci-
fications. The branch provides JIT delivery to the OEM, and its manu-
facturing process is based on build to stock. Its competitive advantages
are fast delivery and a short lead time production cycle. In addition,
interviewees felt that because new operational processes are increasingly
introduced by big industry players, the plant is under pressure to com-
pete. The plant recently announced a new strategy moving to a custom-
er-focused and responsive business.
The manufacturing and logistics managers explained that the business

is to provide excellent service to its customer. Overall, Company B3 has
not been concerned about end-user information or expanding current
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Y. Wu
markets. Specific practices for achieving customer sensitivity by IS inte-

gration has not been identified through interviews.
The plant business objective is to provide the right products at the
right time and in the right quantity to Company B1 (Logistics manager,
Company B3). In addition, the plant has one service coordinator at the
OEM site who is responsible for final checking and provides feedback
instantly if any problem occurs.
The role of IS integration with Company B1 is ‘to transfer standard
data and mutual consensus information’ (Material management manager,
Company B3). This means that the level of IS integration is automating
tasks and facilitating data transfer. Furthermore, interviewees also iden-
tified other factors that contribute to understanding and satisfying cus-
tomers, such as face-to-face communication and emails. ‘It is much faster
to get feedback through phone calls and such communication helps us to
understand what the problem is’ (Logistics manager, Company B3).
Another factor that contributes to customer sensitivity, listed by
the interviewees, is the company culture. It plays an important role
in the overall business of a company (Material management manager,
Company B3). Pagell (2004) identifies that culture is an important fac-
tor to achieve great cooperation among departments within the firms.
This case expands his research in that culture is also important to coop-
eration between partners.
To sum up, the case confirms that customer sensitivity is impor-
tant to supply chain agility as defined in the model, and IS integration
with the OEM improves information visibility to the plant. The find-
ing highlights the role of IS integration in customer sensitivity, which is
primarily for task automation and data transfer. Additionally, culture is
recognised as a factor influencing customer sensitivity.
The manager of materials management explained that any change

requires detailed preparation and planning, taking account of human
resources, production capacity and machine status. Company B3 started
analysing the capability of logistics and manufacturing to fully support
161
the new shop floor of Company B1. ‘It took quite a long time to pre-
pare…the first thing to be considered is human resource and maximum
of logistics capacity. Then manufacturing and procurement sections will
change accordingly’ (Logistics manager, Company B3).
In responding to changes, the materials management manager also
mentioned that business process re-engineering is one approach to
achieving process integration. However, the manager confessed that
the plant lacks the capability to cope with changes and adapt to a new
environment quickly. Such capability could be improved if Company
B3 deploys advanced IS to facilitate business process optimisation
(Materials management manager, Company B3). This indicates the
importance of IS integration in achieving process integration.
As for IS integration in the context of process integration, the plant is
able to access Company B1’s manufacturing schedules through integrat-
ing IS which facilitates real-time data synchronisation. ‘Our delivery is
based on Company B1 daily manufacturing schedules…and we know
precisely every single minute what is happening at their shop floor.
Hence, if anything is changed, the logistics team can get the informa-
tion instantly. Based on new schedules, we just need to re-pack prod-
ucts. To this extent, IS integration helps information visibility. In fact, it
is unlikely that Company B1 will change the order when a vehicle is on
the production line’ (Logistics manager, Company B3).
The findings show the importance of process integration in achieving
greater agility as defined in the model and the role of IS integration in
process integration by explaining that IS integration is able to optimise
business processes. However, in order to respond to changes and uncer-
tainties, IS integration can only realise real-time information transfer to
provide instant notices.
Interviewees acknowledged the significance of suppliers in their businesses.

‘They [Company B3’s suppliers] are part of our businesses. You cannot say
that because they are suppliers, they are one level lower than us. It is abso-
lutely wrong’ (Manager of material management, Company B3).
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Y. Wu
The collaboration with Company B3’s suppliers is normally carried

out in the form of sub-assembly outsourcing. Although he showed his
willingness to use IS systems to work with his suppliers, currently, the
plant does not have any advanced IS systems to realise digital commu-
nication, but communication with local suppliers has been identified as
important (Logistics manager, Company B3). It is usually by formal or
informal meetings. But formal meetings fall short because they occur
on a regular basis when it is convenient to meet, not when a problem or
opportunity arises (Logistics manager, Company B3). ‘We usually have
meetings with our suppliers. The main purpose is to exchange informa-
tion regarding the current manufacturing status, the problems in the
business, and the layout of the future business’ (Manager of material
management, Company B3).
The managers expressed their intention to develop IS-enabled com-
munication to realise real-time information transfer with second tier
suppliers. To some extent, their responses indicate that IS-enabled net-
work integration is able to provide considerable operational benefits.
‘We do need IS systems…to have real time and fast communication…
The other benefit is to reduce waste. Take orders, for example. We need
to constantly send emails and faxes to make orders. If we had a system,
we could directly publish the information to all suppliers. Something
like a portal’ (Manager of material management, Company B3).
The findings indicate the importance of information in network inte-
gration and the awareness from the managers. One efficient approach
to realising information visibility is through integrating IS systems
(Christopher 2005); but face-to-face communication e.g. scheduled
meetings facilitates in-depth understanding.
The use of IS to share data between partners creates information-based

rather than inventory-based supply chains, so that the supply chain
can be more responsive (Christopher 2005). The manager of materials
management stressed the importance of information in the business,
especially information visibility among partners. The logistics manager
163
stated that the business requires a more advanced and integrated IS

to fully support the role of information. ‘For raw material inventory
management, we can only check numbers. But we do not have….
for example, the minimum inventory should be three days. But when
the number is less than three days, there is no alarm to indicate…we
can only check manually…it is easy to make mistakes of safety stocks’
(Manager of materials management, Company B3).
Although the branch intends to integrate IS to leverage the impact of
information, the interviewees identified other factors that contribute to
virtual integration. First, IS development should match and reflect cur-
rent businesses. Most IS failure is not for technical reasons, but rather
because of human and organisational limitations. Employees prefer the
status quo and are averse to change (Koh et al. 2011). The manufac-
turing manager gave an example to indicate the importance of aligning
IS to businesses. ‘The head office developed one IS system to help the
materials management department to manage raw material status for
daily manufacturing. But we could not use it and have to ask the rele-
vant department to check for us and send back a paper-based report…
The reason is the system did not match our business’ (Manufacturing
Second, ‘We have to have skilled employees to run systems to real-
ise the values’ (Logistics manager, Company B3). Knowledge is listed
as another important factor to facilitate the impact of information in
the businesses. Fawcett et al. (2008) identify that the success of strate-
gic supply chain would also depend on the degree of resources sharing
among supply chain partners such as information, knowledge and skills
and the ability to use the resources effectively.
Third, cost is another factor influencing the leveraging processes. The
head office was unsure how many benefits could be realised through IS
integration although the interviewees identified the need for advanced
IS systems. In particular, in the automotive industry, suppliers are
constantly being driven by cost reduction (Hoppe and Parkin 2017).
However, IS integration is still viewed as cost, and Logistics manager
mentioned that ‘if the head office can spend less and maintain the cur-
rent status, why not?’ (Logistics manager, Company B3).
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Y. Wu
The findings confirm the importance of IS integration in the context

of virtual integration, and suggest that knowledge and alignment of IS
with business are also critical to virtual integration. Although the inter-
viewees identified the necessity of implementing advanced IS systems to
support businesses, cost is still one main barrier to leverage the impact
of information.
5.4 Summary of Supply Chain B Case Analysis

5.4.1 The Critical Factors of Implementing IS Integration
in the Context of Supply Chain Agility
Data consistency and cross-functional application integration have been

confirmed by all cases. Data consistency provides data standards across
the change and common understandings of shared information. For
example, by common data standards, applications can speak the same
language (Lam 2005). In particular, common key data definitions are
highlighted by interviewees as a foundation of smooth information
flows across departments and firms. Company B1 and Company B2 are
good examples, indicating the importance of data consistency. Having
a common data definition not only enables connectivity, but also facili-
tates the exchange of complementary information between departments
and firms (Rai et al. 2006).
The findings, shown in Table 5.1, provide evidence that IS integra-
tion facilitates cross-functional and inter-firm communication, and
transforms fragmented, functional processes into integrated supply
chain processes. However, instead of using integrated cross-functional
applications such as collaborative planning, the connectivity is carried
out through a web portal or VPN as cost-effective approaches.
One important finding is the requirement for system reliability
and stability from Company B2. However, this issue is only raised by
Company B2’s manager as a particular case because the plant has servers
located at various places, requiring stable and reliable systems for com-
municating with and updating each other. The survey by Djavanshir
and Khorramshahgol (2007) determines system reliability as one of
165
Table 5.1 Critical successful factor of IS integration of supply chain B

Position in the supply chain CSF of IS integration
OEM 1st tier suppliers
Company B1 Data consistency, cross-func-
Company B2 Data consistency, system relia-
bility and stability, cross-func-
Company B3 Data consistency, data accuracy,
integration
the key process areas in system integration. Another important finding

is the importance of data accuracy, identified by Company B3 since a
minor data inaccuracy may leads to serious operational problems.
5.4.2 The Role of IS Integration in the Context

The discussion is carried out from the four dimensions of sup-

ply chain agility, starting with customer sensitivity. The categories
of the Tables displayed in the following sections (from Table 5.2 to
Table 5.5) are explained first. Linkage shows the links where the four
dimensions of supply chain agility are applied in the company. For
example, the linkage of customer sensitivity is to link to customers.
The linkage of network integration is to link to suppliers. Approaches
indicate the practices each company uses to achieve customer sensitiv-
ity. Technology-used indicate what technology is adopted, where non-IS
enabler shows other identified issues that contribute to customer sen-
sitivity. Operation performance indicates the operational impacts of IS
integration on four dimensions.
Table 5.2 presents the approaches to improving customer sensitivity and

the role of IS in this context. The results illustrate improved operational
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Y. Wu
Table 5.2 Customer sensitivity case analysis display of supply chain B

Linkage Technology Non-IS enabler Approach Operation performance
used impact
Company B1 Car dealers DMS Telephone, recruiting new Build to stock Improved working effi-
car dealers mainly ciency, accurate forecast
Company B2 Company B1 Web portal, Face-to-face communication, BTO Information transparency,
Web EDI telephone, customer service responsiveness, reduced
coordinator at shop floor, inventory level
email
Company B3 Company B1 Web portal, Similar culture background JIT delivery Information transfer
VPN
167
performance by integrating IS systems. Company B1 provides DMS

to car dealers and collects end-user information through DMS. Due to
more end-users’ information being available, Company B1 has the capa-
bility to develop more accurate forecasts, which has a great impact on its
suppliers. Both suppliers benefit from integrating with Company B1 as
shown in Table 5.2. Especially with advanced integrated IS, Company
B2 has more benefits from operational outcomes than Company B3.
According to Christopher (2005) and Mondragon et al. (2004), infor-
mation from end-users should be broadcast to all participating compa-
nies in an agile supply chain. However, the cases show that information
has been spread from one party to the other rather than broadcasting,
because a certain amount of information is treated as confidential,
which is normally not shared with partners (Childerhouse et al. 2003).
BTO has been widely discussed as an approach to enrich customer
satisfaction (Gunasekaran and Ngai 2005), and it has been adopted
in Company B2 to help reduce inventory level. In addition, Table 5.2
shows Company B1 and Company B3 which apply less advanced IS
systems compared to Company B2, obtained less operational benefits.
On the other hand, fast response brings more uncertainties in its BTO
production (Waller 2004). During the cycle from order to delivery,
85% of the elapsed time is made up by order processing delays (Holweg
and Pil 2001). The key to a dynamic but stable BTO is order process-
ing and scheduling (Holweg and Jones 2001), which were stressed in
Company B2.
The findings also identify the non-IS enablers to achieving greater
customer sensitivity, in particular, face-to-face communication, such as
meeting and service coordinators at Company B1’s shop floor provided
by first tier suppliers.
Table 5.3 presents the approaches and the role of IS in the context of
mastering changes. Among these three companies, only Company
B2 adopts ERP with function-specific applications. Company B1
uses interfaces to link IS systems within the firm. These two cases
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Y. Wu
Table 5.3 Process integration case analysis of supply chain B

