Md Ashiq and DR Arun.article 2008 IJME Binary University

8/14/2019 Md Ashiq and DR Arun.article 2008 IJME Binary University

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Supply Chain Management Practices: Malaysian Perspective

Arun Kumar Tarofder

Faculty of Business Management, Binary University College

[email protected]

Mr. Ashiquzzaman

Faculty of Management, Universiti Tun Abdul Razak

[email protected]

Abstract

Supply chain management (SCM) is a new concept involving the integration of allthe value creating element in the supply chain, manufacturing, and distribution

processes: from raw material extraction, through the transformation process, to enduser consumption. The advent of information technology and intense globalcompetition has enticed many world class manufacturers and service providers intoadopting an integrated strategic approach to supply chain management. Althoughmany supply chain management efforts have failed to achieve the desired results, ithas become a significant strategic tool for firms striving to achieve competitivesuccess. Using a survey of senior top management professionals in the Malaysia,the study tries to determine the contemporary practice and concerns of supply chainmanagement.Our results reveal that fourteen activities, which can be improved by supply chain

performance, are related mostly with time based customer needs and demand,communication with members. It proves that by the supply chain functions firmscan be more effective in operational activities along with providing moresatisfaction to their customers. Lack of trust and lack of cooperation are the mainhindrance for implementing SCM among Malaysian organizations according to ourresults. Results regarding IT solutions show a clear shift to areas which involvenetworking with business partners. More precisely, the future areas of operationsfor IT solution include web technologies, distribution networking planning, lottracking, and freight cost management. In our study, we found that most of theorganizations are involved in outsourcing activities especially, warehousing andtransportation. And they involve these activities due to lower cost.

Key Word: Supply Chain Management, Malaysia

Introduction

Todays businesses have extremely complex. The interplay of three Cs, namely,Consumers, Competition, and Convergence, have thrown open new challenges fororganizations all over the world. The competitive pressure leads product changes,super change by shorting products and technologies development lifecycles.Convergence shifts the balance of power in favor of consumers thereby giving wayto globalization of business and integration of economics. To combat these risksand challenges, organizations round the globe are re-organizing and streamliningtheir supply chain.Supply Chain Management (SCM) is a new concept involving the integration of all

the value creating element in the supply, manufacturing, and distribution processes
mailto:[email protected]:[email protected]


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from raw material extraction, though the transformation process, to the end userconsumption. SCM activities are insisted by the ideals of customer service,compression of lead time, and inventory reduction.Supply Chain Management concept has begun to surface in the late 1980s (George

et. al. 2005). The first is the essential of the never satisfied customera consumerwho wants more options, flexibility, better quality and so on at a lower price. Thesecond emergence is the shrinking product life cycle, which is typically driven byconstantly changing technology. The third important development in SCMsevolution is the emergence of newer, faster, and cheaper computer software andhardware. Advancement of technologies has enabled firms to link and integrate notonly internal activities but also the activities of suppliers and customers (George et.al. 2005). All of these three developments lead the concept of SCM by encouragingmanagers to rethink their reliance on owing and controlling operations internally.

Market Report

IDC recently concluded a study on the competitive analysis of server vendors inMalaysia, entitled Malaysia Server 2005 2009 Vendor Analysis: A CompetitiveVendor Analysis. In this study, IDC notes that a total of 24,306 units of servers --high-end, midrange, and volume servers -- valued at US$186 million were shippedin Malaysia in 2004. The total Malaysian server market grew marginally by 0.8%in unit shipment and increased by 6.3% in revenue from 2003 to 20041. Using theIDC Leadership Grid, the study reveals the expected positions of each vendorwithin the enterprise server market. Market sizing and forecasts are also presentedto provide better knowledge of potential markets by server range within theenterprise server area. The Leadership Grid places IBM and HP as the most capablecompanies among three high-end server vendors in Malaysia. Similarly, it also

places these two companies as the most capable companies among the midrange

server vendors in the country. There are five notable volume enterprise servervendors in the Malaysian market; with three multinational vendors taking theleadership positions while two other notable local players are placed in the crisis

potential corner. This IDC study provides a market sizing of and a five-yearforecast on the Malaysia enterprise applications market, which consists ofenterprise resource management (ERM), customer relationship management(CRM), and supply chain management (SCM) applications. It also includes asegmentation of the market by vendor ranking, vertical, channel, and customer size.This study also examines the major market trends, accelerators, and inhibitors thatare emerging in the country. "The Malaysia enterprise applications market grew2.8% year on year in 2003 to stand at US$96.69 million. Most vendors reported

that 2002 was a difficult year in terms of customer acquisition. In 2003, both CRMand SCM applications recorded comparatively higher growth rates," says Jun-FwuChin, senior analyst, IDC Malaysia2.

