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UNDERSTANDING THE INTERFACE OF

SUSTAINABILITY BETWEEN SUPPLY


CHAIN AND VALUE CHAIN ACTIVITIES

Abstract:
Purpose: This Paper investigates the moderating effect of various value
chain activities on the Firms supply chain activities.
Design/ Methodology/ Approach: The data was collected from 120
manufacturers/ suppliers/ distributors with the help of a well designed and
pre-tested questionnaire. Exploratory factor analysis and linear regression
analysis were used to finalize the items of different constructs.
Findings: The study identified eleven value chain adding activities with
the help of explanatory factor analysis. Further the study found that out of
these identified value adding activities, fill rates, impact of promotions on
demand and cost of holding inventory are the most quantifying activities
of all.
Limitations: This study does have a few major limitations. First, the
manufacturers didnt provide any kind of financial information and
secondly the responses of the sample population are another limitation
which was resolved to some extent by applying reliability and validity test.
Also this study is limited only to Jammu region.
Originality/value: The study makes an attempt to understand the
operational dynamics, which may not be visible as such in the real world
but can act as a very important components. The study makes a
contribution by exploring that what are the different value adding
activities that affect the supply chain of the organization.
Keywords: Marketing functions, Supply Chain Functions, Supply Chain,
value chain management.

INTRODUCTION
Supply Chains and Supply Chain Management (SCM) have emerged as
important areas in both business practice as well as academic research.
Recognized as separate area in the 1980s, SCM has garnered a lot of
interest and attention from both academicians and practitioners. Recent
conceptions of SCM show its increasing role within organizations to
encompass activities associated with the integration of supply and
demand management within and across companies, including
coordination and collaboration with channel partners and customers,
sourcing, procurement, conversion, and logistics. It also includes
importantly, coordination and association with channel partners, which
can be intermediaries, third-party service providers, suppliers, and
customers. In essence, Supply Chain Management integrates supply and
demand management not only within but across companies. As reflected
in their definitions and other conceptual developments, the disciplines of
both Marketing and SCM have evolved over time. Many researchers have
described conceptual developments in and across these disciplines for
advancing the understanding of the interrelationship between marketing
and SCM. To address this vital aspect, Esper et al. (2010) introduced a
conceptual framework which focuses on the creation of customer value
through implementation of knowledge management processes between
firms; they described how successful integration may be achieved through
the shared generation, dissemination, interpretation and application of
real-time customer demand together with supply capacity restraints. In
both marketing and SCM, the notion pertaining to supply chains has
steadily evolved from a narrow focus on tangible goods and their
movement for the purposes of manufacturing to broadened consideration
of
(1) The nature of goods offered in the market and
(2) The scope of managerial architectures within and between firms for
doing so
This broadening consideration of thought within marketing and SCM has
led to expansion of the breadth and scope of these disciplines over time.
This expansion has been a critical source for SCMs advancement but at
the same time it also led to some confusion. On one hand it has enabled
SCM to better address its integration goals, but on the other it has created
challenges for its understanding and development. It has also resulted in
perceived redundancies with other disciplines in some areas. In an effort
to facilitate better understanding of the field, to clarify its development
and to identify opportunities for future research, in their article Stock, et
al; (2010) trace and qualitatively analyze 166 unique definitions of SCM
that have emerged since SCMs introduction in the 1980s. They identify
and elaborate on the major themes that have emerged over time to define
SCM. In so doing they identify key research questions and issues

pertaining to supply chains and SCM that would benefit from research
including work by marketing scholars.