Linkage Technology Non-IS Approach Operation
used enabler perfor-
mance
impact
Company B1 Internal Integrated Full prepa- N/A Information
func- ration visibility
tion-spe-
cific
applica-
tions
Company B2 Internal ERP with Full prepa- Flexible Information
func- ration processes visibility
tion-spe- to Chinese
cific market
applica-
tions
Company B3 Internal Function- Full prepa- N/A N/A
specific ration
applica-
tions
demonstrate that IS integration provides information visibility to

inform any change or uncertainty. The main non-IS enabler for process
integration is also presented in Table 5.3. Detailed preparation is needed
in terms of human resources, finance and production capacity. Previous
research (Grant 1996) proposes that the foundation for a company’s
sustainability is to optimise its resources and capabilities, including its
human resources, financial assets, physical properties and technology. It
shows that IS integration is important, but is not sufficient in itself to
master organisational changes.
Table 5.4 shows how the OEM and the first tier suppliers integrate
with their suppliers. The cases illustrate that management focuses more
on individual companies than on the whole supply chain. The collab-
oration with their suppliers is mainly through sub-assembly outsourc-
ing. By using Internet-enabled connectivity, the companies improve
Table 5.4 Network integration case analysis of supply chain B
Linkage Technology used Non-IS enabler Approach Operation perfor-
mance impact
Company B1 Company B2 Web portal, Web Phone, face-to-face Increasing infor- Fast and accurate
EDI, Emails communication mation visibility, data transfer,
outsourcing value-adding
activities
Company B3 Web portal, VPN Phone, face-to-face Close relationship Work efficiency,
communication, culture, improved data
email accuracy
Company B2 2nd tier Email Phone, face-to-face Product N/A
suppliers communication, staff outsourcing
on site, fax, instant
messenger
Company B3 2nd tier Web EDI Phone, face-to-face com- Product N/A
suppliers munication, fax, email outsourcing
169
170
Y. Wu
operational performance. Having an integrated supply chain has been

shown to provide a significant competitive advantage. The connection
between first and second tier suppliers is much simpler compared with
the connection between the OEM and first tier suppliers in the sup-
ply chain. In particular, emails, phones or faxes are the main approach
to orders and inquiries as they are considered as cost-effective means to
pass updates to their second tier suppliers. Meetings in Company B3
are always preferred although Pagell (2004) identifies the disadvantages
of formal meetings, such as the inability to respond quickly when prob-
lems occur. The finding shows that non-IS enablers are necessary for
communication. Furthermore, the cases suggest that collaboration with
suppliers is not synonymous with IS application integration. IS inte-
gration supports data transfer and information visibility which in turn
facilitates cooperation, but network integration also requires other ena-
blers, such as face-to-face communication.
Another finding is the role of organisational culture. Effective net-
work integration is dependent upon a number of fundamental success
factors relating to organisational culture and business relationships,
such as trust, collaboration, and effective communication (Sharif et al.
2007). However, this issue is only raised and discussed in Company B3.
It is not identified by the other interviewees from the follow-up email.
Therefore, this issue will not be further discussed.
Virtual integration investigates how to leverage impacts of informa-

tion and what the role of IS integration is, presented in Table 5.5. ERP
in Company B2 helps integrate IS systems and provides information
that is required by the plant. It is noted that such leveraging processes
require skilled and knowledgeable people, so that employees are capable
of optimising their work by using IS systems to deal with the ‘drudg-
ery’ around creating reports, invoices, orders etc. and release employees
to spend more time to enhance other areas (Harland et al. 2007; Yusuf
et al. 2004). Furthermore, information-based processes require human
171
Table 5.5 Virtual integration case analysis display of supply chain B

Linkage Technology Non-IS Approach Operation
used enabler perfor-
mance
impact
Company Internal Function- Leveraging No process Information
B1 specific the knowl- identified dissem-
appli- edge of ination/
cations people acquisition
integrated
Company Internal ERP inte- N/A Information- Information
B2 grated led manu- dissem-
with func- facturing ination/
tion-spe- processes acquisition
cific
applica-
tions
Company Internal Function- Alignment N/A N/A
B3 specific with busi-
applica- ness, cost
tions concerns,
knowledge
resources to implement data and execute all applications (Kotzab et al.

2003). However, the cases show that many firms still view the invest-
ment of IS integration as an expense rather than a benefit, which slows
down the integrating process.
The findings also show that other factors need to be considered.
The Company B3 case explains the importance of matching IS with
the work context (Cooper and Zmud 1990). Due to the misalignment
between business processes and IS system, the plant could not apply the
system appropriately. Thus the plant needs to adequately account for
the ‘fit’ between the system being implemented and the work context
within which the technology is being introduced (Cooper and Zmud
1990).
Fisher (1997) categorises supply chains into efficient supply chains
and responsive supply chains. In efficient supply chains, products
are standardised and firms tend to deploy more practices to stand-
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Y. Wu
ardise processes. In responsive supply chains, firms tend to emphasise

customer interaction and personalisation rather than standardisation.
The automotive firms from the cases are likely to have efficient agile
supply chains, although many firms claim having customer-focused and
responsive business.
The results suggest that although IS integration improves overall
operation performance, there is a need for greater information visibil-
ity, in particular, end-users information. However, such information
is regarded as confidential and is rarely shared with partners (Kotzab
et al. 2003). According to Fawcett et al. (2007), IT investment could
succeed if it is supported by willingness to share information. Thus
trust is necessary in order to share information with each other in
supply chain (Chong et al. 2009) and facilitate the integration of
business processes and boost the potential of achieving greater supply
chain agility. The automotive industry still has limited trust through-
out the supply chain (Childerhouse et al. 2003), which increases the
difficulty of sharing information. In the manufacturing environment,
achieving agility requires not only IS, but also other enablers, shown
in Fig. 5.7.
Non-IS enablers
Right internal IS design Culture
IS applications
Production
capacity Proper knowledge
balance
Face to face Second enabler
communication Investment
IS integration
Flexible structure
Supply chain agility
Fig. 5.7 The role of IS integration in achieving supply chain agility from supply
chain B
173
5.5 Conclusions
This chapter presents the analysis and discussions of the Supply chain B
case study. Managerial practices and quotations illustrating their percep-
tions and approaches undertaken are presented, as well as the compari-
son of two suppliers with different levels of IS applications.
Relationships in the participating companies tend to be based on cost
reduction. The case analysis confirms the IS integration factors identi-
fied in the literature. Considering the popularity of IT and the expenses
connected with integrating IS systems, cross-functional application
integration is Internet enabled, such as using a web portal or web EDI.
However the findings are not clear whether IS systems among partners
can be integrated in practice, or whether firms should continue apply-
ing Internet-based integration solutions. In addition, the results explore
other factors that are critical to integrating IS, including system relia-
bility and stability as a foundation to provide stable infrastructures for
communication.
In terms of customer sensitivity, IS integration has been extensively
applied in order to get real-time information and to improve working
efficiency and responsiveness. BTO and JIT are adopted by the first
tier suppliers to improve customer sensitivity, along with face-to-face
communication, phone calls, emails and fax to help to clarify customer
requirements and in-depth understanding. As for process integration,
the findings show the different results from companies which inte-
grate IS systems and those which do not. Information visibility can be
achieved when the firm implements ERP to address the need of enter-
prise-wide information. In relation to network integration, sub-assem-
bly outsourcing is a major approach taken by the participating firms to
collaborate with their suppliers. The role of IS integration is to auto-
mate tasks and to transfer real-time information. One interesting find-
ing from Company B3 is the influence of culture on how companies
collaborate. In the context of virtual integration, IS integration is one
enabler to leverage the impact of information to facilitate informa-
tion dissemination and acquisition. Other enablers are proper knowl-
edge, skills of employees, and business requirements which are the ‘fit’
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Y. Wu
between business and technology, to maximise information value and IS

benefits.
In the next chapter, the cross-case analysis will be presented to com-
pare the similarities and differences between supply chain A and supply
chain B. The analysis will be carried out based on the existing issues and
emerging subjects from interview analysis.
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6
Comparative Analysis of Cases
The purpose of this section is to discuss and compare the two cases of
Supply chain A and B. The chapter starts by considering the critical
factors of IS integration in Sect. 6.1, and the interview findings of the
role of IS integration in the context of supply chain agility in Sect. 6.2.
Section 6.3 presents the comparison of interview findings with the orig-
inal model, presented in Chapter 2. The chapter concludes with a sum-
mary of these findings in Sect. 6.3.
6.1 The Critical Factors of Implementing IS

Integration in the Context of Supply Chain
Agility
6.1.1 Data Consistency
Data consistency has been defined as a basic IS capability to transfer

and exchange data across departments and firms. According to Muller
and Seuring (2007) and Rai et al. (2006), it can be enabled by com-
mon data definitions and automated capture systems in supply chains.

https://doi.org/10.1007/978-3-319-98440-7_6
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Y. Wu
In the cases presented, all IS managers confirmed that data consistency

is a critical factor in integrating various applications of IS across supply
chains. The interview analysis provides further evidence for the impor-
tance of data consistency in IS integration. In particular, such data con-
sistency has been carried out by having common key data definitions
within and across firms to facilitate information flows. For example,
Company A1 shares its Vehicle ID with its suppliers and car dealers.
Company A2, a first tier supplier, has the same definition for auto-part
ID as its second tier suppliers.
6.1.2 Cross-Functional SCM Application Integration
Cross-functional SCM application integration enables firms to have

real-time communication between function-specific SCM applications
(Rai et al. 2006) so that the supply chain can integrate and optimise its
resources. Managers interviewed in the case studies recognised the ben-
efits of SCM application integration, but acknowledged the difficulties
of integrating different platforms due to cost and technical difficulties.
Their approach was to use IT, such as web portals, as a cost-effective
means of achieving such integration.
Internal IS integration was also recognised as important. ERP sys-
tems were implemented in Company A1, Company A2 and Company
B2, providing central databases to connect function-specific applica-
tions, while Company B1 used interfaces to link the SCM-related frag-
mented systems to deliver process automation and data transfer.
6.1.3 Other Insights from Case Studies
In addition to the factors identified from the literature, the case analysis
has identified additional factors that are important for IS integration.
• Data accuracy
Two companies, Company A1 and Company A2, believed that data

accuracy is important to their business by providing high-quality
data. The interviews with Company B1’s procurement manager,
6 Comparative Analysis of Cases
181
Company B2’s procurement manager, and Company B3’s logistics man-

ager also revealed the importance of having accurate and correct data in
their business. For example, Company B3 does not have internal inte-
gration, and the company, receiving orders through a web Portal, has to
re-key data manually into another system for orders and payments. One
small inaccurate piece of data might cause serious problems across the
whole supply chain.
• Information sharing
This issue was raised by the IS manager at Company A1. He stressed the
critical role of identifying which information should be shared with its
suppliers and car dealers, because different levels of information visibil-
ity could lead to various outcomes. For example, forecasts and manufac-
turing schedules are common forms of shared information. Follow-up
emails have been sent to the IS managers of other participating com-
panies. Case analysis shows that Company B1 has the same procedure
to identify the level of information sharing with its suppliers and car
dealers. Company A3 and Company B2 also recognised the necessity of
achieving a common understanding of the extent of information visibil-
ity with its customers. The results show that well-defined information
sharing among partners is required when firms communicate with each
other.
To sum up, the case analysis of both supply chain A and B confirms
the importance of data consistency and cross-functional SCM applica-
tion integration as defined in the conceptual model, and also identifies
additional factors, data accuracy and information sharing, which are
important for IS integration.
6.2 The Role of IS Integration in the Context

