THE ROLE OF SUPPLY CHAIN PROCESSES AND
INFORMATION SHARING IN SUPPLY CHAIN MANAGEMENT

DISSERTATION Presented in Partial Fulfillment of the Requirement for
the Degree Doctor of Philosophy
in the Graduate School of The Ohio State University By
Honggeng Zhou, B.S., M.S., M.A.

*****
The Ohio State University
2003 Dissertation Committee: Approved by

Professor W.C. Benton, Advisor

Professor Glenn Milligan _____________________________
Advisor
Professor David Schilling Graduate Program in Business Administration

ABSTRACT
Supply chain process and information sharing play critical roles in today’s supply
chain management. Previous research in supply chain management has studied various
supply chain processes and different aspects of information sharing separately. Therefore,
this dissertation proposes a comprehensive framework to study the relationships among
supply chain process, information sharing, supply chain dynamism, and business
performance.
The dissertation starts with mathematical models and simulation models to better
understand the relationships among the variables. The theorems derived from the
mathematical models are tested in more generalized supply chain settings. The results
from the mathematical models and simulation models provide several managerial insights
and help develop the empirical models.
The empirical part of this dissertation uses a cross-sectional survey method.
Structural equation modeling is used to explore the relationships among five supply chain
processes, four aspects of information sharing, supply chain dynamism, and five
dimensions of business performance. Responses from 120 executives in manufacturing
industries, representing a 18 percent response rate, suggest that both effective supply
chain process and effective information sharing are necessary to achieve optimal business
performance. When supply chain dynamism increases, effective information sharing
ii becomes more important. Information sharing does not have direct positive impact on
business performance, but it has positive impact on business performance through
effective supply chain process. Effective supply chain process has positive influence on
all performance dimensions, but the degrees of positive influence vary for different Dedicated to My Grandfather, My Father, My Mother, and My Sister 献给我的外公丁方丈, 我的父亲周强, 我的母亲丁招弟, 和我的妹妹丁添娟

v VITA

October, 19, 1974 ………………………… Born Hangzhou, Zhejiang, P. R. China
1993-1997 ………………………………… B.S., Computer Science and Engineering
Zhejiang University, Hangzhou, P.R. China
1997-1999 ………………………………… M.S., Statistics and Computer Science
University of Memphis, Memphis, TN
1999-2002 ………………………………… M.A., Business Administration
The Ohio State University, Columbus, OH
FIELDS OF STUDY
Major Field: Business Administration
Concentration: Operations Management
Minor Field: Management of Information Systems

vi


2.2.3 “Source” Process………………………………………………. 23
2.2.4 “Make” Process……………………………………………… 26
2.2.5 “Deliver” Process……………………………………………… 31
vii 2.2.6 “Return” Process………………………………………………. 33
2.2.7 Relationship between Supply Chain Processes and Business
Performance…………………………………………………….
34
2.3 Information Sharing……………………………………………………. 34
2.3.1 Information Sharing Support Technologies…………………… 35
2.3.2 Information Content…………………………………………… 37
2.3.3 Information Quality……………………………………………. 39
2.3.4 Information Sharing and Supply Chain Processes…………… 42
2.3.5 Information Sharing and Business Performance………………. 44
2.4 Supply Chain Dynamism………………………………………………. 48
2.4.1 Supply Chain Dynamism………………………………………. 48
2.4.2 Supply Chain Information Sharing System Dynamics……… 50
2.5 Business Performance…………………………………………………. 52
2.6 Summary………………………………………………………………. 54

CHAPTER 3: RESEARCH PROBLEM FORMULATION AND
RESEARCH PLAN…………………………………………
65
3.1 Introduction……………………………………………………………. 65
3.2 Research Problem Formulation……………………………………… 65
3.2.1 General Research Problem Formulation……………………… 66
3.2.2 Analytical Problem Formulation……………………………… 68
3.2.3 Empirical Problem Formulation………………………………. 70

5.3.1 Measurement Validity…………………………………………. 147
5.3.2 Measurement Reliability………………………………………. 148
5.3.3 Item Deletion Process…………………………………………. 149
5.3.4 Sampling Adequacy and Correlation Matrix Sphericity Testing 166
5.4 SUMMARY…………………………………………………………… 167

CHAPTER 6: TESTING THE STRUCTURAL EQUATION MODELS
AND HYPOTHESES………………………………………
169
6.1 Introduction…………………………………………………………… 169
6.2 Fit Indices……………………………………………………………… 169
6.3 COST Model………………………………………………………… 171
6.4 FLEXIBILITY Model…………………………………………………. 177
ix 6.5 RESPONSIVENSS Model…………………………………………… 181
6.6 DELIVERY Model……………………………………………………. 185
6.7 FINANCIAL Model…………………………………………………… 189
6.8 Summary………………………………………………………………. 193

