Effect of information technology-enabled supply chain integration on firm's operational performance

Abstract

PurposeUsing the assumptions of the resource-based view, relational view and swift, even flow theories and the overarching principles of supply chain management, the study aims to test the role of information technology (IT) capability (cross-functional application, supply chain application and data consistency) in enabling supply chain integration (SCI; internal, customer and supplier integration) and the impact of SCI on firm's operational performance in terms of quality, delivery, production cost, inventory level, customer service and product-mix flexibility.Design/methodology/approachThe structural equation modeling approach is used to test theoretical predictions underlying the relationship among dimensions of IT capability, SCI and operational performance based on data obtained from senior executives of 108 large manufacturing firms listed in the Tokyo Stock Exchange.FindingsThe results suggest that IT capability has positive impact on SCI, except for data consistency, which is found to have negative impact on internal integration. The results further indicate that SCI, especially customer integration, has positive and significant impact on all operational performance indicators.Practical implicationsThe findings inform future initiatives associated with the SCI improvement via specific IT capabilities. When undertaking such initiatives, managers are advised to consider the differential impact of the following IT capabilities on SCI: cross-functional applications, supply chain applications, and data consistency capability.Originality/valueThe study makes an empirical contribution to the body of knowledge by demonstrating the value of the multidimensional representation and analysis of IT capability, SCI, and operational performance given a differential and even opposed influence by some of the dimensions in specific business contexts.