Four dimensions of supply chain agility are customer sensitivity, process
integration, network integration and virtual integration (van Hoek et al.
2001). The following analysis follows these four dimensions of supply
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Y. Wu
chain agility and discusses the role of IS integration in each context of

supply chain agility, starting with customer sensitivity.
6.2.1 Customer Sensitivity
This section summarises the practices that participating companies carried

out to achieve customer sensitivity and the role of IS integration in the
process. The agile supply chain should be market-sensitive, and should
be capable of reading and responding to real demands, rather than based
on past sales or forecasts. Thus, it is becoming increasingly important to
be able to integrate demands or customer-led information with logistics,
manufacturing, and planning knowledge (Goldman et al. 1995).
The case studies present strategies for achieving greater customer-ori-
ented supply chains. Overall, the OEMs intend to move to custom-
er-oriented processes from build to forecast. None of the firms apply
BTO manufacturing, taking into account building constraints, such
as production capacity, and machine status. They tend to adopt a cus-
tomer-focused approach by using DMS with car dealers and web EDI
and a web portal to their suppliers to control costs. IS integration helps
the companies to improve their forecasts and work efficiency. Company
A1 in particular demonstrates that the integration between DMS and
advanced internal IS systems in the marketing department provides
more benefits, compared with Company B1, which does not have an
ERP system as a backbone system. Instead, Company B1 links all the
systems across departments. The analysis provides evidence that IS inte-
gration improves operational performance, such as task automation and
data transfer, but the companies do not leverage the role of IS integra-
tion to a strategic position.
Some of the first tier suppliers adopt BTO manufacturing and JIT
delivery to the OEMs. They found more operational benefits than those
without BTO or JIT. This supports the conclusions of the existing liter-
ature on the impact of IS integration and BTO approach to achieve cus-
tomer sensitivity. PDM and configuration enables the customers to view
a catalogue of products that the enterprise manufactures, but it also
enables the fulfilment process to access the information to customise
183
products or services. For example, Company A2 and Company B2

adopt BTO manufacturing enabled via IS integration. Their responsive-
ness has been improved and the inventory level has been significantly
reduced. However, it is noted that BTO, adopted in the plants, is not
embraced at a strategic level as a significant goal, although IS integra-
tion improves the organisation’s ability to understand the end-market
and reduce response time. Hence, responsiveness is improved on short-
ening customer waiting time and working efficiency.
6.2.2 Other Insights from Customer Sensitivity
In addition to the factors identified from the literature, it is noted that

there are other factors identified in the process of achieving customer
sensitivity.
• Face-to-face communication
All the firms have face-to-face communication with their customers

in addition to their digitally enabled connections. The cases presented
suggest that it is necessary to ensure mutual understanding for people
across different functional units. For instance, most first tier suppli-
ers provide customer service co-ordinators on the OEMs’ shop floors.
If any problem occurs, the co-ordinator is able to inform their com-
pany immediately to seek solutions. Company A2 has weekly meetings
with all managers present to discuss existing and potential problems.
Company A1 has also investigated weekly meetings to ensure the mar-
keting and production departments meet regularly to exchange con-
cerns—something they would not have done regularly otherwise. Lack
of communication can be a serious inhibitor to understanding custom-
ers (Pagell 2004). The higher the level of communication, the greater
the capability to achieve integration (Zhao et al. 2011). Company B2
PC&L manager explained that face-to-face communication helps to
get more information about their customer’s views and the perceptions.
IS integration is critical when it comes to information sharing and
exchange, but itself is not sufficient to improve customer satisfaction.
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Y. Wu
6.2.3 Process Integration
This section discusses the practices that the company takes to achieve
process integration and the role of IS integration in the practices.
According to the literature, an agile supply chain is capable of thriv-
ing on changes and uncertainties. It should have a flexible structure to
allow rapid re-configuration of human and physical resources (Goldman
et al. 1995) across the supply chain. Hence, as Christopher (2005) dis-
cusses, supply chain partners can make a full use of shared information
through integrated IS to achieve collaborative working and re-allocate
resources rapidly when any change occurs.
The cases provide detailed approaches to process integration. In gen-
eral, the firms, including OEMs and first tier suppliers, require careful
preparation and planning for any major changes in processes. Business
process re-design has been widely discussed by the interviewees as an
approach to accommodating changes. Although Auramo et al. (2005)
argue that the use of IS is closely related to process change, the case
analysis indicates that other factors need to be considered in process
integration.
When it comes to the role of IS integration, the findings show that
ERP systems with function-specific applications facilitate the progress
of optimisation of business processes. Company A1 and Company A2
are excellent examples. In these two companies, ERP with function-spe-
cific applications assists business analysis and workflow design to
achieve optimised business processes and to control waste in the manu-
facturing procedure. On the other hand, the results from Company A3
and Company B3 which have less advanced IS applications and inte-
gration, show a lack of capability for re-designing business processes,
and thus provide further evidence of the importance of IS integration in
business process re-design. Furthermore, it is noted that Company B2,
the only company among others which applies ERP with function-spe-
cific applications, does not use IS systems to optimise the business pro-
cesses. The PC&L manager of Company B2 claimed that IS systems
were not flexible enough to cope with changes, although IS should be
able to change dynamically in line with changing customer needs in
terms of product variety and volume.
185
One possible explanation for this is lack of management commit-

ment and support in the implementation of IS (Denolf et al. 2015).
After significant investment in time, effort and finance to implement
ERP-enabled processes, the management is reluctant to change and
re-design the business process to meet the new needs. Sometimes, by
locking in the business process enabled by IS, the management compro-
mises the potential improvement in businesses by re-designing some of
the business processes. Follow-up emails from Company A2 confirmed
that business optimisation through ERP system requires a level of effort
and support, but the outcomes were positive in improving the efficien-
cies and waste control.
The case analysis shows that IS integration improves information vis-
ibility and real time information transfer in process integration, such as
in the case of Company B2. Sharing the status of resource availability
and updates facilitates resource optimisation in the supply chain. The
shared information could be operational data such as product orders,
delivery status or strategic supply chain information for supply chain
partners making strategic decisions in the operations (Prajogo and
Olhager 2012).
When it comes to the operational impacts of IS integration in pro-
cess integration, the literature shows product and volume flexibility
can be improved. However, the case studies indicate that IS integra-
tion does not always have a positive impact on flexibility. Five out of
six participating companies thought IS integration prevented the com-
panies from achieving product and volume flexibility, because IS com-
puterised business processes. This contradicts the conclusions of Barratt
and Oke (2007), who argue that IS integration, in particular collabora-
tive planning systems and EDI, should increase product flexibility and
availability.
6.2.4 Other Insights from Process Integration

there are other factors identified in achieving process integration.
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Y. Wu
• Preparation and coordination
IS integration is a technology-based enabler for achieving process inte-

gration. It is noted that there is significant preparation and planning
in responding to any major change. All the participating firms claimed
that changes require detailed plans and full preparation, including tak-
ing account of machine status, man-power, and space in the manufac-
turing companies. For example, it took years for Company B1 to plan
its second and third shop floors and prove the feasibility of having new
shop floors. The manufacturing manager at Company A1 stated that
the departments spent years designing and developing a new vehicle
model before it could be produced.
6.2.5 Network Integration
This section discusses the practices that the company employs to achieve
network integration and the role of IS integration in these practices.
According to Christopher (2005), the third ingredient to agility is that
the supply chain should be a confederation of partners linked together
as a network. Co-operation becomes paramount as companies focus
on managing their own core competencies and outsource all non-val-
ue-adding activities. Hence, a great reliance on suppliers becomes inevi-
table. There can be no boundaries among partners.
All the participating firms recognised the importance of their suppli-
ers as part of their businesses. In working with their suppliers, sub-as-
sembly outsourcing seems to be a common form of collaboration to
make use of partners’ strengths. Discussion and clarification are nor-
mally carried out through emails, meetings or phone calls. Functional
units should be connected and coordinated to achieve effective and effi-
cient resources, such as the flow of products, information, and services
(Christopher 2005; Naylor et al. 1999; Yu et al. 2013; Zhao et al. 2008).
Case studies suggest that the higher the level of integration with
suppliers, the greater the potential benefits. Yu et al. (2013) suggest
that supplier integration is significantly correlated with financial per-
formance on sales, market share, return on investment and profits.
Frohlich and Westbrook (2001) also propose that greater integration
187
with suppliers is strongly associated with performance improvement.

The cases specify that when the company is integrated with its suppli-
ers by IS, IS integration enables an IS-based platform to synchronise
information instantly, facilitating information visibility, and the opera-
tional impacts identified from the cases are improved working efficiency,
increased information transparency, and reduced inventory level. More
specifically, the cases show that IS integration in network integration
is widely applied in transferring information about orders to suppliers
and delivery from their suppliers. For example, a web portal has been
adopted between the OEMs and the first tier suppliers, transferring
information related to forecasts, orders, and plans. Web EDI has been
extensively applied between the OEMs and the first tier suppliers with
JIT delivery to synchronise daily manufacturing data from the OEM to
first tier suppliers. OEMs find operational impacts of improved work
efficiency and reduced inventory level.
It is interesting to observe that in network integration, IS integration
plays an important role in task automation, but alone it is not sufficient
to enable network integration. Instead, it is used for the purpose of
replacing manual, paper-based systems with electronic systems in order
to improve the efficiency. For example, Company A1 implemented web
EDI with Company A2 to increase the efficiency of sequenced in-line
supply operations.
6.2.6 Other Insights from Network Integration
It is noted that there are other factors identified in network integration.

• Face-to-face communication
The cases suggest that mechanisms for actual face-to-face communica-

tions are important in collaboration processes, and are believed to be
the best way of fulfilling their customers’ needs. All the participating
firms had formal or informal meetings or conversations with their sup-
pliers. For example, Company A2 sends out its professionals to their
suppliers’ site to discuss and solve problems. Phone calls are also fre-
quently used in the product development process. It provides further
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Y. Wu
evidence that IS integration by itself is not sufficient for communication

between partners.
• Imbalanced power
Powerful partners in the supply chain appear to play a significant role

in determining supply chain integration. The OEMs’ decisions with
regard to the extent and nature of information exchange and inte-
gration are a powerful factor influencing SMEs, especially local sup-
pliers. The study also supports the conclusions of Ngai et al. (2011)
that large organisations tend to pay more attention to supply chain
integration. All the first tier suppliers regard the OEMs as the leading
firms in network integration. Company A3 offers a good illustration
of the strong position of the OEM in network integration. The com-
pany was forced to implement IS systems to establish electronic com-
munication with the OEM Company A1. However, the other three
suppliers are international companies and all internal and external sys-
tems have been developed by their head offices. The managers from
Company B2 indicated that although Company B1 did not push on
IS adoption, the OEM was in a stronger position than its suppliers
to discuss the degree of information sharing. Therefore, imbalanced
power to force IS use seems to be happening with local small suppli-
ers. But in network integration, the OEMs take the initiative on the
degree of information sharing.
• More advanced IS integration required between first and second tier
suppliers
Evidence suggests that information exchange is important in network

integration. The procurement manager at Company B2, for instance,
complained that there was a lack of information from suppliers, on their
manufacturing status, order confirmation, and product delivery status.
A low level of IS integration slows down the process of achieving greater
supply chain agility. In the current auto-industry, information sharing
and exchange is more like a one-way information transfer from custom-
ers to suppliers. The supply chain process cannot be smooth without
189
mutual information exchange. Managers from Company B1 and

Company A2 explained that they would be more pro-active and would
have a better collaborative plan if they had more information from their
suppliers.
6.2.7 Virtual Integration
This section discusses the practices that the company takes to achieve
virtual integration and the role of IS integration in the practices. The
use of integrated IS to share and exchange data between supply chain
partners can create an information-based rather than an inventory-based
supply chain. Because once information visibility of demand can be
shared, supply chain partners can act upon the same data rather than
distorted data that are transferred to upstream suppliers.
Interviewees were aware of the importance of leveraging the impact
of information on their business and showed their intention of moving
to information-based rather than inventory-based business processes.
The cases illustrate the important role of information in achieving
greater agility. For example, Company A1 tries to use IS systems to
support its decision-making processes in the marketing department.
Company A2 is developing its IS systems to help the plant to identify
the value adding activities in business processes in order to minimise the
non-value-adding activities.
Operational outcomes from internal IS integration are information
acquisition and dissemination, identified in all companies apart from
Company B3. The reason for this is that Company B3 has fragmented
systems across the plant and data is exchanged through hard-copy.
Company B3’s case provides further support for the necessity of apply-
ing IS integration within the firms to improve operational performance.
Two types of IS are applied in the cases. ERP that is integrated with
function-specific applications can help firms to achieve more opera-
tional benefits than MRP. An ERP system facilitates centralising infor-
mation and increases information visibility and accessibility to improve
operational decision-making.
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Y. Wu
6.2.8 Other Insights from Virtual Integration

other additional factors are important to achieving virtual integration.
• Leveraging the knowledge of people
Employees’ knowledge is one factor highlighted from case studies.

