Introduction Literature Review Methodology Finding Conclusions

Supply chain collaboration, inter-firm trust andlogistics performance:

Evidence from the tourism sector

Pairach Piboonrugnroj and Stephen M. Disney

Logistics Systems Dynamics Group,Cardiff University

July 3rd , 2011

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Motivation

How do firms successfully implement supply chain collaborations?

Many firms have succeeded in implementing collaborativeactivities and have enhanced their performance.

However, many firms have struggled or failed to do so.

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Aims

1 To understand how firms effectively implement supply chaincollaborative activities.

2 To empirically test such a mechanism in supply chains.

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Supply Chain Collaborations

Definition

”At least two firms in the same supply chain work together toachieve their mutual goals”(Mentzer et al., 2001; Simatupang and Sridharan, 2005).

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Costs and Benefits of Supply Chain Collaborations

Costs and Benefits

Costs: Finding the best suppliers (e.g., price, quality),Monitoring (QC) (Barratt, 2004; Holweg et al., 2005)

Benefits: Better level of responsiveness and service level(Speckman, 1998; Holweg et al., 2005)

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Methodology

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Empirical Findings 1Exploratory case study and focus group interviews

Information sharing between the hotel and its partners e.g.,suppliers and travel agents.

Joint team work and planning as well as investing in specificequipment or special training.

Collaboration activities could give rise to performance viabetter trust between partners.

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Conceptual Framework

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Empirical Findings 2Multiple-case Study

Hotel A Hotel B Hotel C Hotel D Hotel E Hotel F

Management International Local Non- International Local Non-System Chain Chain Chain Chain Chain Chain

Destination Island Island Island Mainland Mainland Mainlanddestination destination destination destination destination destination

Location Beach City Beach Suburb Shopping ShoppingShopping area Centre area /Riverside area area

Supplier Carbonated Poultry Alcohol Carbonated Poultry Alcoholdrink drinks drinks drinks

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Empirical Findings 2Multiple-case Study

Hotel A Hotel B Hotel C Hotel D Hotel E Hotel F

Collaborative EffortsInformation sharing High Moderate Low High Moderate HighJoint activities High High Moderate Low High HighDedicated investment High Moderate High High Moderate Moderate

Inter-firm TrustTrust belief High High Moderate Moderate High HighTrust behaviour High Moderate Low Moderate Moderate High

Logistics PerformanceOrder High High Moderate Moderate High HighDelivery High High Moderate Moderate Moderate HighForecasting High Moderate Low Low Moderate High

SatisfactionOn commitment High Moderate Moderate Moderate High HighOn performance High High Low Moderate Moderate High

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Construct operationlisation

Collaborative Efforts (Nyaga et al., 2009)

Information Sharing

Joint Activities

Dedicated Investment

Collaborative Mechanism & Outcomes

Inter-Firm Trust (Kwon and Suh, 2004)

Logistics Performance (Simatupang and Sridharan, 2002)

Relationship Satisfaction (Nyaga et al., 2009)

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Our Conceptual Framework

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Research Hypotheses

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Empirical Findings 3Questionnaire Survey

Data

Questionnaire survey

Tourism industry of Thailand

109 usable responses

Analysis Methods

Confirmatory Factor Analysis (Joreskog, 1969)

Path Analysis (Wright, 1918)

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Confirmatory Factor Analysis 1

Survey items FactorLoadings

CFA Model 1: Collaborative efforts(Chi-square/df =1.093, CFI=0.933, TLI=0.989, NFI=0.927, RMSEA=0.051, AIC=70.040)Information sharing (α = 0.937)We inform this supplier/buyer in advance of changing needs. .926It is expected that any information, which might help the other party, will be provided. .948The parties are expected to keep each other informed about changes that may affectthe other party. .883

Joint activities (α = 0.942)My firm and this supplierhave a joint team. .921conduct joint planning to anticipate and resolve operational problems. .950make joint decisions about ways to improve overall cost efficiency. .887

Dedicated investments (α = 0.811)In building the relationship with my firm, this supplierhas invested substantially in personnel. .847has provided proprietary expertise and/or technology. .829has dedicated significant investment. .632

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Confirmatory Factor Analysis 2

Survey items FactorLoadings

CFA Model 2: Collaborative mechanism and outcomes(Chi-square/df =1.010, CFI=0.999, TLI=0.999, NFI=0.915, RMSEA=0.017, AIC=112.455)Inter-firm trust (α =0.823)My firm can understand this supplier well. .812This supplier is genuinely concerned that we succeed. .946We trust this supplier keeps our best interests in mind. .667This supplier/buyer considers our welfare as well as its own. .520Satisfy with relationship (α = 0.900)

My firm is satisfied with this relationship in terms of:- Coordination of activities. .826- Participation in decision making. .809- Level of commitment. .977

Logistics performance (α =0 .971)This relationship hasimproved our order processing accuracy. .949improved our on-time delivery. .858increased our forecast accuracy. .919improved our order accuracy in term of product types. .964improved our order accuracy in term of product quantity. .980

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Hypothesis TestingResult from Multiple Regression Models

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Interaction Effects of Collaboration Efforts

-3 -2 -1 0 1 2 3

-3-2

-10

12

3

Information sharing

Inte

r-fir

m tr

ust

Low levelof Joint Activities

Moderate levelof Joint Activities

High levelof Joint Activities

-3 -2 -1 0 1 2 3-3

-2-1

01

23

Dedicated Investment

Inte

r-fir

m T

rust

Low levelof Joint Activities

Moderate levelof Joint Activities

High levelof Joint Activities

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Follow-up Interviews

Joint activities can enhance the creditability andcomprehensibility of the information shared between supplychain.

Such activities can provide an opportunity to buildinter-person trust and personal relationship between hotelsand their supply chain partners.

Hotel managers are more likely to believe in data if they knewand trusted the person that gave them the information.

Joint activities are a necessary when firms share theirinformation with supply chain partners.

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Conclusions

Firms can the enhance benefits from supply chaincollaboration if their employees work together with supplychain partners in a joint team.

Supply chain collaborations leads to better inter-firm trust.

Such trust can further improve logistics performance andinter-firm satisfaction.

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Acknowledgements

“The author is grateful tothe Royal Thai Government

through the Commission on Higher Educationfor financial support of this study.”

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge

Introduction Literature Review Methodology Finding Conclusions

Thank you

Q&A

Pairach Piboonrugnroj and Stephen M. Disney Logistics Systems Dynamics Group, Cardiff University

Supply chain collaboration, inter-firm trust and logistics performance: Evidence from the tourism sector, EurOMA2011, Cambridge