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Int. J. Production Economics 122 (2009) 133149

Contents lists available at ScienceDirect

Int. J. Production Economics


journal homepage: www.elsevier.com/locate/ijpe

A causal analysis of the impact of information systems and supply


chain management practices on operational performance: Evidence
from manufacturing SMEs in Turkey
Erkan Bayraktar a, Mehmet Demirbag b, S.C. Lenny Koh b,, Ekrem Tatoglu c, Halil Zaim d
a

Bahcesehir University, Faculty of Engineering, Besiktas, Istanbul 34349, Turkey


University of Shefeld, Management School, 9 Mappin Street, Shefeld S1 4DT, UK
Faculty of Economics and Administrative Sciences, Bahcesehir University, Besiktas, Istanbul 34349, Turkey
d
Fatih University, Faculty of Economics and Administrative Sciences, Buyukcekmece, Istanbul 34500, Turkey
b
c

a r t i c l e in fo

abstract

Available online 31 May 2009

This study has empirically tested a framework identifying the causal links among supply
chain management (SCM) and information systems (IS) practices, SCMIS related
inhibiting factors and operational performance based on a sample of 203 manufacturing
SMEs operating in the manufacture of fabricated metal products and general purpose
machinery within the greater metropolitan area of Istanbul in Turkey. Moderating effect
of SCM and IS related enabling factors on the above mentioned relationships is also
investigated in this study. Tests of hypotheses indicate that both SCM and IS practices
positively and signicantly inuence the operational performance of sample rms. The
results of the structural model also indicate a strong support for negative relationships
between SCMIS related inhibitors and the implementation levels of both SCM and IS
practices. Similarly, a strong support was found for the hypothesized negative
relationship between SCMIS inhibitors and operational performance of SMEs. Finally,
we veried the moderating impact of SCMIS enablers on the link between SCM
practices and operational performance. A similar moderating impact was also found
with regard to the relationship between IS practices and operational performance.
& 2009 Elsevier B.V. All rights reserved.

Keywords:
Supply chain management
Information systems
Operational performance
SMEs
Turkey

1. Introduction
Spurred by intensifying competition in global markets,
most companies have been increasingly implementing
supply chain management (SCM) and information systems (IS) practices. Lean practices have long dominated
companies to accomplish excellence in their business
operations. Information systems facilitated by technological advancements attempt to integrate many business
processes for fast, accurate and on-line access to data.
With the increasing use of integrated information systems

 Corresponding author. Tel.: +44 114 222 3395; fax: +44 114 222 3348.

E-mail address: S.C.L.Koh@Shefeld.ac.uk (S.C.L. Koh).


0925-5273/$ - see front matter & 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2009.05.011

and enabling technologies, it has now become possible to


create seamless supply chains linking suppliers to customers in order to eliminate the poor performance of the
suppliers, unpredictable customer demands, and uncertain business environment. An integrated supply chain has
a clear advantage on the competitiveness of the individual
rms. As a result, the chainchain competition has started
to take over the enterpriseenterprise competition,
although many enterpriseenterprise competitions do
exist particularly in the less developed economies (Koh
et al., 2006). The forward-looking enterprises today are
dynamic; they collaborate with suppliers, customers and
even with competitors; share information and knowledge
aiming to create a collaborative supply chain that is
capable of competing if not leading a particular industry.

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Hence, gaining competitive edge through effective use of


SCM and IS practices in a highly competitive environment
becomes increasingly difcult and crucial in order to
optimize the rms operational performance, if not
impossible. Such increased competition has even greater
effect on small and medium size enterprises (SMEs) due to
the possible external pressure from large size customers
and also internal pressure of resource limitations of most
SMEs. Without an adequate understanding of the SCM and
IS related enabling and inhibiting factors, it is unlikely to
accurately evaluate the effect of the SCM and IS practices
on operational performance of manufacturing SMEs.
Although the needs and operating environment of
SMEs are very different from those of large rms, the
question still remains open on how well the use of SCM
and IS practices ts with SMEs. Despite their widely
accepted benets, there is a dearth of literature regarding
the use of SCM practices and their effects on the
performance of SMEs particularly in emerging countries
such as Turkey. The use of IS in large rms provide major
opportunities for acquiring added value with the exploitation of the information resource and also serves a major
driver of strategic change (Levy et al., 2002). There is,
however, less evidence of SMEs investing in IS to capture
similar benets. SMEs have signicant impact on supply
chain performance, where they may serve the roles of
suppliers, distributors, producers and customers (Hong
and Jeong, 2006; Koh et al., 2007). In several emerging
countries, SMEs form the largest group of manufacturing
rms which essentially provide specialty manufacturing
and support services to large rms (Huin et al., 2002).
SMEs also play a very crucial role to the economies of
most emerging countries from the viewpoint of generating employment and economic growth (Demirbag et al.,
2006). They account for more than half of the employment and value added in most countries (UNCTAD, 1993).
Similar trend is also observed in Turkey where SMEs
constitute 99.5% of all business establishments and
employ 61.1% of the workforce (Yilmaz, 2004).

In view of the fact that the success of small business


has a direct impact on the national economy, this study
serves essentially three main goals. First, based on a
sample of SMEs operating in two sub-sectors of manufacturing industry within the greater metropolitan area of
Istanbul in Turkey, this study seeks to determine the
underlying dimensions of SCM and IS practices. Next, we
empirically test a framework identifying the causal links
among SCM and IS practices, SCM and IS related inhibitors
and operational performance. Finally, we investigate the
moderating effect of SCM and IS related enablers on the
above mentioned relationships. Relying on the perceptual
assessment of managers, this study in general contributes
to extant research by identifying the critical SCM and IS
practices and their impact on operational performance
specic to Turkish manufacturing SMEs.
The remainder of this study is organized as follows.
The next section presents the literature review that helps
to underpin the research framework and sets out the
studys hypotheses. The research methodology is presented in the third section. Results and discussion are in
section four followed by conclusion and implications.
2. Literature review and hypotheses
The research framework developed in this study is
presented in Fig. 1. The framework proposes that SCM and
IS practices implemented in SMEs will inuence their
operational performance. In doing this, the framework
also considers the direct impact of SCMIS related
inhibitors as well as the moderating impact of SCMIS
related enablers on the operational performance of SMEs.
A detailed description of both the SCM and IS practices
constructs along with SCMIS related inhibitors and
enablers constructs is provided in the following subsections. Based on the extant literature, a number of
hypotheses are developed with respect to the proposed
relationships among SCM and IS practices, SCMIS
inhibitors, enablers and operational performance of SMEs.

SCM Practices

SCM- IS
Inhibitors

SCM- IS
Enablers as
Moderator

Operational
Performance

IS Practices
Fig. 1. Research framework.