Company A3 illustrates that without knowledge, IS systems cannot
be properly applied. Company A1 and Company A2 provide training
courses for all employees to improve their knowledge and skills in the
use of IS systems. Company B2 offers training courses to all employees,
providing further evidence on the importance of knowledge in achiev-
ing greater virtual integration.
• Business alignment
Case studies show that the alignment between the needs of the busi-
ness and what IS systems can offer is another factor that determines the
impact of information. The Company B3 case shows the importance
of such alignment. The material management department of Company
B3 had a new IS system which could not deliver what the business
required, leading to a wasted investment. Company A1 reveals that the
difficulty in realising value from IS applications is due to the mis-align-
ment between the businesses and IS strategy.
• High cost
Interviewees from Company B3 mentioned the investment in integrat-

ing the distributed systems and viewed the expense as a main obstacle
to improving the accessibility of information. There is a lack of aware-
ness of the benefits of integrated IS. IS integration is viewed more as a
cost and a threat than a business-enhancing provider of benefits in the
company. In contrast, the investment on IS development and integra-
tion has been carefully evaluated in Company A1 and Company A2 to
ensure a return on investment.
To sum up, the studies acknowledge the four dimensions of sup-
ply chain agility as defined in existing scholarship. The cases show the
191
importance of IS integration to supply chain agility. Furthermore, by

identifying additional factors, such as face-to-face communication,
building constraints, proper knowledge and skills, the cases show that IS
integration itself is not sufficient to realise greater agility. As for the role
of IS integration in the context of supply chain agility, an integrated
IS-enabled supply chain agility improves forecast accuracy, information
acquisition and dissemination and increases dependability. More impor-
tantly, IS integration in the context of supply chain agility facilitates
responsiveness by improving work efficiency and shortening response
time.
6.3 Comparison with the Framework

To sum up, the cases identify:
1. Data consistency and cross-functional SCM application integration

as important factors to IS integration;
2. IS integration as a significant enabler to achieve greater supply chain
agility from the four dimensions of supply chain agility, but IS inte-
gration itself not sufficient to achieve agility;
3. Customer sensitivity, process integration, network integration and
virtual integration as important dimensions of supply chain agility;
4. Substantial operational benefits from IS-enabled supply chain agility,
such as improved working efficiency, information visibility, reduced
inventory level, reduced responding time, and accurate forecasts.
However, the impact of IS integration on flexibility is not clear, sug-
gesting that IS-enabled supply chain agility may not be capable of
providing interactive real customised services.
The literature suggests that supply chain agility is primarily about cus-
tomer responsiveness, but the cases indicate a different form of supply
chain agility that focuses on efficiency, suggesting that IS-enabled effi-
cient supply chain agility is more relevant than the customer-responsive
supply chain in the automotive industry. Figure 6.1 presents an updated
model.
192
Y. Wu
Data Customer Network Reponsivenss

Consistency sensitivity integration Reduced inventory
level
Work efficiency
Cross-functional
application system
integration
Supply chain Dependability
IS Operational Accurate forecast
agility performance
integration
Data accuracy
Information
Process Virtual acquisition/disseminati
Information integration integraiton on (organisational
sharing learning)
Information visibility
Value-adding activities
Business process
optimisation
Fig. 6.1 A revised conceptual model
First tier enabler Second tier enabler

Preparation and
cooperation IS design
Building Proper
constraints knowledge
and skills
Face to face Right
communication attitude to
changes
IS integration
Proper investment Appropriate
internal IS
integration
Supply chain agility Timeline
The cases also position IS integration within the context of supply

chain agility by suggesting that IS itself is not sufficient to achieve
agility. Additional factors are identified that contribute to achiev-

ing four dimensions of supply chain agility, such as data accuracy, the
degree of information sharing, face-to-face communication, prepara-
tion and coordination among functional units, employees’ knowledge
and skills, alignment between IS and business, and proper investment.
In the manufacturing environment, previous research (Mondragon et al.
2004) concludes that agility is not a state that can be associated directly
with IS integration. Instead, achieving agility may require two stages.
193
Figure 6.2 presents the implementation process of IS integration and

the factors identified from the cases. IS integration should be better to
be applied after those factors are taken place.
6.4 Conclusions
There are many similarities across these two supply chains. Data con-
sistency and cross-functional application integration are recognised
as important factors to IS integration, confirming the literature.
Additionally, the cases of supply chain A and B indicate the importance
of data accuracy and information sharing in achieving IS integration.
The cases confirm the four dimensions of supply chain agility as defined
in the theory. However, instead of achieving customer responsive agil-
ity, the findings indicate that supply chain agility through IS integration
is better suited to efficient agility rather than customer-focused agil-
ity. That is, companies apply IS to shorten customer waiting time and
automate tasks to improve the work efficiency, rather than achieving
substantial customer-interactive businesses. The results provide further
evidence to show the inability of IS integration to improve product and
volume flexibility in achieving greater supply chain agility. To further
illustrate this point, the survey of assistant managers and team leaders
from the supply chain will be discussed.
References
82–100.
Management, 25, 1217–1233.
194
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16–26.
185–200.
24, 1219–1246.
Muller, M., & Seuring, S. (2007). Reducing information technology-based
transaction costs in supply chains. Industrial Management & Data Systems,
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232–249.
514–522.
225–246.
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Yu, W., Jacobs, M. A., Salisbury, W. D., & Enns, H. (2013). The effects of
supply chain integration on customer satisfaction and financial perfor-
mance: An organisational learning perspective. International Journal of
Zhao, X., Huo, B., Flynn, B. B., & Yeung, J. (2008). The impact of power
and relationship commitment on the integration between manufacturer
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Zhao, X., Huo, B., Selen, W., & Yeung, J. H. Y. (2011). The impact of inter-
nal integration and relationship commitment on external integration.
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7
Survey Study
Two sets of surveys were sent out to IS departments and SCM-related

departments respectively to ensure that the appropriate person provided
information (Hufnagel and Conca 1994). The first instrument was cre-
ated to measure implementation factors for IS integration, and the sec-
ond to measure the impacts of IS in achieving supply chain agility. The
respondents were assistant managers or team leaders in the interviewed
companies, different from interviewees who were the senior managers
of the departments. 102 surveys were collected. Of the respondents,
29.3% were from logistics/distribution function. 25.6% were from
procurement function. 31.7% belonged to manufacturing function.
12.2% had responsibility for IS integration to the supply chain. 1.2%
were from the supply chain function. The analysis and measurement
processes were developed based on the procedures outlined by Rai et al.
(2006) and Wixon and Waston (2001), which are related to IS study by
using a PLS Graph.
The level of IS integration, internal to departments and external to
suppliers and customers is examined in both surveys in order to link the
two survey sets. A one way ANOVA was applied to test whether these
two sets of data have very different means. The level of IS integration

https://doi.org/10.1007/978-3-319-98440-7_7
198
Y. Wu
is regarded as the dependent variable, and group variance as the inde-

pendent variables (Brace et al. 2006). The result (F = 0.191; p = 0.663)
indicates that there is no significant difference between these two sets
of surveys, suggesting that the data for each organisation could be
combined.
The chapter starts with the two sets of survey analysis to explore the
critical factors of IS integration and the role of IS integration in the
context of supply chain agility (Sects. 7.1 and 7.2). Section 7.3 collates
the findings from the two sets of surveys.
7.1 Critical Factors of IS Integration

that Influence Supply Chain Agility
This section presents the survey study on the critical factors of IS inte-
gration from the perspective of IS departments. It starts with measure-
ment scale analysis and constructs validity and reliability testing. It then
moves to results analysis.
7.1.1 Measurement Scale
A summary of the survey questions is shown with the summary sta-

tistics in Table 7.1. The standardised coefficient (beta coefficient) is a
standardised regression coefficient. SE stands for standard error, explain-
ing the expected distribution of an estimated regression coefficient
(Hair et al. 2005). SD stands for standard deviation, indicating the
average or standard deviation of scores away from the mean (Brace et al.
2006). Descriptive statistics for each survey statement are presented
in Table 7.2 in which the columns Mean and SD show average scores
and measures of dispersion. Descriptive statistics are ‘procedures used
to summarise large volumes of data… Common descriptive includes
measures of central tendency (e.g. mean, median and mode), confidence
intervals and measures of dispersion (e.g. minimum and maximum,
standard deviation and variance)’ (Brace 2006).
7 Survey Study
199
Table 7.1 IS survey questions and descriptive statistics

Factors and scale items Standardised SE Mean SD
coefficient
Data consistency (DC)
DC1: automatic data capture sys- 0.8 0.113 4.14 0.648
tems are used across the supply
chain
DC2: same data stored in different 0.751 0.141 3.86 0.81
databases across the supply chain
is consistent
DC3: definitions of key data 0.634 0.128 4.54 0.741
elements are common across the
supply chain
Cross-functional SCM application
integration (CFA)
CA1: supply chain planning 0.635 0.116 4.31 0.796
applications
CA2: supply chain transaction 0.652 0.101 4.23 0.731
applications
CA3: supply chain applications 0.739 0.125 4.14 0.879
with internal applications of the
organisation, such as ERP
IS integration
IS1: internal integration 0.414 0.153 3.86 0.81
IS2: external integration 0.936 0.213 3.4 0.83
Table 7.2 Results of measurement validation of IS integration

Construct Variables Corrected item- Factor loading Statistics
total correlation
DC DC1 0.647 0.855 Cronbach’s
DC2 0.615 0.84 alpha: 0.764
DC3 0.547 0.788
CA CA1 0.753 0.889 Cronbach’s
CA2 0.819 0.923 alpha: 0.887
CA3 0.783 0.906
IS IS1 0.388 0.833 Cronbach’s
IS2 0.388 0.833 alpha: 0.601
Each statement requires responses based on a five-point Likert scale.

IS integration measures the critical factors of integrating IS systems
within and among organisations from the aspect of IS departments.
The definition of IS integration is aligned with the definition used in
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Y. Wu
interviews. Internal integration and external integration are used to

evaluate the degree of IS integration.
Data consistency measures the status of common data definitions
and consistency in stored data across the supply chain. Three scale items
measure this factor:
1. the usage of automatic application systems;

2. the consistency of the same stored data; and
3. key data definitions across the supply chains.
The first variable, the usage of automatic applications, focuses on cap-

turing real-time data transfer, utilising an integrated database to realise
information visibility across departments. Data consistency in supply
chains is also enabled by the common data definitions, suggested by
Huber (1990).
Cross-functional SCM application integration is defined as the
degree of real-time communication of firm’s function-specific SCM
applications with each other (Rai et al. 2006). IS applications that
are related to the supply chain can be divided into planning applica-
tion integration, execution application integration and the integration
with ERP (Rai et al. 2006). Together they characterise the applications
for end-to-end management of supply chains (Kalakota and Robinson
1999).
7.1.2 Validity and Reliability of Measurement Scales
In order to perform meaningful analysis of the causal model, measures

need to display certain empirical properties (Sanders 2007). The vali-
dation process for survey instruments has three steps: content validity;
construct validity and reliability. The literature review and interviews
established the basis of content validity for the survey instrument
(examples such as Hair et al. 2005, Prajogo and Olhager 2012; Swafford
et al. 2008; Zhou and Benton 2007). The construct validity is to show
that the items measure what they purport to measure.
7 Survey Study
201
Convergent validity is the extent to which varying approaches to

construct measurement yield the same results (Hair et al. 2005), and
discriminant validity is the extent to which individual items intend to
measure one latent construct do not at the same time measure a differ-
ent latent construct (DeVellis 1991). One way to test convergent valid-
ity is to evaluate whether the individual item’s standardised coefficient
from the measurement model is greater than twice its standard error
(Anderson and Gerbing 1988). The statistics in Table 7.1 reveals that
coefficients exceed twice their standard error.
Discriminant validity is assessed by factor analysing items grouped
under data consistency, cross-functional SCM application integration
and IS integration. The expected factor structure was illustrated in
Table 7.2, along with the item-total correlations for these factors. Uni-
dimensionality is established with exploratory factor analysis where 0.30
is generally considered to be the lowest significant factor loading to
define the construct (Hair et al. 2005). Table 7.2 shows that all factor
loadings are greater than 0.30.
To further investigate discriminant validity, another suggested cri-
terion is adopted. A construct is considered to be distinct from other
constructs if the square root of the average variance extracted for it
is greater than its correlations with other latent constructs (Barclay
et al. 1995; Fornell and Larcker 1981) as shown in Table 7.3 which is
observed to be the case.
As for the reliability measurement, the internal consistency is
measured by Cronbach’s alpha. Cronbach’s alpha is commonly used
to establish internal consistency construct validity, with 0.60 con-
sidered acceptable for exploratory purposes, 0.70 considered ade-
quate for confirmatory purposes, and 0.80 considered good for
Table 7.3 Factor correlation of IS integration part

