DEFINING AND OPERATIONALIZING SUPPLY CHAIN PROCESS INTEGRATION

Journal of Business Logistics, 2009 by Chen, Haozhe, Daugherty, Patricia J, Roath, Anthony S

INTRODUCTION

The importance of integration to supply chain management (SCM) has been widely recognized and is explicitly indicated by SCM definitions. For example, Cooper, Lambert, and Pagh (1997, p. 1) define SCM as "the integration of key business processes from end users through original suppliers that provides products, services, and information that add value for customers and other stakeholders." Similar emphasis on integration can be seen in the Council of Supply Chain Management Professionals' (CSCMP) definition: "In essence, Supply Chain Management integrates supply and demand management within and across companies." While research on supply chain integration continues to grow, an extensive literature review reveals issues still exist. There is no clear and widely accepted definition of integration (Pagell 2004). Many studies on integration do not even clearly define the concept. While the basic concept of integration may be familiar to most researchers, the actual conceptualizations and operationalizations of the construct vary a great deal (Pagell 2004). Also, examination of the ways integration has been operationalized indicates that existing measures do not match well with theoretical conceptualizations. Scale validity is often questionable, because many of the existing integration scale items can be used to measure otiier constructs. Thus, the current study was undertaken to provide clarification regarding the conceptualization of both internal and external integration, and to develop a more straight-forward way to operationalize integration.

The paper is organized as follows. Relevant literature is first reviewed and synthesized, followed by introduction of a qualitative study that helped to focus the subsequent empirical study. The resultant definition and operationalization are tested and assessed using the empirical data. The conclusion and implications are presented last.

CONCEPTUALIZING SUPPLY CHAIN PROCESS INTEGRATION

According to the Merriam-Webster Dictionary (2007), integrate means "to form, coordinate, or blend into a functioning or unified whole," and integration is "the act or process or an instance of integrating." Early research on integration often referred to vertical integration and focused on the make-or-buy decision using a Transaction Cost Analysis (TCA) framework as rationale for integration (Coase 1937; Williamson 1975). Transaction cost analysis is an approach the firm utilizes to determine low cost alternatives within its functional areas or across its activities the make-or-buy decision. Today, integration involves a much broader concept than a firm's determination of the lowest cost alternative. Integration describes the firm's objective to achieve operational and strategic efficiencies through collaboration among its internal functions as well as with another firm (Rodrigues, Stank, and Lynch 2004; Stank, Keller, and Closs 2001). In addition to cost benefits, some of these efficiencies may include access to better technology, process improvements, joint capabilities, improved competitive positioning, and risk/reward sharing (Bowersox, Closs, and Stank 2003; Finley and Srikanth 2005). Integration suggests that the firm takes deliberate steps to achieve these objectives through collaboration, commitment, and coordination with another firm's functional areas and activities.

Results of a literature review indicate that despite the large amount of research on integration, the construct does not have a single, accepted definition or operationalization (Pagell 2004). Additionally, integration is frequently equated to other concepts such as collaboration or coordination (Barratt and Oliveira 2001; Ross 2002).

A summary of various definitions and applications of integration in the fields of marketing, management, and logistics is shown in the Appendix. There appear to be certain themes or core concepts that emerge from review of the definitions. Integration is viewed as involving cross-functional or cross-departmental interactions. Those interactions are described variously as links or linking, involvement, and working together. Ideally the interactions result in strong relationships internal to the company and externally with other organizations. The interactions frequently are characterized by coordination, cooperation, and/or collaboration as a way the different groups can focus efforts to jointly achieve objectives. The integrative interactions are also commonly supported by information sharing and open communication.

Integration is such a broad term that it can be used to describe a wide variety of structural linkages between departments and firms. For example, internally or externally, firms can integrate different elements of their operations. These elements may be tangible (such as product flows and measurement) or intangible (such as relationships and information). The wide variety of integration applications have introduced a great deal of complexity. Managers may question what type of integration should be focused on, what actions should be taken, and what procedures should be followed. Therefore, a simple but meaningful definition of integration is needed for more effective research and management efforts. Ideally, this definition could serve as an overarching guide for all integration activities and be applied to different settings.