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2.1. SCM practices


The supply chain concept is theorized from the
formation of a value chain network consisting of individual functional entities committed to providing resources
and information to achieve the objectives of efcient
management of suppliers as well as the ow of parts (Lau
and Lee, 2000). SCM includes a set of approaches and
practices to effectively integrate suppliers, manufacturers,
distributors and customers for improving the long-term
performance of the individual rms and the supply chain
as a whole in a cohesive and high-performing business
model (Chopra and Meindl, 2001). As dened by the
Council of Supply Chain Management Professionals
(CSCMP), SCM encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities
as well as coordination and collaboration with channel
partners.
The literature is replete on the dimensions of SCM
practices from variety of perspectives. In a more recent
study, Li et al. (2005) attempted to develop and validate a
measurement instrument for SCM practices. Their instrument has six empirically validated and reliable dimensions which include strategic supplier partnership,
customer relationship, information sharing, information
quality, internal lean practices and postponement. Strategic supplier partnership represents the long term relationship between the organization and suppliers. Customer
relationship covers the practices on complaint handling,
customer satisfaction and long-term relationship establishment. Information sharing means the information
communicated between partners where the accuracy,
adequacy and timeliness refer to the quality of information. Lean practices are represented by the elimination of
waste, low inventory, small lot sizes and JIT delivery.
Postponement is the delayed differentiation of products
on the supply chain.
Relying on the extant literature, this study identies a
set of twelve SCM practices, contributing to operational
performance. Close partnership with suppliers concerns
with cooperation between buyer and supplier, and this is
the starting point to establish a successful SCM and a
necessary, but insufcient condition. The next level
requires coordination and collaboration between buyer
and suppliers. This includes specied work-ow, sharing
information through electronic data interchange (EDI) and
the Internet, and joint planning and other mechanisms
that facilitate the just in time (JIT) system and total
quality management (TQM) in the company (Spekman
et al., 1998; Mistry, 2005). This kind of partnership could
lead to reduced lead-time in production.
Downstream supply chain management can be
deemed by demand chain management (Frohlich and
Westbrook, 2002; Hsu, 2005), and in this context,
establishing close partnerships with customers are essential. Building a close partnership with customers is equally
important as establishing a close partnership with
suppliers, though the existing literature focuses on the
latter rather than the former. More research is denitely
called for to uncover the importance of partnering with

135

customers. It must be noted that the partnering with


customer is slightly different from building customer
relationship in that the latter focuses on relationships
management while the former focuses on either joint
venture and/or long-term supply agreement. Such partnering results in better demand forecasting, which in turn
leads to improvement in resource planning and operational efciency.
JIT is an integrated set of activities designed to achieve
high volume production using minimal inventories of raw
materials, work in process and nished goods (Spekman
et al., 1998). Therefore, JIT supply requires the suppliers to
produce and deliver to the manufacturer the right
quantity at the right time with the objective of continuous
and consistent conformance to performance specications
(Canel et al., 2000; Mistry, 2005; Kros et al., 2006).
With this SCM practice, it is envisaged that lead-time
in production, inventory level and holding cost could
be reduced.
Conventionally, strategic planning focuses on the manufacturing process, technical innovation, nancial considerations and market penetration. Firms integrate strategies
in each of these areas to produce and sell high-quality
products at a low cost. Given the state of technology at
present, a competitor often can match any single rms
advantage in these areas. Thus, rms have begun to explore
ways to create competencies in the supply chain through
more efcient distribution networks (Tan, 2001; Lin and
Tseng, 2006), improved quality and reduced total cycle
time, better post-sale service and higher responsiveness to
customer needs (Carter et al., 1997).
Traditionally, vendors are selected from among many
suppliers in terms of their ability to meet the quality
requirements, delivery schedule and the price offered
(Trkman and McCormack, 2009). In this approach, suppliers
aggressively compete with each other. The relationship
between buyer and seller is usually adversarial. The main
purchasing objective in this approach is to obtain the lowest
possible price by creating strong competition between
suppliers, and negotiating with them.
In contemporary business, many rms prefer a strategy
of using few suppliers (Chandra and Kumar, 2000; Chen
and Paulraj, 2004). This strategy implies that a buyer
wants to secure a long-term relationship and the
cooperation of a few dedicated suppliers. Using few
suppliers can create value to the buyer and yield lower
transaction and production costs.
Benchmarking of supply chain performance enables
comparison between peers supply chain and competitors
supply chain. This stimulates continuous improvement
and hence allowing key performance indicators such as
delivery speed, enhanced service quality and experience
to be re-positioned and re-valued over time subject to
market forces and dynamics. This SCM practice leads to
improved operational efciency as a result of striving for
continuous improvement.
Holding safety stock and sub-contracting have been
two of the widely adopted SCM practices to cope with
uncertainties in a supply chain (Koh and Tan, 2006). It
should however be noted that most SMEs may not have
the required capacity and resources to maintain safety

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stock. Then, in this case, sub-contracting becomes an


appropriate SCM practice when dealing with supply chain
uncertainties under resource constraints.
Electronic procurement (e-procurement) as a virtual
purchasing application also enhances visibility of data by
leveraging supplier negotiations. It allows a company to
control their suppliers, hence reducing purchasing cost
(Rahman, 2004; Gunasekaran and Ngai, 2008). Very often,
an e-procurement tool also interfaces with an ERP to
automate many purchasing and payment tasks (Koh et al.,
2006; Gunasekaran et al., 2004).
Many rms at present have been revising their
priorities and focusing their resources on a limited
number of selected activities and processes to gain more
competitive advantages. The outcome of this trend is that
rms increasingly outsource some non-core activities and
processes (Sink and Langley, 1997). As competition
becomes more intense, many rms are considering the
option of logistics outsourcing in order to streamline their
value chains (Franceschini et al., 2003). Boyson et al.
(1999) noted that outsourcing relationships historically
are based on routine functions, such as warehousing
operations and freight payment, whereas at present they
are based on logistics activities that require more strategic
knowledge and expertise, such as information systems,
inventory management and customer order fulllment. A
third-party logistics (3PL) is a type of services of multiple
distribution activities provided by an external party
(assuming no ownership of inventory) to accomplish
related functions that are not desired to be rendered
and/or managed by the purchasing enterprise (Sink et al.,
1996). The use of a third-party provider for all or part of an
enterprises logistics operations (Coyle et al., 1996) is
increasingly popular (Lambert et al., 1999; Marasco,
2008). Coyle et al. (1996) identied several key benets
of logistics outsourcing, including operating cost reduction, service level improvement core competence prioritization, employee based reduction and capital cost
reduction.
The previous research as noted above clearly demonstrates that these SCM practices lead to higher levels of
operational performance, and this argument can be
generalized to all manufacturing rms regardless of their
size. There is, however, no specic indication on which
particular SCM practices enhance SMEs operational
performance. Based on this discussion, we expect that:
H1. SMEs with higher levels of SCM practices will have
higher levels of operational performance.
2.2. IS practices
Managing a manufacturing operation includes a wide
range of activities ranging from production planning and
control, material sourcing to production scheduling,
logistics and distribution network optimization, evidenced with the necessary information ows within and
between departments and rms, which are supported by
relevant information systems. Most manufacturing rms
implement various IS practices to achieve agility and
improve operational performance (Swafford et al., 2008).