DC CFA IS
DC 0.833
CFA 0.541 0.798
IS 0.244 0.47 0.833
The bold diagonal values are the square root of the average variance extracted
for each construct
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Y. Wu
confirmatory purposes (Nunnally 1978; Hair et al. 2005). Table 7.2

shows Cronbach’s alpha values for each factor and the values are in the
acceptable range, above 0.60. Second, the corrected item-total correla-
tion reliability is used (Kerlinger 1986). In this test, all the items had
a corrected item-total correlation greater than 0.3 for the same con-
struct, so should be closely related to the underlying latent variable
(Buckingham and Saunders 2004).
7.1.3 Results and Analysis
The test of the structural model includes estimating the path coefficients
and R2 which represents the amount of variance explained by the inde-
pendent variables. Together the R2 and the path coefficients can indi-
cate how well the model fits. The PLS method usually does not directly
provide significant tests and confidence interval estimates of path coef-
ficients in the research model (Gefen et al. 2000; Rai et al. 2006). In
order to estimate the significance of path coefficients, bootstrapping
analysis was adopted with 100 sub-samples and all path coefficients
were estimated using this technique. This approach is used to determine
the significance (Efron and Tibshirani 1993; Urbach and Ahlemann
2010), and has been adopted in prior research (Howell and Higgins
1990; Rai et al. 2006; Wixon and Waston 2001). The result of the anal-
ysis for the structural model is presented in Fig. 7.1.
DC1
.508
.035 Data
DC2
consistency Internal
integration
.000 R² = 30.6%
.617 .977
DC3
IS integration
.285
CFA1
.977 .553
External
integration
.285 Cross-functional
CFA2
application integration
.298
CFA3
Fig. 7.1 Critical factors of IS integration

7 Survey Study
203
There are three variables of data consistency—automatic data capture

systems utilisation, the consistency of the same data stored in different
databases and common definitions of key data elements. The follow-
ing numbers in brackets are t-values, indicating whether the indicators
are significantly correlated to the sub-latent construct. These indicators
are significantly associated with data consistency with the weight 0.508
(t = 3.0367), 0.035 (t = 1.6527), and 0.617 (t = 2.1200) respectively.
The indicators of cross-functional SCM application integration also
have significant weight, which are 0.977 (t = 3.0850) for planning sys-
tem integration, 0.285 (t = 2.4256) for transaction applications integra-
tion and 0.298 (t = 1.8225) for the connectivity with internal systems
such as ERP. Furthermore, the results indicate that data consistency
does not have a direct influence on IS integration. Instead, cross-func-
tional SCM application integration has a significant weight on IS inte-
gration with a result of 0.553 (1.6891). Overall, the results show the
predictive power of path model, indicating that the model explains
30.6% of the variance in operational performance. The model provides
more perceptions on critical factors of IS integration.
• Cross-functional SCM application integration is significantly corre-

lated to the degree of IS integration. It has been also identified in the
case studies, although firms keep cost-effective forms of digitally-ena-
bled communication to automate tasks, such as a web portal, web EDI,
and emails. In particular, such digital connectivity can realise informa-
tion exchanges and sharing, such as forecasts, production plans and
manufacturing schedules. Hence, both interviews and surveys show the
significance of the connection via IS, enabling the transformation of
fragmented business processes into an integrated, cross-functional busi-
ness process. Furthermore, since the cross-functional application inte-
gration is significantly correlated with its indicators, it is beneficial to
consider the indicators when firms plan to integrate SCM applications.
• 30.6% of the variance in IS integration is explained by data consist-
ency and cross-function SCM application integration. It suggests that
besides these two constructs, other critical factors are required to be
identified, which is illustrated in the case studies such as data accu-
racy, information sharing.
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Y. Wu
• Data consistency does not have a strong correlation with IS integra-

tion, indicating that stronger data consistency may not lead to higher
IS integration. However, the case studies identify data consistency
as one critical factor for IS integration. One explanation is that in
enterprise IS systems, data integrity, consistency, process capabil-
ity of information and standardised business processes are expected
to create an excellent backdrop for embarking on integration within
organisations and with external partners in the supply chain, as pro-
posed by Seethamraju (2006) and Tarn et al. (2002). This statement
provides the rationale for data consistency in IS integration processes,
indicating the possibility of an indirect relationship between data
consistency and IS integration, rather than the direct relationship
shown in the conceptual framework. Put in other words, organisa-
tions are ready to integrate cross-functional SCM applications after
they share industry standards and have common data definitions.
Considering the rationale for direct or indirect relationships among

these constructs, the results suggest a search for an alternative model
to explain the phenomenon. When case studies were analysed again,
the study found that data consistency is important to IS applications
integration.
The logistic manager of Company B2 and the procurement manager
of Company A1 emphasised that data consistency is critical in facilitat-
ing information flows and common understandings of the same data
among IS applications. This statement proposes a different causal rela-
tionship among these three constructs and shows one possible indica-
tion of the indirect causality of data consistency and IS integration.
Thus PLS is used for Fig. 7.2. Numbers in the brackets are t-values.
Automatic data capture system applications, the consistency of the same
data in different databases and common data definitions have a strong
weight on data consistency, with 0.331 (t = 3.0127), 0.364 (t = 2.0289)
and 0.513 (t = 2.5194) respectively. Furthermore, planning applications
integration has strongest weight with values of 0.790 (t = 3.9589) on
cross-functional SCM application integration, followed by transac-
tion applications integration 0.414 (t = 3.1301) and connection with
7 Survey Study
205
DC1
Data
DC2
integration
DC3
IS integration
CFA1
External
integration
Cross-functional
CFA2
CFA3
Fig. 7.2 Revised framework on IS integration
DC1
.331
.364 Data
DC2
integration
.513 R² = 29.9%
.585
DC3
.549 IS integration
.615
CFA1
.790 External
.546
integration
.414 Cross-functional
CFA2
.176
CFA3 R² = 30.1%
Fig. 7.3 Results of an alternative model
internal systems 0.176 (t = 2.1561). However, the results indicate a sig-

nificant correlation between data consistency and cross-functional appli-
cation integration, with the weight 0.549 (t = 5.7483). 30.1% of the
variance in cross-functional SCM application integration was explained
by data consistency. Overall, considering these two factors together,
the model explains 29.9% of IS integration, similar results to Fig. 7.1.
Synchronising the results from the surveys and the interviews, data con-
sistency is of importance to IS, especially when SCM—related applica-
tion integration is conducted (Fig. 7.3).
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Y. Wu
7.2 The Role of IS Integration in the Context

7.2.1 Measurement Scale
The measurement is conducted based on the three main constructs: sup-

ply chain agility, operational performance and IS integration.
• Supply chain agility
The definition of supply chain agility was given in the survey so that
the common understanding could be achieved, which is ‘using market
knowledge and a virtual corporation to exploit profitable opportuni-
ties in a volatile marketplace’ (Naylor et al. 1999), including Customer
Sensitivity (CS), Process Integration (PI), Network Integration (NI)
and Virtual Integration (VI) (van Hoek et al. 2001). The definitions of
the four dimensions of supply chain agility in the survey aligned with
the definitions in the interviews. All indicators for each dimension
employed are extracted from literature, and all the scale indicators used
are based on a five-point Likert type scale.
Factor analysis was applied to identify which items (indicators) are
for which factor (sub-latent constructs). Principle component fac-
tor analysis was adopted. The factor loadings used Varimax rotation to
identify factors. The purpose of rotation is not to change the number
of components extracted, but to arrive at a new position for the com-
ponents that is easier to interpret than the un-rotated one (Kinnear and
Gray 2006). All the items relating to the four dimensions of supply
chain agility separate out into the four factors based on factor loadings
(bold in Table 7.4). After that, which factor is which sub-latent con-
struct can be identified based on the characteristics of grouped items.
Table 7.4 shows that Items 1, 3, 4, 6, 9, 10 load most strongly onto
Factor 1, and based on the characteristics of these six items, Factor 1
can be network integration. Items 12, 13, 14 load most strongly onto
Factor 2 and based on the description of these three items, Factor 2 can
be virtual integration. Items 7, 8, 11 load most strongly on Factor 3 and
Factor 3 can be process integration. Items 2 and 5 load most strongly
7 Survey Study
207
Table 7.4 Four dimensions of supply chain agility factor loadings

Item Factor
1 2 3 4
1 Taking advantage of markets 0.784 0.126 −0.032 0.311
changes as opportunities
2 Pro-actively seeking new emerg- 0.295 0.074 0.184 0.76
ing markets
3 Having adaptive capabilities to 0.858 −0.008 0.218 0.167
be able to respond to future
changes
4 The ability to meet customer 0.673 −0.12 0.36 0.434
changes as a source of compet-
itive advantages
5 Customer treated individually 0.148 0.152 0.138 0.826
6 Suppliers’ involvement in the 0.673 0.482 0.093 −0.124
business
7 Mobility of resources to meet 0.316 0.11 0.769 0.204
different requirements
8 Being nimble in its processes to 0.068 0.111 0.884 0.011
achieve different objectives
within the same facilities
9 Fast response to variations in 0.574 −0.026 0.415 0.149
demand
10 Being cost-effective re-configure 0.797 −0.002 0.315 0.139
to respond to new production
models
11 Leveraging information to 0.389 −0.034 0.701 0.35
understand market and cus-
tomer requirements
12 Leveraging the impact of infor- −0.063 0.872 0.051 0.116
mation in everyday business
13 Leveraging information to adapt 0.103 0.888 0.02 −0.109
to organisational changes
14 Leveraging information to facili- 0.061 0.78 0.089 0.335
tate collations with partners
Extraction method Principal component analysis
Rotation method Varimax with Kaiser normalization
on Factor 4 and Factor 4 can be customer sensitivity. Furthermore, the

factor analysis of the sub-constructs indicates that all items load onto
a single factor with all factor loadings greater than 0.67, which are
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Y. Wu
substantially above the minimum requirements of 0.40 (Gefen et al.

2000; Nunnally and Bernstein 1994).
• Operational performance
Operational performance has been measured in numerous ways, and

the measurement usually includes quality, dependability, speed, cost and
flexibility (Ferdows and de Meyer 1990; Slack et al. 2007). In addition,
innovation and organisational learning have been added to the perfor-
mance dimensions (Fitzgerald et al. 1991; Neely et al. 1995). Some
researchers have suggested that manufacturers tend to simultaneously
pursue multiple performance objectives rather than purely focusing on
one measurement (Roth and Miller 1990; Sanders 2007). Following
the approach of multiple performance objectives, and the discussion
of the relationship between IS integration and the four dimensions of
supply chain agility, the operational performance in this study focuses
on responsiveness, flexibility, dependability and organisational learning
(information dissemination and acquisition).
Responsiveness is defined as the response to demands to change offer-
ings in production and service (van Hoek et al. 2001). It is critical for
supply chain effectiveness (Holweg 2005; Reichhart and Holweg 2007).
Flexibility is another important operational characteristic and it has
been widely discussed in prior research. Product and volume flexibil-
ity are the focus of this study. Product flexibility is the ability to han-
dle difficult, non-standard orders to meet special customer requirements
(Vickery et al. 1997). Volume flexibility is the ability to be flexible in
adjusting the volume of products from peak demand and slack periods
(Sanders and Premus 2002). In addition to flexibility, dependability is
an important supply chain characteristic. It refers to the coordination
of a firm with its partners, using the partners’ strengths and focusing
on the firm’s core competencies (Christopher et al. 2004; Gunasekaran
et al. 2008; Ismail and Sharifi 2006). Finally, information acquisition is
the process whereby a company seeks usable information (Kohil et al.
1993), while information dissemination is the extent to which the
information obtained by the firm is shared with its functional units
(Neely et al. 1995).
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209
• IS integration
The definition of IS integration is the same as the first instrument (Sect.