Research Objectives

This research study is takes up to address the concerns raised by managers, expert professionals and academicians on issues of supply chain at the national level.However, this study is under taken the following objectives

1

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To know the current practices of supply chain managementfollowed in Malaysian Organizations.

To identify the drivers of enhanced supply chain practice amongthem.

To identify the barriers of supply chain activities among theses

organizations.

Significance of the Research

With the characteristics of supply transformation and demand, a supply chain issimply a network of material processing (Davis 1993). Therefore, SCM is as astrategic tactic to acquire a sustainable competitive advantage by reducinginvestment without compromising with customer satisfaction (Lee and Billington,1992). SCM very much focuses leveraging the skills, expertise, and capabilities ofthe firm who comprise this competitive network referred to while reduced cost aretypically a result. While many studies have been conducted of supply chain

management practice in specific countries and regions (Gilmour et. al., 1995;Hanfield and Withers, 1993; Ainworth and Gold, 1995; Byrne and Markham, 1993;Cilliers and Nagel, 1994; McMullan 1996; Cox, 1999), no study to data hasexamined in its entirely. This study presents the result of recently conductednation-wide research survey on supply chain management practice amongMalaysian Organizations.

Literature Review

In the 1950s and 1960s, most manufacturers emphasized mass production tominimize unit production cost as the main operation strategy, with little products or

process flexibility. Development of new products was slow and dependent

exclusively on in-house technology and capacity. It was very risky to sharetechnology with the stakeholders even imaginable, thus little emphasis was placedon cooperative and strategic buyer-supplier partnerships. MRP had been developedin the mid of 1970s and managers realized the effect of huge work-in-progressinventories on manufacturing cost, quality product development, and delivery lead-time. The concept of globalization and competition forced organization to offerlower cost without considering quality with greater design flexibility. Therefore,manufacturers utilize Just-in-time and other available management programs toimprove manufacturing efficiency and cycle time. All of these made topmanagement to rethink about the potential benefits and importance of strategic andcooperative buyer-supplier relationships. And the concept of Supply ChainManagement had emerged.The advent of SCM continued into the 1990s as organizations further extended best

practice in managing corporate resources to include strategic suppliers and thelogistic functions. Novack et. al. (1995) and Tyndall et. al. (1998) concerned thatSCM is integrated and synchronized operational efforts to improve flow ofmaterials and products. Some other authors (LaLonde, 1997; Ross, 1998;Davenport, 1993) consider that SCM is a management process. Handfield and

Nichols (1999) define Supply Chain as .... encompasses all activities associatedwith the flow and transformation of goods from the raw materials stage(extraction), through to the end users as well as information flows.Harwick (1997) stated that SCM is a philosophy that extends traditional internalactivities by embracing an inter-enterprise scope, bringing trading partners together

with the common goal of optimization and efficiency. Harland et. al. (1999)


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suggested a four stage supply chain typology, outlining four primary usages for theterm Supply Chain Management.

Integrates the internal Supply Chain business functions involved inthe flow of information and material from start to end such as inbound to

outbound ends of the business, The management of two party relationships with immediatesuppliers.

The management of a chain of business including all stakeholders.

The management of a network of interconnected businessesinvolved in the ultimate provision of product and service package required

by end customers.

Classification of Supply Chain Management

Saunders (1997) describes supply chain management as containing differentrelationships between suppliers and as controlling supplies in the supply chain. He

stresses that supply chain management does not form company organizations.Monczaka et al. (1998) in turn see that a strategic view in supply chainmanagement is important. The chain has to contain elements that guarantee a fastinformation flow between each of the member elements. The whole supply chainmust also be agile and flexible in order to compete effectively and to respondquickly to changing customer demands. Kuglin (1998) has found that supply chainmanagement varies from one enterprise to another. His definition of supply chainmanagement for a manufacturer stresses the concept of extended enterprise, whichmeans that a company produces a product and/or service that is, low-cost of high-quality and delivered quickly to the marketplace. In this way customer-centredsupply chain management extends the concept to cover the whole life cycle of the

product and service, as well as customer satisfaction. The different definitions andviews of supply chain management mentioned above do not cover all supply chainmanagement descriptions but a final and overall description has not yet been made(Croom et al. 2000, Saunders 1995, Cooper et al. 1997, Cox 1997). However, theyall give us a possibility to find important constructs behind supply chainmanagement. According to our analysis the impact of the supply chain managementseems to lie on two constructs: The Knowledge Level of the Supply Chain(Commercial Challenge) and the Utility Level of Technology in the Supply Chain(The Technological Challenge). These constructs form the basis of our researchdimensions.The Knowledge level of the Supply Chain -construct describes the knowledge

level in the supply chain. If the knowledge level is high all the individual membersof the supply chain are conscious of their own position in the supply chain and theyknow how to add value to the supply chain. A low level means that the membercompanies do not know or understand the meaning of the supply chain concept (seeFigure 1).