These practices include material requirements planning


(MRP) (Koh, 2004), manufacturing resource planning
(MRPII) (Stevenson et al., 2005), enterprise resource
planning (ERP) (Koh et al., 2006), supplier relationships
management (SRM) (Choy et al., 2004), customer relationships management (CRM) (Tang et al., 2005) and
advanced planning systems (APS) (Lockhamy III and
McCormack, 2004). This study identies a set of 13 IS
practices with each of these having their own specic
purposes and benets.
MRP and MRPII are production planning and control
systems used to coordinate order fulllment by synchronizing material and resources availability to customer
demand. Effective use of these systems could result in
better resource planning and reduced inventory level,
through releasing purchase and/or work orders only when
they are needed. ERP system is an integrated application
program for enterprise business organization, management and supervision (Davenport, 2000). ERP technologies have been designed to address the fragmentation of
information across an enterprises business, to integrate
with intra- and inter-enterprise information (Sharif et al.,
2005), and to provide an integrated platform for an
enterprise-wide information system which is an extensive
upgrade from its ancestors, i.e. MRP and MRPII.
Not every enterprise could afford an ERP system. For
instance, a large scale ERP system implementation (e.g.
SAP) could cost up to 4million, whilst a mid-range ERP
system implementation (e.g. Sage) could cost around
25,000. Such price range shows that medium and large
enterprises are the likely users of large scale ERP system.
Even though increased number of SMEs has started to
adopt mid-range ERP systems (Loh and Koh, 2004), its
predecessors, MRP and MRPII, are still very popular
particularly amongst the manufacturing SMEs (Loh and
Koh, 2004).
When considering ERP integration between enterprises
for a seamless supply chain performance, the differences
related to various types of ERP adapted by suppliers and
customers in the supply chain could create interoperability problems. To this end, the concept of extended
enterprises was purported to study the role of ERPII,
which could be operationalized by extended enterprise
application (EEA) and/or enterprise application integration (EAI) to create links between different ERP systems to
be integrated in a supply chain (Loh et al., 2006). With
effective use of MRP, MRPII and ERP, it is envisaged that
lead-time in production and inventory level could be
reduced, while resource planning and operational efciency could be improved. These IS practices reduce
manual paperwork and hence are likely to lead to reduced
ordering cost and eventually cost saving in the entire
process. With the Master Production Schedule module
within MRP, MRPII and ERP, an improved demand forecast
may also be expected, particularly with the feedback loop
available through MRPII and ERP.
However, it must be noted that an enterprise must not
rely solely on these IS practices for managing their
operations (Koh et al., 2006). Due to its system rigidity
and incapability to deal with uncertainty (Koh and
Saad, 2002), other systems such as APS, SRM and/or

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technologies such as radio frequency identication (RFID),


mobile and wireless technologies, would help to improve
order, part and product traceability and operational
efciency (Koh and Gunasekaran, 2006; Sevkli et al.,
2007).
APS predicts potential future effects on the plan as a
result of historical uncertainty pattern and potential
future uncertainty. With its effective use, this IS practice
will result in better forecasting and improved resource
planning leading to better operational efciency.
On the downward supply chain, SCM and SRM systems
manage the procurement and relationships with suppliers
in order to secure delivery of bought-out materials and
components required for in-house production. These IS
practices also enable partnership building, performance
evaluation and purchase strategy to be enhanced, thus
reducing lead-time in production, improving resource
planning and operational efciency, and reducing inventory level. On the upward supply chain, CRM system might
be used to build relationships with customers and
customize future marketing strategy according to specic
customer needs, thus resulting in better demand forecasting. Enterprises combine these IS practices in order to
optimize the supply chain and operational performance.
E-commerce and e-business have received signicant
research attention over the past few years. Many rms
have set-up e-commerce and e-business applications
to reduce direct and indirect costs in the business.
E-commerce enables rms to market their product/service
on the web and also allows on-line transaction and
payment to take place. E-business, however, extends the
features within e-commerce, with the addition of integration of such a set-up to the backward supply chain,
i.e. replenishing the supplies on-line in tandem with
receiving customer orders. Therefore, rms that adopt
e-business practices are considered to employ CRM, ERP
and SRM/SCM philosophies, and this could take place at
the B2B level and/or B2C level.
It will not be complete unless a rm links and feeds the
information from the systems discussed above into a DSS
for holistic decision making. However, it will not be
surprising to note that many rms do not fully integrate
these systems for decision making. DSS helps a rm,
especially one that is subject to dynamic market changes
and instability, to consolidate the information from
various systems together in order to make the most
suitable decision considering all constraints. This will
assist forecasting; optimize resource planning and
operational efciency; and ultimately provide a more
accurate costing.
Tagging and satellite technologies such as RFID, global
positioning system (GPS) and wireless and mobile
technologies have been applied to several industries
including manufacturing (Lu et al., 2006), service (Wu
et al., 2005), logistics and distributions (Giaglis et al.,
2004), healthcare (Tzeng et al., 2008) and retailing (Prater
et al., 2005). These technologies are normally used along
with IS systems to allow ubiquitous ow of information in
the supply chain (Ngai et al., 2008). Hence, these
technologies can be classied as part of the IS practices.
The importance of better tracking of products logistics,

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improved efciency in information processing, improved


security, reduced counterfeit, fast-tracked quotation and
ordering, improved customer relationships, better control
of supplies on the SCM performance has been repeatedly
reported by the cases such as Frankfurt Airport in
Germany and Wal-Mart in the USA, even though these
cases often are from more developed countries where
appropriate infrastructure is in place.
Electronic data interchange has been used widely to
transfer information between suppliers and customers in
a supply chain. Bar coding is still heavily used to ensure
part and product tagging. These long-established technologies are not expensive as compared to RFID, when
considering their robust implementations at all micro
macro and backwardforward levels in a supply chain.
Although the cost of RFID tag is decreasing rapidly (Smith,
2005), the reader standard and interoperability with
suppliers persist to be a constraint for its integrated
application in a supply chain. Smith (2005) argued that
RFID should be viewed as a transformational event rather
than a technological innovation. From the security
perspective, it was identied that RFID technology
provides both business and consumers with enormous
economic benets, while simultaneously, potentially constituting one of the most invasive surveillance technologies threatening consumer privacy (Kelly and Erickson,
2005). Nonetheless, Smith (2005) argues that RFID is a
smart technology on which counteracting theft outweighs
consumer privacy invasion.
It must be emphasized that these tagging and satellite
technologies could improve operational performance
when implemented and used correctly. For example, RFID
tags on products enable accurate counting and locating of
the subjects in real-time and hence improving operational
efciency. EDI allows suppliers to ascertain when to
replenish the parts/products, thus reducing inventory
level and improving forecasting.
Most of the existing research concentrates on these IS
practices in relatively large size rms with only few
studies however focusing on their uses in small business
environments. It may therefore be not unreasonable to
expect that the implementation of IS practices may also
lead to an increase in the operational performance of
SMEs. This leads to the following hypothesis:
H2. SMEs with higher levels of IS practices will have higher
levels of operational performance.
2.3. SCMIS inhibitors
Understanding the effect of SCM and IS practices on
SMEs operational performance will not be complete
unless due consideration is given to explore the SCM
and IS related inhibiting factors. SCMIS inhibitors consist
of factors that prevent the achievement of the operational
performance through SCM and IS practices. In this study, a
set of SCM and IS inhibitors are identied.
The SCMIS inhibitors include resistance to change
from employees, insufcient vendor support, integration
with suppliers and customers systems, integration
within existing system, resources shortages and skills