LITERATURE REVIEW
In the area of business procurement, purchasing and operations, the
term " Supply Chain Management" has become ubiquitous. A supply chain
has been defined as, "encircling all activities associated with the flow and
conversion of goods from the raw materials (extraction) stage, through to
the end user" (Handfield and Nichols, 1999). Supply chain management
has been defined as "a systems approach to managing the entire flow of
information, materials, and services from raw materials suppliers through
factories and warehouses to the customer (Leenders and Fearon, 1997).
From these definitions, Supply Chain Management can be seen as a
broadly encompassing concept that can include basic marketing elements
such as, product, price, place (channels), and communications
(promotion). However, while Supply Chains exist in both manufacturing
and service organizations, the concept is generally applied to physical
products that have to be handled, assembled, or physically processed in
some way, and not as often to services or products that have a large
service component. Typical debate of supply chain management is
presented in the perspective of manufacturing situations, (for elaboration,
refer for instance, paper by Ganeshan and Harrison, 1995). Because
supply chain management is often accessible in the purchasing or logistics
management literature (e.g. Cooper and Ellram, 1993, Ellram, 1994;
Kranz, 1996) one may be inclined to conclude that it is most often
initiated by the buying rather than the selling entity. Thus it may be
dismissed as having little potential importance to marketing because it
appears to be simply a new purchasing technique that may have limited
impact on marketing. However, almost all of the descriptions of how
supply chain management works include as a primary characteristic that
buying, selling, and other involved organizations such as, transportation
and distribution channels, must work together closely, usually as part of
cross-functional and cross-organizational teams (Monczka, Trent, and
Handfield et al. 1998). Therefore, supply chain management appears to
be a concept that marketing can neither afford to ignore nor wait for
buyers to initiate. Because supply chain management involves the
integrated management of the entire supply chain from raw material to
end user, marketing may be involved in two types of situations vis-a-vis
supply chain management:

(1) Marketing's firm may be a supplier into a supply chain managed


business situation or, (2) Marketing's firm may be the buyer or customer
in a supply chain managed business situation.
The classic marketing situation, or course, would be the first one
where marketing's firm is the supplier. Conceptual and empirical research
on the concept of market orientation has long suggested that interfunctional coordination is key to achieving the main goal of marketing, the
creation of superior customer value (e.g. Jaworski and Kohli, 1993; Kohli
and Jaworski, 1990). As a consequence, a stream of research on the
relationship between marketing and R&D (e.g. Gupta et al, 1986),
marketing and finance (e.g. Rajendra et al. 1998), marketing and
engineering (Fisher et al, 1997) and the integration of marketing with
several other functions in the formation of business strategy can be traced
(e.g. Hutt et al, 1988; Kahn and Mentzer, 1998). SCM has grown in
importance since the early 1990s, although the approach was introduced
in early 1980 (Oliver and Webber, 1982). SCM can be defined as the
management of upstream and downstream relationships with suppliers
and customers in order to create enhanced value in the final market place
at less cost to the supply chain as a whole (Christopher, 1998). The
synergies between SCM and marketing have been widely acknowledged
(Martin and Grbac 2003; Ellinger 2000; Svensson 2002), leading some to
conclude that better coordination could define competitive superiority in
new ways (Piercy 2002).
DATA COLLECTION & RESEARCH METHODOLOGY
The review of literature suggest that in order to find various
activities those have an impact on supply chain the quantitative method
employing personal (direct) survey was selected and for this purpose the
descriptive type of research has been. The study is based upon the
primary survey and data that was collected from 120 manufacturer,
distributors & retailers from Jammu region (J&K) with the help of a well
designed pre-tested structured questionnaire. The present study is
descriptive and conclusive in nature and the sampling technique used was
Regression & Factor Analysis. The function of descriptive statistical
analysis has been performed for each of the section and also factor
analysis was used to reduce the large number of factors to few factors i.e.
most important factors that affect the supply chain, with the help of SPSS.
The deduced variables are modeled as linear combinations of the
potential factors, plus "error" terms. The information gained about the
interdependencies between observed variables can be used later to
reduce the set of variables in a dataset. After getting the key factors that
affect the supply chain and for quantifying the impact of promotional
schemes on supply chain the linear regression model has been used; as
stated in equation (1).
Y= 0 + 1 Y1+ 2Y2 + - - - + n Yn+ I
(1)
Here; S = f(Y1+Y2+----Yn)

(2)