The Utility Level of Technology in the Supply Chain -construct describes whatstate of technological readiness the members of the supply chain possess. If thelevel of readiness is high, the use of IT between the members is formalized andstructured (e.g. extranet, EDI etc.). If the utility level is low a single member may

possess good technological readiness but no uniform system or policy for the use ofIT exists between the various functions in the supply chain. By using these twoconstructs as factors, it was possible to roughly classify supply chain management


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into four different management categories, i.e. Functional Management,Information Network Management, Technical Network Management, and Dynamic

Network Management (Figure 1).Functional Management - Companies that follow Functional Management are

companies that do not use long- term contracts and do not like to buildpartnerships. This means that they do not co-operate with other companies and thattheir business activities are mostly based on the ad hoc - principle. Thesecompanies are not used to utilize IT in their normal external activities and they donot belong to any formalized business network.

Information Network Management - According to our evaluation theInformation Network Management area contains the companies whose

purchasing and supply chain management is already very well developed on theconceptual level. The companies have formed an active network, which has clearand consistent objectives. Every member in the supply chain has a structured andqualified position in the network, where all member companies know the needs oftheir end customers. Moreover most agreements between different companies are

based on the win-win principle. In this area integrated use of IT is still low.Typically the companies have their own IT systems, but they do not have specialapplications, e.g. EDI or Extranet, to be used for horizontal and vertical integrationin the supply chain (Figure 1).

Technical Network Management

The companies which, in general, have a very well developed IT system, forexample EDI, Extranet and Internet, belong to the Technical NetworkManagement area. The companies use IT to move their own business processes toanother company but only temporarily. The companies do not commit themselves

to the network or supply chain, so the barrier to entrance into and exit from thesupply chain or the network is low (Figure 1).

Dynamic Network Management - The demands of the Dynamic NetworkManagement area come from the concepts of extended enterprises and virtualsupply chains. In the virtual supply chain companies have organized material,information, product, service and funds flows for example according the model ofCristopher (1998). The system creates a common information highway, whichthe companies control by means of IT, i.e. with different EDI, Intranet, Extranetand Internet applications.

Development of Supply Chain ManagementBy using the above mentioned two constructs and four categories, it is now possibleto find a new challenge on supply chain management. This new potential area ofsupply chain management is illustrated in Figure2. The company reaches theDynamic network management area in its supply chain management by addingknowledge, information, and utilizing of technology to the companys purchasingand supply functions. As Figure 1 illustrates, both development activities areneeded and they should be in balance. In the development process the abovementioned features should be utilized. The features used are chosen so that they fitthe companys business situation in the best possible way. It is important that thecompany forms a measurement system. With the aid of this measurement system,

the company can control the development process.


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Figure 1: Classification of Supply Chain Management

Source: Cristopher. 1998

Figure 2: Development of Supply Chain Management

Source: Cristopher. 1998

SCM Techniques Used in Industry

Researchers in the operations research community have contributed a substantialamount of analysis of the supply chain management strategies actually utilized by

businesses and industry. Lee and Billington (1992) discuss commonly-made pitfallsin supply chain management practices. Tayur et al. (1999) review quantitativeapproaches to supply chain modeling. Their discussion primarily focuses onmathematical and computational analysis of supply chain models. They discuss thedesign and evaluation of supply contracts, the impact of information on decision-making performance, management of product variety, and future researchchallenges. Biswas and Narahari (1999) classify supply chain problems into threecategories based on the expected timeframe of the decisions: strategic, tactical, and

operational. Strategic decisions affect the long-term performance of the supply


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chain, tactical decisions affect medium-term performance, and operationaldecisions affect short-term performance. Operational decisions are under theadditional constraint that they must be made in real-time. They further classifysupply chain decisions into four functional categories: procurement, manufacturing,

distribution, and logistics. They also give a list of measures that can be used toquantify the performance of a supply chain. These measures are useful as metricsfor real-world supply chain situations, but are also useful as measures of the

performance of TAC SCM agents. The measures suggested by Biswas and Narahariinclude:

Customer satisfaction

Product quality

Supply chain lead time

Order-to-delivery lead time

Order fill rate

Probability of on-time delivery

Financial costs

Research Construct

In the competitive global arena, by more effectively managing all internal andexternal value-adding activities, organizations have focused on core competence,and attempted to achieve competitive advantage. To effectively managerelationship with strategic suppliers, many firms have reduced their supply base(Tully 1995). Some literatures indicate that buying firms are developing mutually

beneficial relationships with suppliers and viewing suppliers as virtual extensionsof their firm (Mason 1996; Copacino, 1996). Tan et. Al. (1998) described ten SCM

practices, and showed that some of the practices affected firms performance. On

the other hand, many SCM models have been suggested, these has been a lack ofknowledge on actual industry practice for implementing effective SCM, and theirrelationship to firms performance. Thus, in our study we have proposed 23commonly cited SCM practices from the literatures review. These include practicesrelated to supply and materials management issues, operations, customer service,delivery services, information technology and sharing and so on. Due to theexploratory study in nature, we did not attempt to make any categories or group ofthese activities.In spite of recognizing beneficial the specific practice that result in successful SCMimplementation, it is also essential to understand the primary concerns obstructing asuccessful supply chain. The key goal of realizing these hindrances is to provide

parishioners with a list of issues that adversely impact firms performance andappropriate actions that could be taken. Thus, in our study we have included ninecommonly cited concerns that restrain successful SCM are identified based onliterature review (Keah, 2002). This concern included information capability,ability of managing inventories, competition, geographical distance for bothsuppliers and customers and so on. And again we did not categorized or group forthis concern in survey instrument.Ellram and Pearson (1994) identify that despite the increased concern onintegrating purchasing into overall corporate strategy, the key activities of

purchasing remained a clerical role of negotiating price items. While many SCMstrategies models have been proposed and studied (Frohlich et. Al. 1997; watts et.

Al. 1992; Freeman and Cavinato 1990; Reck and Long 1988) to link the crucialrole of SCM in overall strategic corporate planning, they failed to suggest any


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action model that is useful to practitioners. Despite the significant and theoreticaldevelopment of SCM, there is little empirical research on how practitioners defineand incorporate SCM practice into over all corporate strategy (Keah 2002).Whereas SCM efforts at some companies have resulted in improved

competitiveness, similar results in other organizations have remained elusive. Littleis known about the specific practices or concerns of a successful SCMimplementation. This study investigates these issues by means of empirical data.

Research Methods

Descriptive method of study is more appropriate for the given objectives of thestudy. Hence it is decided to undertake descriptive research study. Descriptiveresearch is not merely data gathering, it may include the investigation of any

possible relationship between two or more variables or objects and prediction offuture events (Peterson and Lewin, 1982). The methodology requires a researchdesign because it provides a framework for carrying out investigation on the subjectmatters. Research design as defined by Churchill (1988) is a framework or plan fora study used as a guide in collecting and analyzing data. In descriptive designinformation sought may come from various sources. Two of the most commonlyused methods are survey type and case study method. For the purpose of thisresearch, a survey method has been used because it provides an in-depthexamination of a given situation.

Questionnaire Design

Many researchers in this area are based on questionnaire survey (Yusuff, 2004).Though there are weaknesses in this methodology, it was deemed for this study asit is exploratory in nature, less time consuming and can target a larger population.

Therefore, a survey instrument in the form of a questionnaire was designed basedon the construct previously described. Respondents were asked to indicate, using afive point Likert scale, the perception of the 23 practices (1- strongly disagree, 5-strongly agree) in their firms SCM efforts. For questions regarding the obstacles ofimplementing SCM in Malaysia, respondents were asked to indicate, on a similarfive point Likert scale, the chance that the nine issues increase difficulties for theirfirm from implementing successful supply chain management. Likert scale alsoused to measure the importance of the supply chain managements objectives.Some other information such as IT uses for their SCM, purpose of IT uses, what arethe operations that they are covered, position of their firm in the SCM anddemographic information were also presented in the questionnaire. The survey

instrument has been pre-tested by managers in supply chain and productionoperations for content validity. Where necessary, questions were reworded toimprove validity and clarity. The pretest questionnaires were not used for sub-sequent analysis.

Sampling Procedure

To make the study free from bias, the designing of the samples and the techniquesthat may be applied for collecting and using those samples are made in theappropriate manner so as to ensure the reliability of the data. Thus, the selection ofthe study area, the selection of the respondents etc. are made in the following order:

Selection of the Sample Size


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In determining the sample size, factors such as precision and confidence, population size, time and cost constraints have been taken into considerations.Further more, according to Roscoe (1975), sample sizes larger than 30 and less than500 are appropriate for most researches. The revised survey instrument was sent to

1153 top managers, mostly production and distribution managers, identified fromthe directory of Federation on Malaysian Manufacturers (FMM) and directory ofMalaysian Industrial Development Authority (MIDA). The questionnaires weremailed on May 1 2008, and followed up post cards were mailed two times. First,remind was sent after three weeks and last remind was sent after 6 weeks. Mailingsand a follow up reminders yielded 72 usable returned surveys.