CHAPTER 7: RESEARCH FINDINGS, CONTRIBUTIONS, AND
IMPLICATIONS…………………………………………….
196
7.1 Introduction…………………………………………………………… 196
7.2 Research Findings and Managerial Implications………………………. 197
7.2.1 Methodological Contributions………………………………… 198
7.2.2 Influence of Supply Chain Process on Business Performance… 202
7.2.3 Influence of Information Sharing on Supply Chain Process and
Business Performance……………………………………………


Table
Page
2.1 Summary of Literature on Supply Chain Process, Information Sharing,
Supply Chain Dynamism, and Business Performance…………………
55
2.2 Research Hypotheses Addressed in Analytical and Empirical Models 63
3.1 Summary of Responses……………………………………………… 97
4.1 Overview of Six Cases in Two Suppliers Model……………………… 102
4.2 Total Costs of the Three Cases in the Three Suppliers Model………… 115
4.3 Simulation Factors and Factor Levels…………………………………. 120
4.4 Percentage of Cost Saved in Hypothesis A…………………………… 125
4.5 Percentage of Cost Saved in Hypotheses B……………………………. 126
4.6 Percentage of Cost Saved in Hypothesis C…………………………… 127
4.7 Percentage of Cost Saved in Hypothesis D…………………………… 128
4.8 Critical Mass Number of Suppliers in Hypothesis E………………… 129
5.1 Reported Average Number of Employees in the Responding
Companies………………………………………………………………
136
5.2 Manufacturing Process Technology…………………………………… 136
5.3 Annual Sales Value of the Responding Companies…………………… 137
5.4 Public or Private Company……………………………………………. 137
5.5 Summary of Measurement Scales……………………………………… 139
5.6 Comparing Early to Late Respondents………………………………… 146
5.7 Original Factor Loadings of Information Sharing Support Technology. 152
5.8 Original Factor Loadings and CITCs of Manufacturer’s Information…. 153
5.9 Original Factor Loadings and CITCs of Supplier’s Information………. 154
5.10 Original Factor Loadings and CITCs of Plan Scale……………………. 154
5.11 Original Factor Loadings of Source Scale…………………………… 155
5.12 Original CITCs of Deliver Scale……………………………………… 155

6.14 Estimations of Measurement Model Parameters for Financial Model… 190
6.15 Measures of Overall Model Fit for the Financial Model………………. 191
6.16 Summary of Statistical Tests for the Hypotheses in Financial Model…. 191
7.1 Research Hypotheses and related Analytical and Empirical Results… 199
7.2 Positive Network Externality Property of Supply Chain Information
Sharing………………………………………………………………….
213
4.2 Critical Mass Number of Suppliers in Hypothesis E …………………. 130
5.1 Overview of the Empirical Analysis Procedures……………………… 135
5.2 Item Deletion Process…………………………………………………. 151
6.1 Overview of the Structural Equation Model Analysis………………… 170
6.2 COST Model………………………………………………………… 176
6.3 FLEXIBILITY Model…………………………………………………. 180
6.4 RESPONSIVENESS Model………………………………………… 184
6.5 DELIVERY Model……………………………………………………. 188
6.6 FINANCIAL Model .………………………………………………… 192 xiii 1
CHAPTER 1

RESEARCH OVERVIEW

1.1 INTRODUCTION
Recently, supply chain management and information technology management
have attracted much attention from both practitioners and researchers. As technology
develops, firms tend to become more integrated. Therefore, integrating supply chain
management with up-to-date information technology becomes critical. “A recent survey
of purchasing managers suggests that the wave of new online business-to-business
activities is far from cresting … New technologies for supply-chain management and
flexible manufacturing imply that businesses can perceive imbalance in inventories at a

2001 (Supply Chain Council, 2002). As information technology has developed in the past
decade, it has had an impressive impact on supply chain management. While the concept
of information technology management covers many aspects of a supply chain, the focus
of information technology management in this dissertation is information sharing among
supply chain members. In particular, this study focuses on three aspects of information
sharing: information sharing support technology, information content, and information
quality. Information sharing support technology includes the hardware and software
needed to support information sharing. Information content refers to the information
shared between suppliers and buyers (manufacturers). It includes two directions of

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information flows: (1) the information that suppliers share with their manufacturers; and
(2) the information that manufacturers share with their suppliers. Information quality
measures the quality of information shared between suppliers and manufacturers. In sum,
the three aspects of information sharing measure the technologies used to support
information sharing, the information shared among supply chain partners, and the quality
of information shared.
In today’s industry, effective supply chain process and effective information
sharing are two major approaches to improve business performance (Piszczalski, 2002).
While some companies emphasize improving supply chain process capabilities, others
emphasize leveraging information technology such as Enterprise Resource Planning
(ERP). Since these two major approaches are not independent, firms should work on both
supply chain processes and information sharing simultaneously. A good example is
Toyota which is well known for its effective processes. Realizing the importance of
information sharing, Toyota began to implement SAP in late 1990 and work on both
effective processes and information sharing. However, extant research provides very little
guidance on the role of supply chain processes and information sharing in supply chain
management, which is the focus of this dissertation.