7.1) and the interviews, in order to keep the consistency within this
book. IS integration is the degree to which firms have established IS sys-
tems for the consistent and high-velocity transfer of supply chain related
information within the supply chain. Table 7.5 shows the factors and
the indicators used to measure each sub-latent construct.
7.2.2 Validity and Reliability of Measurement Scales
A validity and reliability test, consisting of three steps–content validity,

construct validity and reliability was conducted. The validity and relia-
bility tests were carried out in the same process as Sect. 7.1.2.
The test of the measurement model includes the estimation of
internal consistency and convergent and discriminant validity of the
sub-constructs and constructs. Convergent validity was tested by eval-
uating whether the individual item’s standardised coefficient from the
measurement model is greater than twice its SE (Anderson and Gerbing
1988), which was revealed in Table 7.5.
In terms of discriminant validity, Table 7.6 provides the correla-
tion matrix, with correlation among constructs and the square root of
average variance extracted on the diagonal. Each construct is truly dis-
tinct from other constructs. Factor analysing all indicators are grouped
under second-order constructs to provide further evidence of discri-
minant validity—IS integration, supply chain agility and operational
performance.
Two approaches are used to measure reliability. First is the
internal consistency, evaluated from Cronbach’s alpha. Second, the
corrected item-total correlation reliability is used (Kerlinger 1986).
Table 7.7 shows that Cronbach’s alpha of all sub-latent constructs is
greater than 0.60, which is considered acceptable for exploratory pur-
poses (Nunnally 1978; Hair et al. 2005). The corrected item-total cor-
relations shown in Table 7.8 are all greater than 0.3, which is considered
as the lowest acceptable value.
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Y. Wu
Table 7.5 Survey questions and descriptive statistics of IS integration and supply

chain agility
coefficient
Customer sensitivity (CS)
CS1 Proactively seeking new 0.702 0.101 3.52 0.922
emerging markets
CS2 Customer treated 0.702 0.101 3.42 0.921
individually
Process integration (PI)
PI1 Mobility of resources 0.79 0.074 3.42 0.755
to meet different
requirements
PI2 Being nimble its pro- 0.655 0.098 3.64 0.939
cesses to achieve differ-
ent objectives within
the same facilities
PI3 Being cost-effective 0.882 0.08 3.37 0.845
re-configure to respond
to new production
model
Network integration (NI)
NI1 Taking advantages of 0.794 0.08 3.79 0.828
markets changes as
opportunities
NI2 Having adaptive capa- 0.865 0.083 3.42 0.921
bilities to be able to
respond future changes
NI3 The ability to meet 0.837 0.077 3.72 0.838
customer changes as a
source of competitive
advantages
NI4 Suppliers’ involvement in 0.558 0.105 3.52 1.02
the business
NI5 Fast response to changes 0.615 0.098 3.52 0.942
in supply
NI6 Response to variations in 0.787 0.075 3.61 0.913
demand quickly
Virtual integration (VI)
VI1 Leveraging informa- 0.86 0.071 4.09 0.746
tion to understand
market and customer
requirements
(continued)
7 Survey Study
211

coefficient
VI2 Leveraging information 0.793 0.082 4.02 0.813
to master organisa-
tional changes
VI3 Leveraging information 0.739 0.069 4.14 0.697
to facilitate collations
with partners
Responsiveness (RES)
R1 Response to changes in 0.711 0.079 3.96 0.79
product due to market
uncertainty
R2 Process of demands from 0.833 0.062 4.15 0.668
downstream
R3 Process of demands from 0.854 0.073 3.87 0.79
upstream
Dependability (DEP)
D1 Leverage partners’ 0.828 0.08 3.98 0.842
capability
D2 Focus on core 0.749 0.087 4.1 0.884
competence
D3 A single supplier for each 0.377 0.128 3.29 1.13
sourced product
D4 Supplier-collaborative 0.65 0.076 3.83 0.736
product design
Flexibility (FLEX)
F1 Ability to handle difficult 0.679 0.095 3.92 0.898
or non-standards orders
F2 Flexibility of increasing 0.74 0.092 3.91 0.873
or decreasing product
effectively
Organisational learning (OL)
OL1 Process of seeking useful 0.818 0.076 4.13 0.789
information
OL2 Extent to which infor- 0.809 0.081 4.14 0.839
mation shared across
functional units
IS integration (ISINT)
IS1 Internal integration 0.929 0.092 3.58 0.945
IS2 External integration 0.89 0.088 3.55 0.915
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Table 7.6 Assessment of discriminant validity

Constructs CS PI NI VI RES DEP FLEX OL ISINT
CS 0.869
PI 0.443 0.861
NI 0.496 0.574 0.792
VI 0.237 0.152 0.186 0.849
RES 0.346 0.287 0.198 0.562 0.872
DEP 0.368 0.17 0.223 0.502 0.645 0.872
FLEX 0.333 0.089 0.231 0.475 0.681 0.533 0.866
OL 0.227 0.2 0.288 0.557 0.426 0.665 0.684 0.912
ISINTE 0.368 0.357 0.388 0.494 0.524 0.417 0.248 0.475 0.869
The bold diagonal values are the square root of the average variance extracted for each construct
Table 7.7 Analysis of the measurement model
Measurement items Factor structure and loadings
Supply chain agility Customer sensitivity Process integra- Network Virtual
(CS) tion (PI) integration integration
(NI) (VI)
CS1 Pro-actively seeking new emerging 0.841
markets
CS2 Customer treated individually 0.795
PI1 Mobility of resources to meet differ- 0.752
ent requirements
PI2 Being nimble its processes to achieve 0.877
different objectives within the
same facilities
PI3 Being cost-effective re-configure to 0.715
respond to new production model
NI1 Taking advantages of markets 0.784
changes as opportunities
NI2 Having adaptive capabilities to be 0.858
able to respond future changes
NI3 The ability to meet customer 0.67
changes as a source of competitive
advantages
NI4 Suppliers’ involvement in the 0.672
business
NI5 Fast response to changes in supply 0.574
NI6 Fast response to variations in 0.798
demand
7 Survey Study
(continued)
213
Supply chain agility Customer sensitivity Process integra- Network Virtual
(CS) tion (PI) integration integration
214
(NI) (VI)
Y. Wu
VI1 Leveraging information to under- 0.881

stand market and customer
requirements
VI2 Facilitating the collaborative work 0.833
with partners e.g. suppliers
VI3 Leveraging information to master 0.854
organisational changes
VI4 Leveraging information to facilitate 0.774
collations with partners
Average variance extracted 0.756 0.742 0.628 0.72
Cronbach’s alpha 0.678 0.82 0.875/0.910 0.868/0/911

Operational performance Responsiveness Dependability Flexibility Organisational learning
RE1 Response to changes in product and 0.792
service due to market uncertainty
RE2 Process of demands from downstream 0.816
RE3 Process of demands from upstream 0.866
DE1 Leverage partners’ capability 0.764
DE2 Focus of core competence 0.764
DE3 A single supplier for each sourced 0.673
product
DE4 Supplier-collaborative product design 0.863
(continued)
Operational performance Responsiveness Dependability Flexibility Organisational learning
FL1 Ability to handle difficult or non-stand- 0.878
ard orders
FL2 Flexibility of increasing or decreasing 0.878
product effectively
OL1 Process of seeking useful information 0.952
OL2 Extent to which information shared 0.952
across functional units
Average variance extracted 0.76 0.76 0.751 0.831
Cronbach’s alpha 0.764 0.82 0.702 0.897

IS integration Internal IS integration External IS integration
IS1 IS integration among departments n/a
IS2 IS integration with suppliers and customers n/a
1 Rotated factor solution based on principal component analysis with varimax rotation
2 Internal consistency uses Cronbach’s alpha
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216
Y. Wu
Table 7.8 Results of measurement validation of IS integration and supply chain

agility
Construct Variables Corrected item-total
correlation
IS IS1 0.813
IS2 0.813
CS CS1 0.513
CS2 0.513
NI NI1 0.688
NI2 0.808
NI3 0.728
NI4 0.51
NI5 0.59
NI6 0.787
PI PI1 0.697
PI2 0.637
PI3 0.705
VI VI1 0.735
VI2 0.685
VI3 0.66
Res R1 0.55
R2 0.579
R3 0.661
Dep D1 0.558
D2 0.536
D3 0.458
D4 0.696
Flex F1 0.541
F2 0.541
OL OL1 0.721
OL2 0.721
7.2.3 Results and Analysis
The test of the structural model estimates the path coefficients and R2,
which can indicate how well the model fits. The result of the analysis for
the structural model is presented in Fig. 7.4.
The numbers in the brackets are t-values to indicate whether the
indicators are significantly correlated with constructs. The results indi-
cate that the internal and external integration are significantly associ-
ated with IS integration with the weight 0.437 (t = 17.3642) and 0.600
(t = 28.1821) respectively. External IS integration has a more significant
7 Survey Study
217
Reponsivenss
Internal Reduced inventory
Integration level Work efficiency
.471
.437
R² = 39.9% R² = 42.7% Dependability
.047 Accurate forecast
.632 .654
IS Supply Operational
integration chain agility performance .232
Information
External integration .600 acquisition/dissemination
.159
.193 .190 .799 .388 (organisational
learning)
Customer Process Network Virtual Information visibility
sensitivity integration integration integration
Value-adding activities
Business process
optimisation
Fig. 7.4 Results
weight on IS integration than internal integration. Customer sensitiv-

ity, process integration, network integration and virtual integration
have significant weight on supply chain agility, at 0.159 (t = 4.4162),
0.193 (t = 4.0016), 0.190 (t = 4.4479) and 0.799 (t = 15.2938) respec-
tively. Operational performance, consisting of responsiveness, flexibility,
dependability and information dissemination and acquisition have the
weight of 0.471 (t = 12.1630), 0.047 (t = 6.3679), 0.232 (t = 7.7759),
and 0.388 (t = 14.1152) respectively. The results show the predictive
power of the path model. The model explains 42.7% of the variance
in operational performance. Moreover, 39.9% of the variance in supply
chain agility is explained by the degree of IS integration. The path coef-
ficient from IS integration to supply chain agility is 0.632 (t = 8.5758),
and from supply chain agility to operational performance is 0.654
(t = 9.7226).
The results show that IS integration facilitates the process of supply
chain agility, which in turn yields greater operational efficiency. It has
significant implications for the management of IS in the context of the
supply chain.
• Integrated IS for supply chain agility
Previous research (Auramo et al. 2005; Devaraj et al. 2007; Pearcy and
Giunipero 2008; Prajogo and Plhager 2012) indicates the importance
of realising internal or external integration to enable the real-time con-
nectivity across a range of functional units and a range of applications
218
Y. Wu
from ERP to customer/supplier relationship management. Such IS inte-

gration not only realises connectivity across the entire supply chain, but
also enables information visibility between supply chain partners. Both
internal and external integration play an important role in the achieve-
ment of supply chain agility. As Elmuti et al. (2008) argue, integration
and coordination of the functions can lead to positive and substantial
improvements in overall performance. Maiga et al. (2015) suggest that
both internal and external IS integration are significantly related with
cost and quality performance. Internal and external integration are
important in order to transform the fragmented, functional, silo-ori-
ented supply chain processes into an integrated cross-firm supply chain
process.
In addition, the results of the path coefficients suggest that external
IS integration is relatively more important than internal integration,
indicating the significance of electronic communication and informa-
tion sharing among firms. It has the same results compared to the first
set of surveys, where external IS integration has a stronger weight. As
shown in the previous chapters, IT provides efficient and cost-effective
digital connection, although Frohlich (2002) and Hausman and Stock
(2003) discuss high costs, the potential threat of losing confidential
information among the firms and the difficulties of integrating multiple
technology platforms. E-business is used quite extensively by companies
with Internet access to communicate and collaborate with their business
partners.
• IS-integrated supply chain agility
The results suggest that IS integration has a substantial effect on achiev-

ing supply chain agility and the effect is embedded into the process of
customer sensitivity, process integration, network integration and vir-
tual integration. However, IS integration only explains 39.9% of the
variance in supply chain agility, indicating that factors not included
in the model affect the agility. IS integration is a necessary factor but
not sufficient on its own. For instance, Archer et al. (2008) argue for
the need for education for SME management in using e-business
solutions. Fawcett et al. (2008) and Denolf et al. (2015) have shown
7 Survey Study
219
that people issues such as trust, culture, interest alignment, and willing-
ness to collaborate are also important barriers to successful supply chain
collaboration.
The results also suggest that the dimensions of supply chain agil-
ity are hierarchical rather than equal in the formation of supply chain
agility. Virtual integration has the strongest effect, followed by process
integration, network integration and then customer sensitivity. This
provides further evidence to support the theory that supply chain agility
should be information-based (Christopher 2005). Virtual integration
and process integration have a relatively stronger weight than network
integration and customer sensitivity. The findings suggest that successful
deployment of IS integration involves not only the technology to con-
nect with other functional units, but also the identification of the con-
text in which IS is applied.
• Operational performance gained through digitally-enabled supply
chain agility
As identified by the significant weight and R2, the results indicate that
the digitally-enabled supply chain agility can have a substantial impact.
The 42.7% explanatory power also indicates that supply chain agility
is a suitable approach to leveraging operational performance, in par-
ticular when this is facilitated by IS integration. It also indicates that
other factors affect operational performance, especially as Mondragon
et al. (2004) claim, agility is a continuous process rather than a static
state and the factors such as training, employees’ skills are important.
It further supports the case studies’ discussion on emerging issues such
as knowledge, face-to-face communication that contribute to achieving
greater supply chain agility.
Dependability and information dissemination and acquisition both
have strong impacts on operational performance. Dependability indi-
cates the importance of working with partners. Information visibil-
ity should be realised in departments as well as among organisations.
The case studies show that IS integration encourages partners to work
more closely with each other. The survey further supports the dis-
cussion, although limited online collaboration has been identified.
220
Y. Wu
IS integration is employed more on data transfer to shorten lead time

and improve work efficiency. Flexibility within organisations has the
weakest weight on operational performance, showing the inability of
handling non-standard orders and volume changes. One explanation is
that integrated IS standardises business processes and thus reduces the
capability to handle non-standard orders. Another explanation is that
the companies tend to maximise production runs. This leads to orders
being brought forward in order to maintain the same levels of produc-
tion (Levy and Phillip 1998).
7.3 Summary of Survey Results