Selection of Respondents

This research targets single respondent from each target firm, without collectingand cross validating responses from second information from the same firm. Someresearchers argue that relying on single information to answer complex social

judgment about organizational characteristics increases random measures error.Hence, strong assessment of convergent validity cannot be made. However, the costassociated with using multiple informants from each organization is prohibitive(Keah, 2002). Therefore, this study used data from a single respondent whileattempting to minimize the extent of common method variance by targeting thesurveys to top management especially operation manager. It was assumed that theoperation managers were more objective and knowledgeable with respect to thefirms operations.

Respondents Profile

The survey questionnaires were mailed to 1153 target organizations in variousindustry segments in Malaysia. The target population was drawn from the list of

Federation of Malaysian Manufacturers (FMM) and Malaysian IndustrialDevelopment Authority (MIDA) across all industry segments in Malaysia.Responses are received from 72 companies, giving low response rate; there is a

possibility of non-response bias in the mail surveys (Sahay & Mohan, 2003). Butalmost 93 percent of the organizations receiving the survey questionnaires did notrespond, raising the issue of a non-response bias in this study. That is, do the resultsreported in this research misrepresent the true experience and opinions of supplychain management practice in Malaysian industries? We tested this issue by usingchi-square test with 95 percent confidence level and find thatThe distribution of response group by industry category shows no different patternrelative to the population data.

Second, there is no significant difference in response received before remindersafter reminders. We send reminders because we do not get adequate response to doany analysis at the first mailing. The aim of reminders is to get more responses asto ensure representations of all major industry and to provide data relating to anynon-response bias in the original surveys. This helps do analysis and also increasedthe number of response in each industry (Sahay & Mohan, 2003). Eventually, therepresentativeness of the response group is improved. This reminder does assist inobtaining a reasonable overall response rate of 6.23 percent and obtain arepresentative picture of supply chain practice in Malaysian industries.Therefore, validity was provided for the results of representative sample size andeliminating the non-response bias. The 72 responding organizations belonged to

over 12 industry segments including engineering, automotive, consumer durable,


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Industry Wise

0

1

2

3

4

5

6

7

8

9

Engineering

Autom

otive

consum

erDurable

Textile

Telec

ommu

nication

Pharm

aceutical

Oil/G

as

Comp

uterHa

rdware

Service

AgriProduct

Transportatio

Retail

Position of Supply Chain

Raw Material

Component

Final Product

Distribution

textile, telecommunication, pharmaceutical, oil/gas, computer hardware, service,agri-product, Transportation, and Retail. However, the majority of the respondentswere found from service, retail, computer hardware, agri-products, oil/gas,

pharmaceuticals, & automotive (Figure 3). However, results of the study may not

been extrapolated for all individual industry segments because of sample size notbeing representative for individual categories.

Figure 3: Industry Segment

Source: Data Analysis

94.4 percent respondents of this study are using supply chain concept for their

business activities. In terms of their position in supply chain, the distribution of therespondents was given in Figure 3.2. From the Figure 4, we can see that most of therespondents positions in SCM for this study were final product manufacturingfollowed by component manufacturing, distribution and finally raw materialmanufacturing.

Figure 4: Position in SCM


The respondents report the following components of their supply chain in theirSCM efforts as shown in the Table 1. The highest proportion is involved withrecycling and miner/raw material extractors consistent with final product


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manufacturing, raw material manufacturing, physical distribution and retailers.Very few of the respondents were involved in wholesaling.

Table 1: Component of SCM

Results and Discussion

This study designed to examine the barriers and practices of SCM in Malaysianorganizations. This section provides a description of the outcomes of thedescriptive tests done on the major barriers and practices variables amongMalaysian organizations. Before describing the test analysis, we present thereliability results for the two main constructs. The reliability of the scale for thesupply chain activities and hindrances for implementing supply chains wasevaluated using Cronbachs alpha (). Therefore, for the supply chain activitieswas .814 (Table 2), which suggested that the scales were reliable. For thehindrance, the value of was .8737 (Table 2), which also suggest that the scale arereliable. The hindrance to implement SCM scale, which consisted of 9 questions,was the most reliable between the two measurement scales.

Table 2: Reliability Test

Cronbach Alpha () Value

Supply Chain Activities .814

Hindrance for implementation .873

Supply Chain Activities

How extensively is SCM adopted in Malaysian organizations? Businessescompeting globally are under more intense competitive pressure to gain efficiency

and efficacy in their supply and logistics systems. To answer this question, the

Name of the Component Percentage

Physical Distribution 43.1

Miners/Raw Material 94.4

Raw Material Manufacturing 56.9

Final Product Manufacturing 59.7

Wholesalers 5.6

Retailers 31.9

Final Consumer 5.6

Recycling 94.4


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respondents were presented with 23 SCM activities, and asked to evaluate theirimportance in their businesses. Mean responses for the 23 SCM activities shown inTable 3 ranged from 3.28 to 4.41, with a median 4.05. Although activities with ahigher mean value could not be interpreted as statistically more important than the