1.2 RESEARCH BACKGROUND AND MOTIVATION

acknowledge the use of Covisint for their transaction. In addition, Covisint as an
independent entity still has not become profitable yet. The reasons why the majority of 2
Presentation at the Fisher college of Business duing the Spring of 2001
3
See Freep.com, Feb. 2002

5
auto suppliers are not willing to sign onto the system are still not clear yet. One possible
reason is that most suppliers may not have the information technology capabilities
required for the Covisint system. Another possible reason is that most suppliers believe
that Covisint may not be economically beneficial to their firms. It is unclear whether auto
suppliers can benefit from using Covisint.
Although practitioners are enthusiastic about integrating supply chain processes
with information sharing, no comprehensive scholarly research has yet investigated the
role of information sharing and supply chain processes in supply chain management
under alternative supply chain dynamism that includes both supply chain business
environment dynamics and supply chain information sharing system dynamics. The
purpose of this dissertation is to investigate the influence of supply chain processes and
information sharing on business performance under alternative supply chain dynamism.

1.3 RESEARCH OBJECTIVES
The purpose of this dissertation is twofold. First, from the practitioner viewpoint,
this study addresses an important practical question: how should manufacturing firms
make investment in information sharing and supply chain processes? Especially, how
should firms balance the investment in information sharing and supply chain processes?
To date, there are no clear answers. Hopefully, the results of this study provide managers
with some guidance on this question. Second, this dissertation is expected to make the

empirical studies. Three of the six research hypotheses are addressed by the analytical
models in Chapter 4, and five of the six research hypotheses are addressed by the
empirical models in Chapter 5 and Chapter 6. The three hypotheses that are not
appropriate to test with analytical models are tested with the empirical models. The
hypothesis that is not appropriate for empirical models to test is tested in the analytical
models.
Chapter 4 of the dissertation uses mathematical models and simulation models to
consider the value of sharing production progress information in supply chains. The
particular supply chain practice considered is Vendor Managed Inventory (VMI). The
source of supply chain dynamism is supply lead-time uncertainty. The performance
criterion is the sum of inventory holding cost and inventory shortage cost. Mathematical
models are used to explore the value of sharing production progress information among
two and three suppliers. Next a simulation approach is used to extend the mathematical
models to many suppliers. The theorems derived from the mathematical models are
verified by the simulation models in more generalized supply chain environments. The
analytical models evaluate the impact of information sharing and supply chain dynamism
on business performance in the presence of a good supply chain practice – Vendor
Managed Inventory.
Chapter 5 and Chapter 6 of the dissertation use an empirical approach to
comprehensively test the relationships among supply chain processes, information
sharing, supply chain dynamism, and business performance. The supply chain processes
considered in the empirical models include supply chain planning, sourcing, production,
delivery, and product return. Information sharing includes information sharing support

8
technology, information quality, information that manufacturers share with suppliers, and
information that suppliers share with manufacturers. Supply chain dynamism includes the
dynamics of both product and process. Business performance includes both financial
performance and operational performance such as cost, flexibility, responsiveness, and
delivery.

effective information sharing are necessary for achieving optimal business performance.
A firm is unlikely to improve business performance by having only effective supply
chain process or only effective information sharing. The findings of the research
questions addressed in this dissertation are summarized as follows.

Research Question 1: does effective supply chain process improve business performance?
This dissertation shows that effective supply chain process has positive influence
on all performance dimensions, but the degrees of influence are different on different
performance measures. This finding suggests that firms do not have to sacrifice some
performance dimensions to improve others, which contradicts the traditional wisdom
(Skinner, 1974, Abernathy, 1978). Skinner (1974) suggests that firms should focus on
performance dimensions one by one. Abernathy (1978) questions whether it is possible to
achieve both efficiency and flexibility.

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Research Question 2: does effective information sharing enhance effective supply chain
process?
This study shows that effective information sharing significantly enhances
effective supply chain process, which implies that effective supply chain process is
necessary for leveraging the value of effective information sharing, because the result of
research question 3 below shows that effective information sharing does not have direct
positive impact on business performance.

Research Question 3: does effective information sharing improve business performance?
While the analytical study shows that effective information sharing improves
business performance in the presence of effective supply chain process, the empirical
study shows that effective information sharing does not have direct significant positive
impact on business performance. One possible reason for the difference between the
analytical study result and empirical study result is that the analytical study considers
only the benefits of sharing information, not the costs of sharing information. Since many

the system.

Besides the above research findings, this dissertation also validates several
important new constructs for future research. Multidimensional scales are developed for
information sharing and supply chain process. The information-sharing construct