Where S is Sustainable supply chain factors, marketing & supply chain


activities, X1, X2 & Xn will be those factors which have impact on the
supply chain,1 2 & n are the regression coefficient of respective factor
with various promotional schemes & I
is the error term. Then data is
interpreted along with the analysis to make it more understandable to
evaluate the impact of various activities. For this purpose required
information was obtained from sample population.
RESULTS AND DISCUSSION
The result from the descriptive statistics in SPSS shows that among
the overall respondents, 56.66 % were from Jammu city and the rest were
from the adjoining areas like Katra, Akhnoor etc. The sample collected has
been first checked for the reliability using Cronbachs Alpha in Factor
analysis and is shown in Table1.
Table 1 Reliability Statistics

Table 1, depicts Cronbach's


that the value of
the
Cronbachs Alpha
Alpha is 0.766 and
N of Items
as it comes out to .766
be greater than
33
0.6; it implies that
the data collected
is reliable. Cronbach Alpha can take any value less than or equal to 1,
including negative values, although only positive values make sense.
Higher values of alpha are more desirable (Cronbach, L. J. 1951). From the
mean & standard deviation of the various variables used in the study,
mean was found to be highest for Promotional schemes which affect the
level
of
inventory,
Higher
sales
are
achieved
by
promotions/advertisements & lowest for kind of promotional schemes are
usually followed by, standard deviation for the statement Advertising
costs are highest & lowest for Promotional schemes which affect the level
of inventory. In the next step factor analysis was conducted on the
collected sample observations; so first of all KMO and Bartlett's Test was
conducted whose results are shown below in Table 2.
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's
Test
of Approx. Chi-Square
Sphericity
Df
Sig.
Table 2 KMO and Bartletts Test

.556
337.347
120
.000

The value of KMO from the results was 0.556 which should be above 0.5 &
also the value of Bartletts test is significant so it can be assumed that the
factor analysis test is suitable for the data/samples collected
(Kaiser,1963), Bartlett,1950). During the analysis it was found that all the

variables will be grouped under the eleven components; which can also be
justified by the help of scree plot as shown below in Figure 1.

Figure 1 Scree Plot of the Eigen values.


The break between the steep slope and a leveling off indicates the
number of meaningful factors, different from random error. The technique
is illustrated and compared with alternative techniques for determining
the number of factors to retain (D'agostino, and Russell, 2005).
In the Table 3, all the variables having factor loading less than 0.4 are not
shown. The obtained results from the Table 3, shows that variables like
Fill rate during promotions are highly loaded at first component so they
are grouped under the factor called Y 1, variables of Order Size are highly
loaded at second factor hence the are grouped under the factor called Y 2,
variables like Waiting Time are highly loaded at third component hence
grouped under the factor called Y 3, variables like Fluctuation in Demand
are highly loaded at fourth component so grouped under the factor called
Y4, variables like impact of promotions on demand are highly loaded at
fifth component so grouped under the factor called Y 5, variables like lot
size of purchase are highly loaded at sixth component so grouped under
the factor called Y6, variables like Customer service are highly loaded at
seventh component so grouped under Y 7, variables like impact on cost of
holding are highly loaded at eighth component so grouped under Y8,
Table 3 Descriptive Statistics for Rotated Component Matrix

Derived

Lateral
1

X16
X22
X29
X36

0.783
0.742
0.672
0.664

Variable
2

X14
X10
X28
X7
X9
X35
X33
X26
X12
X39
X37

0.651
0.557
0.839
0.838
0.743
0.594
0.46
0.832
0.747
0.737
0.417

variables like types of promotional schemes is highly loaded at ninth


component hence grouped under the factor called Y 9, variables like
Problems during promotions are highly loaded at tenth component so
grouped under Y10, variables like cost of Holding are highly loaded at
eleventh component so grouped under the factor called Y11.
Y= 0 + 1 Y1+ 2 Y2 + - - - + n Yn + I -------------- From eq. (1)
And, P = f (Y1+Y2+----Yn) from eq. (2)
Where; Y1= f (X16, X22, X29, X36, X14, X10);
Y2= f (X28, X29, X35, X41, X33);
Y3= f (X26, X12, X39, X37);
Y4= f (X15, X32, X8, X24);
Y5= f (X9, X7, X12, X15)
Y6= f (X13, X20, X19);
Y7= f (X34, X31);
Y8= f (X21, X11);
Y9= f (X38, X23);
Y10= f (X27);
Y11= f(X18, X17));
1, 2, 3, n represents the regression
corresponding factor;
I is the error term.

coefficient

of

the

TABLE 4(a): Regression Analysis.