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shortages. In the adaptation and implementation of SCM


and IS practices, resistance to change from employees is
one of the fundamental factors which prevent enterprise
fully exercise the benets of SCM and IS practices. For
example, implementing an ERP system within a rm
requires business process reengineering. As part of the
reengineering process, employees have to change their
normal operating practices to suit the ERP practices. Such
requirements to change and get employees to buy in,
especially in industry where the employees have been
working for many years, are difcult to achieve. This
inhibiting factor will negatively impact the operational
performance. Likewise, implementing any IS practice
requires appropriate vendor support. The deciency in
this regard will reduce operational performance of the
IS users.
It is important to recognize that when implementing IS
practices within a rm, its integration issues have to be
scrutinized. This includes the IS integration with suppliers
and customers, and also within the existing system in the
rm. For example, using modules from different ERP
systems prevents full integration of the modules and
hence prohibiting information access and sharing between modules and departments. Incompatibility of
systems used by suppliers, the rm and customers
prevent information exchange and sharing, which will
reduce operational efciency in the whole supply chain.
SMEs, especially those in emerging countries, tend to
have limited skills and resources. Subsequently, this will
result in their inability to implement the SCM and IS
practices as intended, which will in turn reduce their
operational performance.
This discussion suggests that the SCMIS inhibitors
affect negatively the SMEs operational performance.
Although this relationship has not been empirically
examined in previous research, it is axiomatic that these
inhibitors are likely to constitute the core reasons
preventing SMEs to improve their operational performance. This leads to the following hypotheses:
H3a. There is a negative and strong direct relationship
between SCMIS inhibitors and the implementation level of
SCM practices.
H3b. There is a negative and strong direct relationship
between SCMIS inhibitors and the implementation level of
IS practices.
H4. There is a negative and strong direct relationship
between SCMIS inhibitors and the level of operational
performance.
2.4. Moderating impact of SCMIS enablers
Understanding the effect of SCM and IS practices on
SMEs operational performance will not be complete
unless due consideration is placed on exploring the SCM
and IS related enablers (Li et al., 2008). These enablers
consist of factors that facilitate the achievement of the
operational performance through SCM and IS practices. In
this study, the following eight SCMIS enablers are
identied, which include more education, more funding

and nancial support, improved information provision,


easier access to vocational training, more inter-country
regional agreements, better infrastructure, increased
regional cooperation between institutions and close
cooperation between rms and governments. More
education, more funding and nancial support are
deemed to be necessary for a successful implementation
of IS practices. The information systems as mentioned
earlier are highly specialized and technical systems, which
necessitate provision of appropriate training and qualications in order to operate effectively. Given the fact that
SMEs may not have the nancial resources and relevant
expertise to achieve this, it is important to acknowledge
that the enabling conditions may be provided through
alternative methods such as government funding, university sourcing and research centre expertise. With such
SCMIS enabling factors that improved operational performance is likely to be achieved by implementing
appropriate IS practices.
It has been reported that SMEs, particularly those in
the emerging countries do not have adequate information
concerning with any new IS practice available to improve
their operational performance. Although industrial exhibitions are available, many SMEs do not take part and
hence do not have the latest information of any new IS
practices. Therefore, improved information provision to
SMEs will enable them to realize the operational improvement via effective use of IS practices.
In a similar vein, SMEs do not also have an easy access
to vocational training. This implies that the workforce
may not be fully qualied to perform specic tasks (e.g.
use of e-procurement). This type of skill shortage could
be resolved through the provision of vocational training
to SMEs, e.g. free training courses provided by the
government bodies. With improved access to vocational
training, it is expected that the SMEs operational
performance could be improved by effective use of both
SCM and IS practices.
It is also envisaged that SMEs operational performance
could be enhanced by engaging in more inter-country
regional agreements. Supply contract in this regard
promotes cross border business cooperation and hence
may foster sourcing for cheaper and more suitable
supplies from other countries, leading to cost saving.
Provision of better infrastructure is another key enabling
factor for distributing goods ordered in the supply chain.
Most emerging countries suffer from lack of adequate
physical, nancial and judicial infrastructure for business
in terms of telecommunication network, road access,
economical and political instability. Therefore, a better
infrastructure is expected to improve the implementation
of SCM and IS practices and their effect on operational
performance.
Increased regional cooperation between institutions
and close cooperation between rms and governments
will stimulate the formation of various forms of inter-rm
collaborations in terms of joint venture, new product
development, new technology acquisition, new licensing
requirement, patenting and innovation. These SCMIS
related enablers are likely to create business opportunities
for SMEs and hence may improve their operational

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performance, e.g. establishing a joint venture to develop


a new product will result in better operational efciency
in-house.
These SCMIS enablers are undoubtedly important
contributing factors to improve operational performance
of SMEs, which leads to the following hypotheses:
H5a. The positive relationship between SCM practices and
operational performance is greater when the level of SCMIS
enablers is high than when the level of SCMIS enablers
is low.
H5b. The positive relationship between IS practices and
operational performance is greater when the level of SCMIS
enablers is high than when the level of SCMIS enablers
is low.
3. Research methodology
3.1. Sample and data collection
A survey instrument was developed to investigate the
impact of SCM and IS practices on the operational
performance of SMEs. The questionnaire was pre-tested
several times to ensure that the wording, format and
sequencing of questions were appropriate. Occasional
missing data on variables was handled by replacing them
with the mean value. The percentage of missing data
across all data was calculated to be relatively small.
There is no consensus on the denition of SME, as
variations exist between countries, sectors and even
different governmental agencies within the same country
(Yusof and Aspinwall, 2000). In line with small business
research, this study adopted the number of employees as
the base for the denition of SME. An SME is identied as
one that employs fewer than 250 employees. The minimum of at least 10 employees was also chosen in order to
exclude micro rms that would not be suitable for the
purposes of this study. This range is consistent with the
denition of an SME adopted by both the Turkish
State Institute of Statistics (SIS) and Turkish Small
Business Administration and also by a number of
European countries such as Norway and Northern Ireland
(Demirbag et al., 2006; Sun and Cheng, 2002; McAdam
and McKeown, 1999).
Data for this study was collected using a selfadministered questionnaire that was distributed to 800
SMEs operating in the manufacture of fabricated metal
products and general purpose machinery (NACE codes 28
and 29) within the greater metropolitan area of Istanbul in
Turkey. These two industries are highly diverse and
heterogeneous spanning manufacture of structural metal
products, manufacture of tools and cutlery to manufacture
of machinery for production, manufacture of engines,
turbines and other special purpose machinery. Through
the products that they create, their size and their ability to
create employment, these two industries are likely to
inuence a countrys gross domestic product (GDP). They
account for 9.75% of all manufacturing output, while they
create 12.64% of employment in whole manufacturing
sector (Dogruel and Dogruel, 2008). The greater metro-

139

politan area of Istanbul was chosen as the survey setting.