others, the fourteen highest-ranked activities are determining the use of informalinformation sharing with suppliers and customer, creating a greater level of trustamong the supply chain members, reducing response time a cross the supply chain,

participating in the marketing effort of the customers, increasing the firms JITcapabilities, communicating own firms future strategic needs to the suppliers,creating a compatible communication system with the suppliers and customers,establish more frequent contact with members of supply chain, contacting the endusers of the product/services to get feedback on performance, and on-time deliveryof own firms product/service directly to the customer point of use, determinecustomers future needs, improving the integration of activities across the supplychain, communicating customers future strategies needs among the entire supplychain. The 14 activities, which can be improved by supply chain performance,mostly are related with time based, customer needs and demand, communicationwith members and so on. Surprisingly, geographical proximity (locating closer toyour customers, creating SCM teams that include members from differentcompanies) is not rated at the top of the list. Keah (2002) also identified the sameresult. One would expect geographical proximity between supplies and buyers to becritical for integrating a successful supply chain. The use of formal informationsharing is ranked below the median, suggesting that while the literature focusesinformation sharing through electronic data interchange (EDI) to be a significantcomponent of SCM, these activities can not be improved simply by supply chainactivities. But result shows that supply chain activities can improve the activities ofsharing informal information, which is in the top of the rank.

Another interesting identification is the conflict of our result and literature, thesignificance of the extending supply chain beyond immediate suppliers andcustomers (3.99) and adding the suppliers to increase their JIT capabilities belowthe median. It suggested that these activities can not be improved by supply chainactivities. But Keah (2002) mentioned that SCM involved with second and third-tier suppliers and customers. But some data (Tan et. al. 1998) suggested that

businesses just focus on immediate suppliers and customers and thus ignore thetheoretical total cost reduction opportunities of SCM along the chain. A generalsummarization is that supply chain activities can help to improve mostly timerelated activities of a firm. They also help to improve in communication processwith the members, creating trust, and customer service activities. Thus, by the

supply chain, firms can be more effective in operational activities along withproviding more satisfaction to their customers.

Hindrance for Implementing SCM

While SCM is beneficial to recognize the specific practices that result in successfulSCM implementation, it is also helpful to recognize the main concerns hindering asuccessful supply chain. To identify these hindrances, respondents were presentedwith 9 commonly site concerns, and asked to evaluate the importance in their

businesses. Mean response to questions on hindrances to implement SCM inMalaysia ranged from 3.57 to 4.33 with median of 3.85 (Table 4). While lack ofability in managing inventories throughout the entire supply chain receives highestmean score, several other concerns also received high scores. Based on the mean


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value, the lack of cooperation (4.22) and trust (4.03) among supply chain memberswere ranked higher hindrance than lack of interest (3.88) and competitors fromother supply chain. In this study, competitors from another supply chain wereranked a low hindrance, other studies suggest that it will increase and intensify as

SCM develops and evolves into the next century (Morgan & Monezka 1996).

Table 3: SCM activities

MeanStd.

Deviation

On time delivery 4.14 .657

on time delivery from firm's point of view 4.11 .640

future needs 4.11 .545

JIT capabilities 4.36 .484

integration activities 4.08 .746

get feedback on performance 4.17 .751

new ways of integrate 3.99 .682

more frequent contract 4.29 .659

communicating firm's strategy 4.36 .589

reducing response time 4.44 .500

informal information sharing with 4.63 .488

greater level of trust 4.51 .671

aiding the suppliers to increase JIT 3.69 1.460

participating in marketing efforts 4.37 .846

communicating customer future 4.08 1.071

creating compatibility 4.33 .475

formal information sharing 3.76 .813

finding additional supply chain 3.38 .895

improving all the memebers 3.96 .895

sourcing decision 3.61 .491

creating SCM team 3.28 .938

extending SC to include 3.99 .831

locating closer to the customer 3.71 .458


Surprisingly, our results show that sophisticated information system was not thatmuch problem for the firm, although geographical distance and firms lack ofleverage within their supply chain were ranked as the lower respectively.


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Therefore, from the above result, we can say that even though Malaysian businesses were aware of the SCM philosophy, their actual activities in thisdirection were very limited. Mostly they concern with on-time delivery from theimmediate suppliers, and to the immediate customers. To achieve this goal they

emphases on communications, but still they think there is lack of ability to manageinventories throughout the entire supply chain, cooperation, and trust among supplychain members to implement successful supply chain. This may lead to themanagement to give emphasis on communication processes among the supplychain members.