The R value is significant at 1% level of significance which means that


promotional schemes & various deduced variables have a relationship.

TABLE 4(b):- Regression Analysis.


Standardize
d
Coefficients

Unstandardized
Coefficients
Model

B
(Constant)

Std. Error

Beta

Sig.

0.281

0.504

0.558

0.578

0.305

0.133

0.272

2.298

0.023

0.054

0.057

0.106

0.948

0.345

-0.102

0.072

-0.155

-1.43

0.156

-0.036

0.09

-0.052

-0.394

0.695

0.129

0.062

0.211

2.075

0.04

-0.047

0.08

-0.062

-0.592

0.555

-0.032

0.1

-0.037

-0.322

0.748

0.188

0.072

0.3

2.608

0.01

0.036

0.044

0.078

0.812

0.419

10

-0.017

0.043

-0.038

-0.405

0.687

11

0.163

0.12

0.184

1.364

0.175

(Supply
Chain
Factors)
S=0.281+.305V1+.504V2-.102V3-.0.36V4+.129V5-.047V6-.032V7+.18
8V8+.036V9-.17V10+.163V11+ (error).
After factor analysis the deduced factors are regressed with the
promotional schemes variable and result are shown in the Table 4 (a) &
(b); only the variable first, fifth & eighth were found to be significant and
all other factors are not significant for the study.
CONCLUSION, LIMITATION & FUTURE SCOPE
From the deduced regression equation we can easily understand
that out of eleven grouped factors there are only three factors which are
affecting the supply chain namely the factors like fill rate, impact of
promotions on demand and cost of holding are significant. And fill rates
affect supply chain the maximum. In todays markets, understanding the
customers situation and responding effectively to differing needs through
the coordination of marketing and supply chain can be a source of
superior value creation. Promotions/Marketing is traditionally externally
focused and creates customer value, while SCM is inwardly focused and
concentrates on the efficient use of resources in implementing marketing
decisions. Promotions/Marketing and SCM integration is between those
generate demand with those who fulfill it. The results from this analysis
are in concurrence with the study by (Soonhong Ming & John T. Mentzer,
2000). Until today, the concept of integration has been addressed from
SCM and operations perspectives; however, despite its clear relevance, no
promotional marketing contribution can be cited.

The study was conducted in the Jammu region only and the
responses depend upon the psychological state of the respondent while
answering the questions, so in future the study can be extended beyond
the Jammu region & a wide variety of products can also be involved with
more number of specific variables and also some different method of
analysis can be used.
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[2].
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[3].
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to Supply Chain
Management", Working paper, Department of
Management Science and Information Systems, 303 Beam Business
Building, Penn State University.
[4].
Handfield, R. B and Nichols, E. L. (1999); Introduction to
Supply Chain Management,Prentice Hall Inc.
[5].
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and Consequences'', Journal of Marketing, Vol.57,52-70.

[6].
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(Supply Chain Factors) S=0.281+ (VARIABLE NAME V1 = Marketing efforts )


0.305V1 + (Varaible Name V2 = Fill Rates ) 0.504V2 - (VARIABLE NAME V3=
Sales Promotion) 0.102V3 - (VARIABLE NAME V4= Customer relations
initiatives)0.36V4+ (VARIABLE NAME V5= impact of promotions on demand)
0.129V5 - (VARIABLE NAME V6 =Order Processing ) 0.047V6 - (VARIABLE NAME
V7=Supplier engagement) 0.032V7+ (VARIABLE NAME V8 = cost of holding)
0.188V8+ (VARIABLE NAME V9 = Internal Challenges) 0.036V9 - ((VARIABLE
NAME V10= Co-ordination with Stakeholders) 0.17V10+(VARIABLE NAME V11=
Beneficial Practices) 0.163V11+ (error).
ONLY V2, V5 & V8 are significant.