• First, the survey result supports the interview findings on the impor-
tance of data consistency and cross-functional SCM application inte-
gration in IS integration, as well as the identification of taking other
factors into account. Additionally, survey results provide more evi-
dence for the rationale of the indirect relationship between data con-
sistency and IS integration.
• Second, survey results show that IS integration is an important ena-
bler in the achievement of supply chain agility. More importantly, by
identifying the importance of other factors that are not included in
the original conceptual framework, the results provide quantitative
fact to support that IS integration is necessary to supply chain agility,
but not sufficient on its own.
• Third, the survey results show that IS-enabled supply chain agility
provides substantive operational benefits, in particular, highlighting
the intention of achieving efficient agile supply chains rather than
customer-responsive supply chains. Moreover, the survey identifies
that other factors need considering in order to achieve substantial
operational benefits. The results also support theories on supply chain
agility concentrating on responsiveness and flexibility. However,
such responsiveness is mainly achieved through rapid, short time
responses. The relatively stronger weight of responsiveness than flex-
ibility shows that IS-integrated supply chain agility is primarily used
to shorten response and lead time to satisfy customers, rather than
7 Survey Study
221
handling product and volume flexibility to provide extensive cus-

tomer interactions. This implies that efficient agility, which is fast
response, may be the goal for the automotive firms studied, rather
than the customer orientated responsive agility.
One possible explanation for this is that the automotive industry is still
driven by the goal of cost-reduction (Childerhouse et al. 2003) and
many firms still apply build-to-forecast models (Holweg and Pil 2008).
In this situation, even when many firms adopt build-to-order strate-
gies to improve performance of customisation, they do not embrace
the strategy as a significant goal. Holweg and Pil (2008) also identify
the inability of IS to meet the responsiveness goals placed on the over-
all system. Another explanation is that integrated IS computerises and
standardises business processes, and reduces the capability for handling
non-standard orders. Moreover, the companies tend to maximise pro-
duction runs. Levy and Phillip (1998) argue that this leads to orders
being brought forward in order to maintain the same production run,
suggesting that IS does not provide flexibility for companies.
Furthermore, as the results stress working efficiency, the study sug-
gests that the emphasis of IS is more on automation process and task
efficiency. Pagell (2004) finds that IS systems themselves do not play a
critical role in integration. Rather, IS is used to provide communication
and work efficiency.
7.4 Conclusions
This chapter focused on the survey analysis and discussions. The two
sets of survey analysis were carried out separately. The findings confirm
the critical factors and the four dimensions of supply chain agility, and
foreground the relationship between data consistency, cross-functional
application integration and IS integration by identifying the indirect
relationship between data consistency and cross-functional application
integration. As for the role of IS integration, the survey findings provide
further evidence that IS integration is important in achieving supply
222
Y. Wu
chain agility, but IS-enabled supply chain agility puts more weight on
work efficiency rather than extensive customer responsiveness.
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8
Concluding Comments
Close analysis of the role of IS in the Chinese automotive industry

shows the significance of IS integration in achieving greater agile
capability of supply chains and recognises that data consistency and
cross-functional SCM application integration are important as defined.
Additionally, the case findings identify that data accuracy and informa-
tion sharing, as IS integration factors, also influence supply chain agility.
With extant literatures showing the prerequisites for achieving supply
chain agility (Bal et al. 1999; Christopher 2000; Gligor and Holcomb
2012; Ngai et al. 2011; Swafford et al. 2008; Yusuf et al. 2004, 2014;
van Hoek et al. 2001), IS is seen to assume a fundamental role in devel-
oping agility ‘as the notions of speed and flexibility would be incon-
ceivable without them’ (Breu 2001). Since a key feature of supply chain
agility is information visibility across the supply chain, that is, the
instant information exchange to manage ‘in demand’ business opera-
tions, IS integration facilitates the realisation of information visibility
(Li et al. 2009; Ngai et al. 2011).
By examining the relationship between data consistency and
cross-functional application integration, the analysis shows that data
consistency is an antecedent to cross-functional SCM application

https://doi.org/10.1007/978-3-319-98440-7_8
228
Y. Wu
integration and has an indirect influence on IS integration, suggesting

that data consistency should be achieved before integrating applications.
In addition, the Internet reshapes the approach of integrating such
cross-functional SCM application by providing cost-effective digital
links such as a web portal.
van Hoek et al. (2001) propose four basic dimensions of agility in
supply chain settings, as a new approach of SCM in responding to mar-
ket uncertainties and achieving customisation and fast responsiveness.
Meanwhile, the use of IS systems has been identified as a key enabler of
supply chain agility (Ngai et al. 2011; Paulraj and Chen 2007; Swafford
et al. 2008; Vickery et al. 2010). This study supports and extends the
existing literature, acknowledging the importance of the four dimen-
sions to supply chain agility and the role of IS integration in the con-
text of supply chain agility. Furthermore, a hierarchy for those four
dimensions of supply chain agility—virtual integration, process inte-
gration, network integration to customer sensitivity—from the strong-
est to the weakest weight. Instead of applying IS integration to the four
dimensions simultaneously, IS integration can be employed to process
and virtual integration, and then to customer sensitivity and network
integration.
IS integration is important in the context of supply chain agility
to achieve substantial performance, but not sufficient on its own. The
findings show that having IT in place is not equivalent to collaboration
among partners, corroborating Sanders’s (2007) research. Various fac-
tors have been discussed that assist in realising the four dimensions of
supply chain agility, such as face-to-face communication, knowledge,
skills, and good coordination. Other managerial and organisational
issues should also be considered. Additionally, survey analysis shows
that 39.9% of the variance of supply chain agility can be explained by
IS integration, indicating that other factors that were not included in
the survey need to be included in the achievement of greater supply
chain agility.
The results explicitly present feasible practices to achieve customer
sensitivity, process integration, network integration and virtual integra-
tion so that supply chain agility can be realised.
8 Concluding Comments
229
• In order to enrich customers, BTO is identified as an appropriate

way to provide individualised service, but it has not been embraced
as a significant strategic goal. This study shows that in the business
setting, driven by cost and forecast, customer sensitivity focuses more
on shortening lead times and improving work efficiency than on pro-
viding an interactive customised service.
• As for accommodating changes and uncertainties, the study recog-
nises the benefits of having business process re-engineered to opti-
mise resources and business processes, and identifies the importance
of having good coordination among departments or partners to cope
with changes. The firms focus on reconfiguring existing information
flows to accommodate new business processes, but do not necessarily
apply IS as an enabler for such realignment.
• The results are consistent with previous research findings (Cox 1999;
Holweg and Pil 2008; Yusuf et al. 2014). Cox (1999) suggests that
‘the most powerful actor in the chain will favour local optimisation
of its respective processes over a solution that marks a compromise
derived from a systemic perspective’. Yusuf et al. (2014) observe
that ‘minor suppliers tend to have limited influence on their sup-
ply chains’. All the cases show that the OEMs act as central lead-
ers in their supply chains. The focal firm of the supply chain has a
strong influence on the inter-organisational collaboration. New
information flows are generally accepted only if they are benefi-
cial to the core organisation. Otherwise, suppliers could be forced
to rely on buffers or high inventory to protect against information
inadequacies.
8.1 Efficient Agile Supply Chains

The case analysis shows that operational performance has been aug-
mented through the process of achieving supply chain agility via IS
integration, providing evidence on dependability and information
acquisition and dissemination. More importantly, case analysis and sur-
vey results extend the theories on supply chain agility, which is about
customer responsiveness and customer orientation (Aitken et al. 2002;
230
Y. Wu
Christopher 2005; Gligor et al. 2015; Ismail and Sharifi 2006; van
Hoek et al. 2001) by identifying that IS-integrated supply chain agility
is more capable of shortening response time than of handling customer
requirement changes.
The findings imply that efficient agility is the goal for the automo-
tive firms studied, rather than customer-responsive agility. As discussed,
firms focus on shortening lead times to satisfy customers rather than
engaging in extensive customer interaction to improve customer expe-
rience and customer responsiveness. More specifically, businesses con-
centrate on cost-reduction and mass production, areas in which efficient
agility could be the major target.
The book’s findings support the research of Sanders (2008). She pro-
poses that the use of IS in integration focuses more on task automation
than innovation or new ideas development. The studies demonstrate
that when a business is still heavily dependent on build-to-forecast and
mass production, IS itself is not able to identify which products have
been customer ordered. It could be inferred that such products should
not receive preferential treatment. Hence, it is difficult to realise a cus-
tomised and responsive service. The use of IS integration is conducive to
activities that involve process automation and task efficiency.
Figure 8.1 is created by synchronising the results from both case
studies and surveys. The managerial and organisational issues that are
identified in Fig. 6.2 might be components in Fig. 8.1. However, all
these organisational issues only emerged from case analysis. Although
the survey indicates that other factors need to be included, it cannot
identify what these other factors are. Therefore, further study is required
Reponsiveness
Managerial and Reduced inventory
Cross- organisational levelWork efficiency
Data functional issues
consistency application
sytem Dependability
Accurate forecast
IS Supply Operational
integration chain agility performance
Data accuracy Information
acquisition/dissemination
(organisational
learning)
Information
sharing Virtual integration Information visibility
Process integration
Network integration Value-
adding activities
Customer senstivity Business process
optimisation
Fig. 8.1 Proposed model