For centuries being the largest city of Turkey, it has been
undisputedly the main industrial and trade centre. The
greater metropolitan area of Istanbul accounts for nearly
75% of total capital investment generating nearly 23% of
Turkish GDP (Berkoz and Eyuboglu, 2005).
The sample was selected randomly from the database
of Turkish Small Business Administration (KOSGEB). The
KOSGEB database includes a total of 12,270 SMEs in the
greater metropolitan area of Istanbul, which accounts for
nearly 28% of all SMEs registered throughout Turkey. The
sampling frame consists of 1917 SMEs operating in both
industries.
It was requested that the questionnaire be completed
by a senior ofcer/executive in charge of SCM and IS
practices. The responses indicated that a majority of the
respondents completing the questionnaire were in fact
members of the top management. Of the 800 questionnaires posted, a total of 229 questionnaires were returned
after one follow-up. Twenty-six questionnaires were
eliminated due to largely missing values. The overall
response rate was thus 25.4% (203/800), which was
considered satisfactory for subsequent analysis.
A comparison of the annual sales volume, number of
employees and sub-industry variation revealed no signicant differences between the responding and nonresponding rms (p40.1). Following Armstrong and
Overton (1977), another non-response bias check was
undertaken by comparing early with late respondents.
Analysis of variance (ANOVA) tests by type of respondents
indicated no signicant differences (p40.1) in the mean
responses on any of the studys constructs. Thus, the
responses adequately represented the total sample group.
3.2. Measurement of variables
3.2.1. SCM practices
Based on the extant literature, a set of twelve SCM
practices that are applicable to SME context were
identied. These practices include close partnership with
suppliers, close partnership with customers, just in time
supply, e-procurement, outsourcing, subcontracting,
3PL, strategic planning, supply chain benchmarking,
few suppliers, many suppliers and holding safety stock.
Respondents were asked to indicate what extent these
SCM practices were implemented in their organizations
relying on ve-point scales ranging from 1 not at all
implemented to 5 fully implemented.
3.2.2. IS practices
In a similar vein, a set of thirteen IS practices were
identied. These IS practices included materials requirement planning (MRP), manufacturing resources planning
(MRPII), enterprise resources planning (ERP), supply
chain management, customer relationships management, supplier relationships management, advanced
planning system, e-commerce, e-business, decision
support systems, radio frequency identication, electronic data interchange and bar coding. Respondents were
asked to identify to what extent these IS practices were

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implemented in their organizations relying on ve-point


scales ranging from 1 not at all implemented to
5 fully implemented.

3.2.3. SCMIS inhibitors


A number of factors that are likely to inhibit the
implementation of SCM and IS practices in SMEs were
determined. These factors include resistance to change
from employees, resources shortages, skills shortages,
insufcient vendor support, integration with suppliers
system, integration with customers system and integration with existing system. Respondents were requested to
indicate how frequently they encounter problems on the
above inhibiting factors related to SCM and IS implementation in their organizations using ve-point scales ranging
from 1 not at all to 5 very frequently.

3.2.4. SCMIS enablers


In addition to SCMIS inhibitors, a set of enabling
factors for SCM and IS practices were also identied. These
factors range from more education and funding to
improved information provision and closer cooperation
between companies and governments. Respondents were
asked to indicate their perceptions of the relative
importance of these factors in their organizations SCM
and IS efforts relying on ve-point scales ranging from
1 of no importance to 5 of major importance.

3.2.5. Operational performance


It is generally recognized that it is difcult to select a
single measure of rm performance. The extant literature
lists several quantitative objectives that can be set to
guide performance over a period of time, as well as
qualitative objectives (Hunger and Wheelen, 1993;
Thompson, 1993). It has been argued that as there are
obvious difculties in obtaining quantitative measures,
there is a strong a priori case that qualitative measures
should be included in assessments of performance
(Chakravarthy, 1986). Therefore, the subjective approach
has been used extensively in empirical studies, based on
executives perceptions of performance, having been
justied by several writers. While the extant literature
provides various dimensions of operational performance
which may also be applicable to SME context, a list of
seven operational performance (OPER) measures was
identied in this study. These performance criteria include
reduced lead time in production, forecasting accuracy,
better resource planning, better operational efciency,
reduced inventory level, cost saving and more accurate
costing. Respondents were asked to indicate on a 5-point
scale, ranging from denitely better through about the
same to denitely worse or dont know, how their
business had performed over the last 3 years relative to
their major competitors on each of these operational
performance criteria.
The items used to measure SCM practices, IS
practices, SCMIS inhibitors, SCMIS enablers and operational performance of SMEs are reproduced in the
Appendix.

4. Results and discussion


The data analysis testing the proposed relationships
illustrated in Fig. 1 was conducted at four stages. In the
rst stage, an exploratory factor analysis (EFA) with
varimax rotation was performed to determine the underlying dimensions of SCM practices, IS practices and
SCMIS inhibitors constructs. Second stage involved
testing of the measurement models for each construct
using conrmatory factor analysis (CFA) in order to
determine if the extracted dimensions in step 1 offered a
good t to the data. In the third stage, we measured the
unidimensionality of the constructs used in the base path
model and tested the relationships between the path
constructs without moderating effect of SCMIS enablers.
Finally, we estimated the relationships between the path
constructs by considering the moderating effect of SCMIS
enablers. These stages are discussed in more detail in the
following subsections.

4.1. Exploratory factor analysis


Due to potential conceptual and statistical overlap
(Spearman correlation coefcients between the constituent items of SCM practices, IS practices and SCMIS
inhibitor constructs revealed a number of low to moderate
inter-correlations), an attempt was made to produce
parsimonious set of distinct non-overlapping variables
from the full set of items underlying each construct.
Exploratory factor analysis with varimax rotation was
performed separately on the SCM practices, IS practices
and SCMIS inhibitors criteria in order to extract the
dimensions of each construct. Tables 13 show the results
of EFA.
The EFA on SCM practices yielded 3 factors with
eigenvalues greater than 1, as shown in Table 1. Based
on the item loadings, these three factors were, respectively, labeled as Strategic Collaboration and Lean Practices
(SCM1), Supplier Selection Practices (SCM2) and Procurement Practices (SCM3). The Cronbach alpha values of
reliability for the underlying factors range from 0.75 to
0.66 suggesting satisfactory level of construct reliability
(Nunnally, 1978).
Similarly, EFA was undertaken to produce a set of
parsimonious distinct non-overlapping dimensions of IS
practices for Turkish SMEs from the full set of 13 items.
The factor analysis produced 3 factors which explained
57.7% of the observed variance, as shown in Table 2.
Cronbach alphas for the underlying factors range from
0.78 through 0.74 with all values being well over 0.70.
These factors were labeled as IS Facilitators (IS1), IS
Integrators (IS2) and Enterprise-wide IS (IS3).
To capture the underlying dimensions of SCMIS
inhibitors construct, the EFA yielded a total of 2 factors
explaining 73.9% of the observed variance, as depicted in
Table 3. These factors were respectively labeled as:
Organization Specic Inhibitors (INH1) and Integration
Specic Inhibitors (INH2). The Cronbach alpha values for
ORG and INT are 0.77 and 0.71, respectively, exhibiting a
satisfactory level of construct reliability.