Table 4: Hindrance for Implementing SCM

Mean Std. Deviation

Lack of sophisticated IS 3.64 1.052

Geographical distance 3.64 1.179Lack of ability in managing

inventories

4.33 .949

Lack of trust 4.03 1.162

Lack of cooperation 4.22 .791

Firms lack of leverage 3.57 .668

Competition from other SC 3.68 .470

Customer geographical distance 3.72 1.213

Lack of interest 3.88 .473Source: Data Analysis

IT Usages in SCM

Dramatic economic and strategic changes brought about by recent advances intechnology, including the Internet and World Wide Web (WWW) has expanded thescope. These changes have been more evident than in supply chain functioninventory control, logistic and so on. The dramatic growth of the importance of ITis a testimony to the impact of information sharing, which has significant impact ingathering and analyzing these to take decisions. Information has a deep effect oneach part of supply chain to maximize total supply chain profitability. It acts as aconnection between various stages of supply chain and facilitating then tocoordinate their activities.

Present use of IT applicationsFrom the result we revealed that every respondents of this study were using an ofthe software package for their business activities. A total of 87.5 (Table 5) percentof respondents are using Enterprise Resource Planning (ERP)/ ManufacturingResource Planning (MRPII) in Malaysian environment. Next most usages ITapplication was Material Accounting in this study, 69.44 (Table 5) percent ofrespondents were using this IT application. 59.72 (Table 5) percent of respondentswere using Supply Chain Management, which showed that the prospect and usageswere pretty good among the Malaysian organizations. Software package forWarehouse Management and Sales and Distribution were used by 55.55 and 43.05(Table 5) percent respectively. Very few respondents were using Computer Added

Design, Computer Aided process planning and Manufacturing Execution System,


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Engineering Data Management, Demand Management, Process Control andOptimization and Shop Scheduling and loading application were yet to percolate inMalaysian organizations.

Table 5: Present Use of IT application

IT applications Percent

ERP/MRP 87.5

Material Accounting 69.44

Supply Chain Management 59.72

Warehouse Management 55.55

Sales and Distribution 43.05

CAD/Drafting 20.83Computer Aided Process Planning 13.88

Manufacturing Execution Systems 9.72Source: Data Analysis

IT application for Supply Chain

Existing IT solution encompass the business operations covering web technology,EDI with carriers, EDI with customers, facility network planning, EDI withsuppliers, Automatic freight payment, distribution requirement planning, barcoding, freight cost management, distribution networking planning, lot tracking,monitoring cost performance, sales return, warehouse management, orderfulfillment, inventory management. Surprisingly, all of the respondents had eitherusing or were implementing any of the IT solutions. However, all the respondentswere using bar coding and most of the respondents were using EDI with suppliers(93.05 percent) and Inventory management (84.72 percent) Table 6. Moreover, theywere also using EDI with carriers (54.16 percent), EDI with Customers (43.05

percent), Warehouse management (48.61 percent) Freight cost management (33.33percent), Lot tracking (29.16 percent), Distribution network planning (19.44, Webtechnologies (26.38 percent) Table 6. However, the proposed IT solutions showed aclear shift to areas which involve networking with business partners. The futureareas of operations for IT solutions include Web technologies, EDI with customers,distribution networking planning, lot tracking, and freight cost management. (Table

6).

Alignment of Supply Chain strategies with business strategies

Our result showed similarity with the result of Sahay et. al. (2003). Enhancingcustomer service got the highest score all other objectives in terms of theireffectiveness to the supply chain management. Beside this, reducing inventory cost,lowest product cost, improving on-time delivery and highly reliable productfollowed closely in terms of supply chain priorities. The entire there objectivesstated in the table 7 were the most important for any supply chain strategies (Sahayet. al. 2003). Thus, improvement in these has direct effect on the bottom line of the

organizations. Most of respondents had given emphasis to enhance customer


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service as the most important objectives for effectiveness of supply chainmanagement.

Table 6: IT application for SCM

Current

Web technologies 26.38

EDI with carriers 54.16

EDI with customers 43.05

Facility Network Planning 13.88

EDI with suppliers 93.05

Automatic Freight Payment 0

Distribution networking planning 19.44

Bar Coding 100

Freight Cost Management 33.33

Lot tracking 29.16Monitoring cost performance 0

Sales return 13.88

Warehouse management 48.61

Order fulfillment 0

Inventory Management 84.72Source: Data Analysis

Managerial Implementation

After analyzing and findings of the research data, this study proposed some

suggestions for perfecting the supply chain. Supply chain management had madeinroads in the operation of Malaysian organizations. A lot of them had evolvedtheir supply chain strategies and were now in the phase of implementing them. Tomeet the competitive business challenges Malaysian organizations need tosynchronize supply chain strategy with the business strategy. Currently, themajority of Malaysian organizations had a weak coordination of supply chainstrategy with their business strategy. This is because they have failed to follow a