231
to validate the emerging managerial and organisational issues from case

analysis, which are preparation, face-to-face communication, proper
knowledge and skills, right attitude, and proper investment. Therefore,
these issues are not included in Fig. 8.1.
8.2 Limitations
The literature suggests that there are many different ways to determine
the value of IS. The book has focused on the positive impacts of IS inte-
gration on supply chain agility. Such impacts will contribute to achiev-
ing greater agility in the supply chain. Hence, the question is how IS
can provide the agility that organisations are seeking. It will involve var-
ious levels of IS in organisations from strategy to operation. However,
the book only discusses the IS impacts from the operational level rather
than the strategic level.
Second, culture is identified as one of the factors for achieving sup-
ply chain agility, in particular, in network integration and collaboration
between partners. Hence, conducting similar case studies that involve
different cultures may lead to new results on the approaches taken to
agile supply chains. Therefore, the way of realising the values from IS
might be different from other countries.
Third, the case studies and survey only discussed OEMs and first
tier suppliers. Other supply chain actors such as third-party logistics,
shippers, wholesalers or retailers have not been studied. But since it is
not clear whether other markets behave the same way, the conclusions
maybe not suitable to other markets where third-party logistics, ship-
pers and so on play different roles and positions compared to Chinese
market.
References
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Bal, J., Wilding, R., & Gundry, J. (1999). Virtual teaming in the agile supply
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Breu, K. (2001). The role of relevance of management cultures in the organ-
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Index
A B
Agile manufacturing 17, 19–21, 26, BTO (Build-to-Order) 23, 26, 28,
41, 112 37, 99, 100, 110, 111, 124,
Agility 2, 6, 11, 15–23, 27, 28, 35, 132, 143, 152, 153, 156, 167,
38, 39, 41, 42, 44, 47–49, 173, 182, 183, 229
78–80, 82, 91, 97, 102, 104, Business alignment 190
111, 115, 116, 121, 122, 130,
132, 144, 146, 147, 153–155,
161, 172, 186, 189, 191–193, C
218, 219, 221, 227, 228, 230, Chinese automotive industry devel-
231 opment 72
Automatic data capture systems 34, Collaboration and coordination 29
203 Common data definition 33, 122,
Automotive industry 3, 6, 17, 20, 164
34, 45, 49, 67–71, 73, 74, Communication 12, 32–37, 41,
76–78, 84, 93, 163, 172, 191, 44–46, 48, 70, 77, 79, 95,
221, 227 98, 100, 104, 108, 111, 115,
118, 120, 121, 124, 132, 133,
140–142, 144, 147, 150, 152,
153, 155–158, 160, 162, 164,
167, 170, 173, 180, 183, 187,
© The Editor(s) (if applicable) and The Author(s), under exclusive licence 235
to Springer Nature Switzerland AG 2019
https://doi.org/10.1007/978-3-319-98440-7
236
Index
188, 191, 192, 200, 203, 218, Emerging markets 68, 69, 72, 73
219, 221, 228, 231 Enhancing the customers 22
Conceptual model 11, 49, 84, 181, ERP (Enterprise Resource Planning)
192 5, 25, 32, 34–38, 45, 50, 93,
Cooperating to enhance competitive- 105–107, 109, 115, 126, 127,
ness 17 133, 140, 148, 167, 170, 173,
Cost reduction 49, 146, 151, 155 180, 182, 184, 185, 189, 200,
Critical factors 6, 84, 91, 96, 109, 203, 217
118, 122, 123, 142, 150, 158, Execution applications 36, 37
164, 179, 180, 198, 199, 202,
203, 221
Cross functional SCM application F
system integration 34, 39 Face-to-face communication 144
Customer Sensitivity 23, 42, 43, First tier suppliers 6, 37, 45, 71, 79,
48, 81, 84, 91, 98, 100, 110, 91, 92, 103, 104, 124, 133,
111, 119, 120, 124, 125, 132, 139, 141, 146, 167, 168, 170,
143, 144, 151–153, 159, 160, 173, 182–184, 187, 188, 231
165–167, 173, 181–183, 191, Flexibility 2, 3, 12, 16, 21, 23,
206, 207, 217–219, 228, 229 25–28, 30, 31, 39, 40, 44,
46–48, 78, 101, 102, 112,
113, 120, 126, 145, 146, 151,
D 154, 185, 191, 193, 208, 217,
Data accuracy 96, 97, 109, 122, 132, 220, 221, 227
159, 165, 180, 181, 192, 193,
203, 227
Data consistency 4, 30, 33, 34, 50, G
96, 97, 109, 118, 122, 132, Government regulation 70
142, 150, 151, 158, 159, 164,
179–181, 191, 193, 200, 201,
203–205, 220, 221, 227, 228 I
Definition of supply chain agility 11, Imbalanced power 188
21, 28, 206 Industry 4.0 1, 2, 11, 13, 14, 31, 37
Information sharing 4, 25, 31, 32,
38, 39, 77, 79, 96, 97, 105,
E 122, 123, 131, 144, 147, 152,
Effectiveness 20, 28, 38, 98, 100, 156, 181, 183, 188, 192, 193,
208 203, 227
Efficient agile supply chains 172, Integrated planning applications 36,
220, 229 37
Index
237
Interviews 38, 80, 81, 84, 104, N

130–133, 144, 151, 160, 180, Network Integration 24, 44, 48,
200, 203, 205, 206, 209, 220 81, 84, 91, 102, 104, 105,
IS applications 41, 67, 80, 91, 93, 114, 115, 121, 127, 128, 133,
109, 117, 120, 121, 133, 140, 146, 154, 155, 161, 162, 165,
148, 155, 157, 173, 184, 190, 168–170, 173, 181, 186–188,
200, 204 191, 206, 217–219, 228, 231
IS integration 2, 4–6, 11–13, 30, New business landscapes 12
31, 33, 34, 38–49, 67, 78–82,
84, 91–93, 96–102, 104–106,
109–118, 120–124, 126, 127, O
130–133, 139, 140, 142–148, OEM (Original Equipment
150–161, 163–165, 168, Manufacturers) 6, 67–69,
170–173, 179–193, 197–206, 71–74, 78, 79, 91, 92, 95, 96,
208–210, 216–221, 227–231 103–108, 110, 116, 118–121,
IS integration contributes to supply 123, 124, 127, 130, 131, 133,
chain agility 5 139–144, 146–149, 151–154,
156, 159, 160, 168, 170,
182–184, 187, 188, 229, 231
J
Just in time 18, 20
P
Pattern of demand for new cars 69
L PLS (Partial Least Square) 197, 202,
Leanness 16, 18–20 204
Leveraging the impact of people and Preparation and coordination 186,
information 17 192
Leveraging the knowledge of people Process Integration 24, 43, 44, 48,
190 81, 84, 91, 101, 102, 112–
Local content rate 74, 76, 151 114, 120, 121, 126, 133, 144,
145, 153, 154, 160, 161, 167,
168, 173, 181, 184–186, 191,
M 206, 217–219, 228
Manufacturing flexibility 26 Proposed model 230
Mastering changes and uncertainty Pull system 27
102
Measurement scales 200, 209
MRP (Material Resource Planning) R
77, 94, 117, 126, 189 Rapid technological advancement 12
238
Index
Reliability 30, 46, 150, 151, 164, Survey 6, 38, 40, 69, 80–82, 164,
173, 198, 200–202, 209 193, 197–200, 206, 210,
Responsiveness 2, 3, 16, 19–21, 219–221, 228–231
26–28, 32, 35, 39, 43, 44, 47,
48, 78, 101–103, 105, 110,
124, 126, 133, 144, 152, 153, T
155, 173, 183, 191, 208, 217, Times based competition for individ-
220–222, 228–230 ualized products 12
RFID (Radio Frequency
Identification Technology) 34,
153 V
Validity 81, 82, 198, 200, 201, 209,
212
S Virtual Integration 25, 39, 46, 48,
Shanghai automotive industry devel- 81, 84, 91, 105, 115, 116,
opment 74 121, 122, 127, 129, 130, 133,
Small batches 27, 28 147, 156, 162–164, 170,
Supply chain agility 2–6, 11, 12, 171, 173, 181, 189–191, 206,
16, 21–23, 27–31, 39, 41, 217–219, 228
46–50, 67, 68, 74, 78, 80–82,
84, 91, 92, 96, 97, 102, 106,
109, 111, 116, 119–122, 124, W
131, 132, 139, 142, 145, 151, Waste control 19, 112, 126, 185
156, 159, 160, 164, 165, 172,
179, 181, 182, 188, 190–193,
197, 198, 206–210, 216–222,
227–231
Supply chain integration 5, 15, 21,
30, 49, 130, 188

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Yi Wu

ISBN 978-3-319-98439-1 ISBN 978-3-319-98440-7 (eBook)

Library of Congress Control Number: 2018950559

1 Introduction: The Phenomenon of Supply Chain Agility 1

2 IS-Enabled Supply Chain Agility 11

3 Chinese Automotive Supply Chain Management 67

4 Case Studies: Supply Chain A 91

5 Case Analysis-Supply Chain B 139

6 Comparative Analysis of Cases 179

7 Survey Study 197

8 Concluding Comments 227

Fig. 2.1 Supply chain applications 36

Fig. 5.3 Information flow from orders to manufacturing to logistics

Table 2.1 Themes identified from literature 48

Table 7.6 Assessment of discriminant validity 212

1.1 The Rise of Industry 4.0

© The Author(s) 2019 1

Industry 4.0 is a technology-based strategy introducing the concept

1.2 IS-Integrated Supply Chain Agility

1.2.1 Supply Chain Agility

In order to survive in a modern business environment, enterprises have

meeting increasing requirements (Boone et al. 2007; Tse et al. 2016).

1.2.2 IS Integration

A key characteristic of supply chain agility is the instant availability of

1.3 The Issues

2006). With the unit of competition moving from individual firms to

1. What are the IS integration factors that influence supply chain

1.4 Chapter Outline

Frohlich, M. T., & Westbrook, R. (2002). Demand chain management in

Patnayakuni, R., Rai, A., & Seth, N. (2006). Relational antecedents of

This chapter gives an overview of the current research on Industry 4.0,

© The Author(s) 2019 11

the current studies to illustrate the relationship among IS integration,

2.1 From SCM to Supply Chain Agility

Companies in today’s competitive and changing business environment

Increasing market demand, global market fragmentation and competi-

At the same time, the competitive landscape is also driven by technol-

on information which is both highly integrated and available across the

2.1.2 SCM to Supply Chain Agility

The foundation of SCM started from Forrester’s research (1961, cited

a firm’s practice of SCM is influenced by the extent of involvement of

of the operating environment, not for steady sets of conditions

2.2 Supply Chain Agility

2.2.1 Agility and Leanness

Agility is considered one of the basic characteristics needed for a supply

Goldman et al. (1995) define agility as ‘the ability to thrive in a com-

• First is enriching the customers. Products and services are custom-

The concept of agility originated in manufacturing, with the majority

people and organisations into coordinated systems which are capable

greater resource productivity and utilisation and lower inventories and

• JIT flow/continuous flow production (White et al. 1999);

• advanced manufacturing technologies (Brown and Bessant 2003);

To this extent, the emphasis from leanness and agility is different in

concepts and it is recognised that supply chains need to encompass both

2.2.2 Enablers of Supply Chain Agility

Agility is often presented as a concept with close links to the man-

and asynchronous collaborative technology to improve agility in supply

Within the framework, flexibility within product development, pro-

Supply chain agility emphasises the ability to react to changes effec-

Process integration is concerned with mastering uncertainty and change

Network integration refers to cooperating by competing through ‘fluid’

Virtual integration refers to leveraging information along the supply

2.2.3 Flexible, Responsive and Agile Supply Chains

Fig. 2.1 Supply chain applications 36

Fig. 5.3 Information flow from orders to manufacturing to logistics

Table 2.1 Themes identified from literature 48

Table 7.6 Assessment of discriminant validity 212

1.1 The Rise of Industry 4.0

1.2 IS-Integrated Supply Chain Agility

1.2.1 Supply Chain Agility

meeting increasing requirements (Boone et al. 2007; Tse et al. 2016).

1.2.2 IS Integration

1.3 The Issues

1.4 Chapter Outline

2.1 From SCM to Supply Chain Agility

2.1.2 SCM to Supply Chain Agility

2.2 Supply Chain Agility

2.2.1 Agility and Leanness

Goldman et al. (1995) define agility as ‘the ability to thrive in a com-

• JIT flow/continuous flow production (White et al. 1999);

2.2.2 Enablers of Supply Chain Agility

2.2.3 Flexible, Responsive and Agile Supply Chains

2.2.4 Supply Chain Agility vs. Small Batches

2.2.5 Supply Chain Agility and Operational Performance

2.3 IS Integration

2.3.1 Dimensions of IS Integration

Denolf et al. 2015; Sambamurthy et al. 2003) when considering opera-

2.3.1.2 Cross-Functional SCM Application System Integration

Fig. 2.1 Supply chain applications.

Fig. 2.2 Integrated Supply Chain.

2.3.2 IS Integration and Operational Performance

Auramo et al. (2005) examine technologies, including ERP, EDI,

2.4 IS Integration: Platform for Supply

skills. Overby et al. (2006) deconstruct enterprise agility to illustrate

2.4.1 Customer Sensitivity and IS Integration

2.4.2 Process Integration and IS Integration

2.4.3 Network Integration and IS Integration

2.4.4 Virtual Integration and IS Integration

Table 2.1 Themes identified from literature

of IT for collaboration and the take-up of ERP systems (Denolf et al.

3.1 Empirical World: The Automotive Industry