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141

Table 1
EFA of the SCM practices.
Factors

Factor loads

Factor 1: Strategic Collaboration and Lean Practices (SCM1)


Close partnership with suppliers
JIT supply
Close partnership with customers
Holding safety stock
Strategic planning
Supply chain benchmarking

0.70
0.69
0.63
0.61
0.60
0.58

Factor 2: Supplier Selection Practices (SCM2)


Many suppliers
Few suppliers
Vertical integration

0.77
0.67
0.63

Factor 3: Procurement Practices (SCM3)


Outsourcing
E-procurement
Subcontracting
3PL

0.74
0.68
0.67
0.64

Eigen-value

% Variance explained

Cum. (%)

Cronbach alpha

3.57

27.46

27.46

0.75

1.41

10.87

38.34

0.71

1.32

10.13

48.47

0.66

KMO measure of sampling adequacy 0.788; Bartlett test of sphericity 491.765; po0.000.

Table 2
EFA of the IS practices.
Factors

Factor loads

Factor 1: IS Facilitators (IS1)


E-business
EDI
RFID
E-commerce
Decision support systems
Bar coding

0.83
0.81
0.64
0.64
0.63
0.55

Factor 2: IS Integrators (IS2)


CRM
SRM
SCM
APS

0.81
0.79
0.69
0.53

Factor 3: Enterprise-wide IS (IS3)


ERP
MRP II
MRP

0.78
0.77
0.54

Eigen-value

% Variance explained

Cum. (%)

Cronbach alpha

4.06

31.26

31.26

0.78

2.36

18.12

49.38

0.77

1.08

8.29

57.67

0.74

KMO measure of sampling adequacy 0.757; Bartlett test of sphericity 908.734; po0.000.

4.2. Conrmatory factor analysis


This stage is also known as testing the measurement
model, where the constructs of IS practices, SCM practices
and SCMIS inhibitors are tested using the rst order
conrmatory factor model to assess construct validity
using the method of maximum likelihood. The results
consistently supported the factor structure for all three
constructs as discussed earlier in the EFA stage. The
conrmatory factor analysis technique is based on the
comparison of variance-covariance matrix obtained from
the sample to the one obtained from the model. The
technique is quite sensitive to sample size, and it is
recommended to have several cases per free parameter
(Bollen, 1989). The measurement model results at the
aggregate level for SCM practices, IS practices and SCMIS
inhibitors are presented in Tables 46, respectively.

The gures in Tables 46 exhibit the standardized


regression weight between each manifest variable and
its corresponding latent variable. It was found that all
t-values in the CFA are statistically signicant at 0.01
levels, indicating excellent level of convergent validity for
the constructs used in the empirical analyses.
The goodness-of-t indices for SCM practices, IS
practices and SCMIS inhibitors are demonstrated in
Table 7. These indices conform to the normal acceptable
standards. The value of w2 statistic ranges from 42.11
through 141.25, with the values of w2/df ratio varying
between 1.37 and 3.24. This ratio should be within the
range of 0-5 where lower values indicating a better t. The
results show that our models do t in with this criterion.
In addition, the GFI, AGFI and CFI for the SCM practices, IS
practices and SCMIS inhibitors constructs are highly
satisfactory, as they are very close to a value of 1.0, which

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Table 3
EFA of the SCMIS inhibitors.
Factors

Factor loads

Factor 1: Organization Specic Inhibitors (INH1)


Resistance to change from employees
Resources shortages
Skills shortages
Insufcient vendor support

0.82
0.81
0.81
0.61

Factor 2: Integration Specic Inhibitors (INH2)


Integration with suppliers system
Integration with customers system
Integration within existing system

0.92
0.86
0.73

Eigen-value

% Variance explained

Cum. (%)

Cronbach alpha

4.28

61.26

61.26

0.77

1.08

12.61

73.87

0.71

KMO measure of sampling adequacy 0.857; Bartlett test of sphericity 814.055; po0.000.

Table 4
Conrmatory factor analysis of SCM practices.

Table 6
Conrmatory factor analysis of SCMIS inhibitors.

Factors

Regression weight

Factors

Strategic Collaboration and Lean Practices (SCM1)


Close partnership with suppliers
JIT supply
Close partnership with customers
Holding safety stock
Strategic planning
Supply chain benchmarking

0.59
0.57
0.57
0.56
0.67
0.65

Supplier Selection Practices (SCM2)


Many suppliers
Few suppliers
Vertical integration

0.36
0.39
0.69

Organization specic inhibitors (INH1)


Resistance to change from employees
Resources shortages e.g. no maintenance and update
Skills shortages e.g. Computer illiteracy within the
company
Insufcient vendor support
Integration specic inhibitors (INH2)
Integration with existing system
Integration with suppliers system
Integration within customers system

Procurement Practices (SCM3)


Outsourcing
E-procurement
Subcontracting
3PL

0.59
0.35
0.54
0.42

 po0.001.

Table 5
Conrmatory factor analysis of IS practices.
Factors

Regression weight

IS Facilitators (IS1)
E-business
EDI
RFID
E-commerce
Decision support systems
Bar coding

0.91
0.64
0.38
0.60
0.64
0.43

IS Integrators (IS2)
CRM
SRM
SCM
APS

0.76
0.70
0.61
0.65

Enterprise-wide IS (IS3)
ERP
MRP II
MRP

0.62
0.93
0.61

 p o0.001.

Regression
weight

0.76
0.85
0.77
0.65
0.64
0.74
0.89
0.91

 po0.001.

Table 7
Goodness of t statistics (N 203).
Model/Construct

w2

w2/df

RMR

GFI

AGFI

CFI

SCM practices
IS practices
SCMIS inhibitors

82.34
141.25
42.11

1.37
2.39
3.24

0.10
0.07
0.08

0.94
0.91
0.95

0.91
0.85
0.89

0.95
0.90
0.96

denotes a perfect t. The results attest the construct


validity for the measurement models of SCM practices, IS
practices and SCMIS inhibitors.

4.3. Unidimensionality tests of path constructs


The validity and reliability of path constructs can be
assessed by checking unidimensionality of each construct
using three tools: Principal component analysis, Cronbachs alpha and Dillon-Goldsteins r. As shown in Table 8,
all of the Cronbach alpha values meet the threshold alpha
value of 0.50 (Hair et al., 1998). According to the principal
component analysis, since the rst eigenvalue score of the
correlation matrix of the manifest variables of each
construct is larger than one, and the second one is smaller
than one, each construct was considered as unidimensional. Similarly, r value in Dillon-Goldsteins r analysis is
also above 0.70 for each construct. All four tests support

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unidimensionality, suggesting a high level of validity and


reliability of the path constructs.

143

of weights used for estimating the latent variables scores.


The second stage involves the non-iterative application of
PLS regression for obtaining loadings, path coefcients,
mean scores and location parameters for the latent and
manifest variables. For calculating the PLS procedure
SmartPLS 2.0 statistical data analysis software was
employed (Ringle et al., 2005).