process oriented function style. Still organizations were stiffly structured alongfunctional lines with department specific performance measure. Thus, Malaysianorganizations need to resolve the performance measurement issues so that they cansynchronize supply chain objectives with their business objectives. By synchronize

one-to-one alignment of the three dimensions of both the supply chain strategy andbusiness strategy; organizations can have optimal strategic solution.According to our result, it is clear that Malaysian organizations have positive

perception toward supply chain activities. They have realized that supply chainactivities must be straightened up for profitability. But, unfortunately many of themare not taking any serious movement on this. Thus, Malaysian organizations needto change the way people think about supply chains- the burden of which falls onthe top management.It is imaginable to carry out all the activities in the demand fulfillment process bysingle entity. However, supply chain management provides the capability to capturedemands from the market, quickly translate it to supplier requirement and

eventually fulfill consumer needs (Sahay & Mohan, 2003). The entire exercise


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involves building alliance with the supply chain partners. Thus, Malaysianorganizations should collaborate with their supply chain partners for all theactivities which involve in the demand management. A truly collaborative supplychain needs huge commitment by all the members of the chain. it consists of a dual

strategy of breeding trust as well as optimizing resource, performance, and gainacross the supply chain.

Table 7: Alignment of Supply chain Objectives and business objectives

Focal area Business

Objectives

Supply Chain Objectives Important to

the

Respondents

High: Customer

Service

Maximize

customer

satisfaction

Enhance customer

service/satisfaction

Highly reliable product

Best product performance

Improving On time

delivery

4.23

4.67

4.10

4.70

Medium: Profit

Maximization

Maximize profit

Delivery value

to shareholders

Increase

turnover

Increase return

Expanding profit

Reducing inventory cost

Reducing lead time

Lowest product cost

Reducing order to delivery

cycle time

Reducing transportation

cost

Reducing warehousing cost

4.34

4.73

3.84

4.53

4.13

4.23

4.05

Low:

Operational

excellence

Increasing

earning per

share

Flexibility of production

volume

Flexibility product mixInnovating new

product/service

Expanding width/depth of

distribution

Offer broad product line

4.38

4.01

4.203.96

3.57



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Currently, in the business arena technology has become a mandatory element fordoing business activates. This technology helps businesses to analysis theircustomer requirements, forecast demands for future, and differentiate products andservices, design new products and services and so on. Therefore, IT can achieve

breakthroughs in the area of supply chain design configuration and planning. Fromthe result we can reveal that Malaysian organizations are using handful IT tools fortheir businesses. Fewer of the companies are using EDI, although very lessrespondents are using web technology for their supply chain functions. To competein todays environment IT tools are main weapon for the businesses no matter thesize of the organizations; and technology cost has also been reduced so that eventhe smallest organization can now afford them (Sahay et. al. 2003).All the above mentioned steps are neither easy nor a simple task to achieve. Butmany companies across the world have been benefited by doing this. They havedrastically reduced logistics cost and inventory investment, at the same timeincreased customer value and enhanced response speed of order fulfillment.Consequently, they increase handful wealth for doing business and providing valuefor all stakeholders continuously. And those who ignore this epitome will see theircustomers disappear in the face of competition (Sahay et. al. 2003).

Limitation of this research

Limitation like many other researches that have been conducted, this research alsocan not escape from its own limitation that may have affected the results either inone way or the other. One significant limitation of this study is that the researchersonly managed to get response of 72 companies. Their perceptions and opinionsmight not reflect the actual practice of supply chain among MalaysianOrganization. But the direction of SCM practices in Malaysian organizations is inappropriate direction for future growth in a competitive manner.

Further Research

This exploratory research motivates the way for other in-depth studies of some ofthe critical processes identified for supply chain practice. It should also encourageresearches to compare current status of SCM in Malaysian with other developedand developing countries such as Singapore, U.S.A. In fact, further research can becarried out using a specific case to synchronize supply chain strategy with businessstrategy. Finally, research could be on the impact of Internet in supply chain

practice.

Conclusion

This study is an effort to assess the proximity of current supply chain practicesamong the Malaysian organizations. The results reveal that Malaysianorganizations have started their journey toward world class supply chain systems.However, there are areas in which further improvements are necessary, such ascooperation among supply chain partners, managing inventories, and trust among

partners. They need continuous improvement by enhancing their strength andeliminate their weaknesses to achieve world class supply chain. They can also use

benchmarking to evaluate their ability to compete in the world market. Bycontinuously assessing their practice with best practice through benchmarking theorganizations can obtain insights into the level of competitiveness (Yusuff 2004).This paper has outlined the supply chain practices followed by Malaysian

organizations. And we recommend that Malaysian organizations should


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