4.4. Path model


4.4.1. Structural equation modeling
In order to avoid the multicollinearity and measurement errors, while addressing the cause-effect relationships among the research constructs, we utilized partial
least squares (PLS) method, which is a variance-based
structural equation modeling approach. The PLS procedure, developed by Wold (1985), uses two stage estimation algorithms to obtain weights, loadings and path
estimates. In the rst stage, an iterative scheme of simple
and/or multiple regressions contingent on the particular
model was performed until a solution converges on a set

4.4.2. Outer and inner model estimations


Fig. 2 shows the estimation results including both
inner and outer regression weights for the base path
model without considering the moderating effect of
SCMIS enablers. Outer model, also known as measurement model, links the manifest variables to their latent
variables. The regression weights between the manifest
variables and their related latent variables were all found

Table 8
Unidimensionality tests.
Constructs

Number of indicators

Cronbach alpha

Dillon-Goldsteins r

First eigen-value

Second eigen-value

SCM practices
IS practices
SCMIS inhibitors
Performance

3
3
2
7

0.59
0.62
0.80
0.83

0.79
0.81
0.91
0.87

1.36
1.26
1.84
3.23

0.64
0.39
0.35
0.83

SCM1

SCM3

SCM2
0.528

0.595

0.527

SCM
Practices
0.26
OPER1

-0.332
INH1

INH2

0.543
0.509

SCM-IS
Inhibitors

0.226
0.275

0.171
Operational
Performance
0.37

-0.349
-0.288

0.123

0.219
0.193
0.147
0.176
0.290

OPER2
OPER3
OPER4
OPER5
OPER6
OPER7

IS Practices
0.21

0.405
IS1

0.556 0.694
IS2

IS3

Fig. 2. Results of the base path model without moderating effect of SCMIS enablers. *Denotes R2 value.

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Table 9
Outer regression weights for the base path model without moderating
effect of SCMIS enablers.
Construct

Outer weights

Bootstrapping

SCM1SCM practices
SCM2SCM practices
SCM3SCM practices
IS1IS practices
IS2IS practices
IS3IS practices
INH1SCMIS inhibitors
INH2SCMIS inhibitors
OPER1PERF
OPER2PERF
OPER3PERF
OPER4PERF
OPER5PERF
OPER6PERF
OPER7PERF

0.528
0.595
0.527
0.405
0.556
0.694
0.543
0.509
0.226
0.275
0.219
0.193
0.147
0.176
0.290

0.527
0.599
0.326
0.105
0.555
0.691
0.541
0.507
0.226
0.275
0.217
0.193
0.148
0.080
0.289

 po0.01.
 po0.001.

Table 10
Inner regression weights for the base path model without moderating
effect of SCMIS enablers.
Construct

Inner weights

Bootstrapping

SCM practicesPERF
InhibitorsPERF
IS practicesPERF
SCMIS inhibitorsSCM practices
SCMIS inhibitorsIS practices

0.171*
0.349***
0.123*
0.332***
0.288***

0.170
0.345
0.125
0.328
0.282

*po0.05; **po0.01; ***po0.001.

to be signicant (po0.01), as shown in Table 9. Following


the parameter estimation, bootstrapping was also undertaken to conrm the robustness of the ndings. To do this,
1000 Bootstrap samples were built by re-sampling with
replacement from the original sample. The bootstrap
estimated coefcients of inner and outer models were
very close to those estimated by PLS.
The results of the structural model related to Hypotheses 14 are shown in Table 10 and Fig. 2. The model has
one endogenous variable (dependent variable), which is
labeled as operational performance (PERF) and three
exogenous variables (independent variables), which are
labeled as SCM practices, IS practices and SCMIS
inhibitors, respectively. This model essentially evaluates
the impact of all three exogenous variables on the
operational performance of SMEs. Based on the test
results of the overall base model, SCM practices, IS
practices and SCMIS inhibitors explain about 37% of the
variation in operational performance. Some support has
been found for H1 that SCM practices had a positive and
signicant impact (b 0.171; po0.05) on operational
performance of SMEs. This nding is not particularly
surprising in that it tends to conrm the view that the
benets of SCM practices that have been widely recognized in the extant literature are also equally valid for our

sample rms (see for example Karlsson and Ahlstrom,


1997; Bruce et al., 2004).
Similarly, there is some support for H2 that the
relationship between IS practices and operational performance of SMEs was found to be positive and signicant
(b 0.123; po0.05). The nding that the implementation
of IS practices would contribute to enhancing operational
performance in SME context provides a valuable extension
to the previous research (Levy et al., 1998, 2002; Love
and Irani, 2004; Sharma and Bhagwat, 2006) which
largely focuses on the use of IS practices in relatively
large-size enterprises.
The results of the structural model, as shown in Table
10 and Fig. 2, indicate a strong support for H3a and H3b in
that there exist negative and strong direct relationships
between SCMIS related inhibitors and the implementation levels of both SCM (b 0.332; po0.001) and IS
practices (b 0.288; po0.001). Similarly, strong support has been found for H4 that SCMIS inhibitors had a
strong and negative direct effect (b 0.349; po0.001)
on operational performance of SMEs. These ndings in
general point out to the need for seriously considering the
deteriorating effects of some potential impediments to the
effective use of both SCM and IS practices and their
negative impact on the SMEs operational performance.
Finally, to verify H5a and H5b regarding the moderating effect of SCMIS related enablers, a two-group analysis
relying on the base model represented in Fig. 2 was
conducted. Concerning SCMIS enablers the sample was
split as close as possible on the median to form two
groups (the low group consists of 98 rms and the high
group consists of 105 rms). Fig. 3 and Table 11 show the
path model with high moderating group of SCMIS
enablers, while Fig. 4 and Table 12 show the path model
with low moderating group of SCMIS enablers. The
results of the path models, as shown in Figs. 3 and 4, and
Tables 11 and 12, indicate that there is a good deal of
support for H5a in that the positive relationship between
SCM practices and operational performance is much
stronger (b 0.185; po0.01) in the high moderating
group of SCMIS enablers than in the low moderating
group of SCMIS enablers (b 0.116; p40.1). The explanatory power of the path model with high moderating
effect of SCMIS enablers is also more signicant
(R2 0.52) than that of the path model with low
moderating effect of SCMIS enablers (R2 0.15). These
ndings indicate that the SCMIS enablers have a
moderating effect on the relationship between SCM
practices and operational performance: When SCMIS
enablers are low, SCM practices have no effect on the
operational performance of SMEs, but when they are high,
the effect is signicant and positive.
In a similar vein, a strong support has also been found
for H5b denoting that the positive relationship between IS
practices and operational performance is more signicant
(b 0.211; po0.01) in the high moderating group of
SCMIS enablers than in the low moderating group of
SCMIS enablers (b 0.002; p40.1). These ndings again
conrm that the positive relationship between IS practices
and operational performance is moderated by SCMIS
enablers.

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SCM1

SCM3

SCM2
0.496

145

0.490

0.594

SCM
Practices
OPER1

-0.344
INH1

INH2

0.534
0.483

SCM- IS
Inhibitors

0.201
0.310

0.185
Operational
Performance
0.52

-0.386
-0.195

0.211

0.202
0.188
0.147
0.125
0.259

OPER2
OPER3
OPER4
OPER5
OPER6
OPER7

IS Practices

0.450

0.534 0.613

IS1

IS2

IS3

Fig. 3. Results of the path model with high moderating effect of SCMIS enablers. *Denotes R2 value.

Table 11
Inner regression weights for the path model with high moderating effect
of SCMIS enablers.
Construct

Inner weights

Bootstrapping

SCM practicesPERF
SCMIS inhibitorsPERF
IS practicesPERF
SCM practicesSCMIS inhibitors
IS practicesSCMIS inhibitors

0.185
0.386
0.211
0.344
0.195

0.182
0.380
0.205
0.337
0.194

 po0.01.
 po0.001.

5. Conclusion and implications


This paper has empirically tested a framework identifying the relationships among SCM and IS practices,
SCMIS related inhibitors and operational performance
drawing on a sample of 203 manufacturing SMEs operating within the greater metropolitan area of Istanbul in
Turkey. Exploratory factor analysis was employed to
identify the underlying dimensions of SCM and IS
practices. EFA yielded three distinct and non-overlapping
factors of SCM practices; while it produced four non-

overlapping factors of IS practices which make good


conceptual sense.
Using PLS method, test of hypotheses H1 and H2
revealed that both SCM and IS practices positively and
signicantly inuenced the operational performance of
SMEs. The results of the structural model also indicated
that both H3a and H3b were supported. That is, there are
negative and strong direct relationships between SCMIS
related inhibitors and the implementation levels of both
SCM and IS practices. Similarly, a strong support was
found for H4 that SCMIS inhibitors had a strong and
negative direct effect on operational performance of SMEs.
These ndings in general indicate a need for seriously
considering the deteriorating effects of some potential
barriers to the effective use of both SCM and IS practices
and their negative impact on the SMEs operational
performance. Finally, we found strong support for the
moderating impact of SCMIS enablers on the relationship
between SCM practices and operational performance
(H5a) as well as on the link between IS practices and
operational performance (H5b).
These ndings tend to corroborate our conceptual
model and offer a number of managerial implications.
First, managers of SMEs should identify their SCM and IS
inhibitors and seek to remove these inhibitors and/or at

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E. Bayraktar et al. / Int. J. Production Economics 122 (2009) 133149

SCM1

SCM3

SCM2
0.576

0.610

0.409

SCM
Practices
OPER1
OPER2
-0.342
INH1

INH2

0.567
0.530

SCM- IS
Inhibitors

0.281
0.216

0.116
Operational
Performance
0.15

-0.364
-0.433

0.002

0.259
0.161
0.117
0.147
0.371

OPER3
OPER4
OPER5
OPER6
OPER7

IS Practices

0.485

0.581 0.837

IS1

IS2

IS3

Fig. 4. Results of the path model with low moderating effect of SCMIS enablers. *Denotes R2 value.

Table 12
Inner regression weights for the path model with low moderating effect
of SCMIS enablers.
Construct

Inner weights

Bootstrapping

SCM practicesPERF
SCMIS inhibitorsPERF
IS practicesPERF
SCM practicesSCMIS inhibitors
IS practicesSCMIS inhibitors

0.116
0.364
0.002
0.342
0.433

0.111
0.396
0.005
0.339
0.425

 po0.01.

least reduce the effect of these inhibitors on the use of


SCMIS practices and operational performance. These
remedial actions are the pre-requisite prior to introducing
SCMIS enablers to facilitate the effective implementation
SCM and IS practices. Second, relying on the resource
capability of the SMEs and the criticality to implementing
SCMIS enablers to improve the operational performance,
various SCMIS enabling levels could be introduced. SMEs
that are endowed with resources to urgently improve
operational performance could expect a much signicant
improvement on their operational performance in return

of their SCM and IS practices when a high level of SCMIS


enabling factors are implemented. In contrast, SMEs will
not experience signicant improvement in their operational performance, even when SCM and IS practices are in
place, because of the missing SCMIS enablers to drive the
SCM and IS practices. The key contribution from this
research is the empirically tested list of SCMIS inhibitors
and enablers that the managers of SMEs should recognize
and manage in order to optimize the operational performance resulting from the use of SCM and IS practices.
Having a clear understanding of the exact nature of
SCMIS inhibitors and enablers will help SMEs to
strategize and prioritize their supply chain and information system strategies, to be followed by appropriate
subsequent action plan.
A caution, however, should be exercised when interpreting the signicance of the results. Perhaps the most
serious limitation of this study was its narrow focus on
SMEs operating in two sub-sectors of manufacturing
industry within the greater metropolitan area of Istanbul,
thus precluding the generalization of ndings to whole of
Turkey and other emerging countries as well as other
sectors such as service and government sectors that may
benet from effective use of SCM and IS practices. The

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E. Bayraktar et al. / Int. J. Production Economics 122 (2009) 133149

data were collected from single respondents in an organization which might be a cause for possible response bias.
Future research should endeavor to collect data from
organizations across the supply chain. Future studies may
also investigate the proposed relationships by integrating
some contextual variables into the model including the type
of industry, supply chain structure and country of origin.

Acknowledgements
The reviewers comments are greatly appreciated.
Without their helpful comments, the paper should not
have reached this shape.
Appendix A
A.1. IS practices
To what extent the following IS practices were implemented in your organization? (Five-point scales ranging from
1 not at all implemented to 5 fully implemented)
Q#

Variables

Measurement

1
2
3
4
5
6
7
8
9
10
11
12
13

Material requirements planning (MRP)


Manufacturing resources planning (MRPII)
Enterprise resources planning (ERP)
Supply chain management (SCM)
Customer relationships management (CRM)
Supplier relationships management (SRM)
Advanced planning system (APS)
E-commerce
E-business
Decision support/expert systems
Radio frequency identication (RFID)
Electronic data interchange (EDI)
Bar coding

15
15
15
15
15
15
15
15
15
15
15
15
15

A.2. SCM practices


To what extent the following SCM practices were
implemented in your organization? (Five-point scales ranging
from 1 not at all implemented to 5 fully implemented)
Q#

Variables

Measurement

1
2
3
4
5
6
7
8
9
10
11
12

Close partnership with suppliers


Close partnership with customers
Just in time supply
Strategic planning
Holding safety stock
Supply chain benchmarking
Few suppliers
E-procurement
Outsourcing
Subcontracting
3PL
Many suppliers

15
15
15
15
15
15
15
15
15
15
15
15

A.3. SCMIS inhibitors


Please indicate how frequently you encounter problems on the following items related to SCM and IS

147

implementation in your organization? (Five-point scales


ranging from 1 not at all to 5 very frequently)
Q#

Variables

Measurement

1
2
3
4
5
6
7

Resistance to change from employees


Resources shortages
Skills shortages
Insufcient vendor support
Integration with suppliers system
Integration with customers system
Integration within existing system

15
15
15
15
15
15
15

A.4. SCMIS enablers


Please indicate to what extent the following items are
important in your organizations SCM and IS efforts?
(Five-point scales ranging from 1 of no importance to
5 of major importance)
Q# Variables

Measurement

1
2
3
4
5

15
15
15
15
15

6
7
8

More education (e.g. formal qualication)


Easier access to vocational training
More funding and nancial support
More inter-country regional agreements
Better infrastructure (e.g. telecommunications, road,
etc.)
Improved information provision
Increased regional cooperation between institutions
Closer cooperation between companies and
governments

15
15
15

A.5. Operational performance (OPER)


How did your business perform over the last 3 years
relative to their major competitors on each of the
following performance criteria? (Five-point scales ranging
from denitely better to denitely worse)
Q#

Variables

Measurement

1
2
3
4
5
6
7

Reduced lead time in production


Forecasting accuracy
Better resource planning
Better operational efciency
Reduced inventory level
Cost saving
More accurate costing

15
15
15
15
15
15
15

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