THE DETERMINANT OF THE SUPPLY CHAIN

PRACTICES THAT INFLUENCE SUPPLY CHAIN

PERFORMANCE IN MALAYSIA
NOOR IZZATUL ASMIDA BINTI MOHD ANUAR
Faculty of Business And Management,
Universiti Teknologi Mara Puncak Alam, Selangor, Malaysia

Abstract
Purpose- The purpose of this study is to examine the supply chain practices – Supplier strategic partnership,
customer relationship, information sharing, information quality, postponement, agreed vision and goals as
well as risk and reward sharing towards the supply chain performance.
Design/ Methodology/ Approach- The study utilizes survey data. The results are based on regression
analysis and equation modelling by using SPSS software.
Findings-The study finds that all supply chain practices namely supplier strategic partnership, customer
relationship, information sharing, information quality, postponement, agreed vision and goals and risk and
reward sharing have a positive relationship towards the supply chain performance.
Practical Implications- For supply chain practitioners, the results indicate that the practices of supply
chain practices that will improve the supply chain performance
Originality/ Value- The paper theoretically develops determinants shows that all off the supply chain
practices will influences the supply chain performance. Considered at a higher level of abstraction, these
relationships indicate a contribution to theory that explains how supply chain practices can result in supply
chain performance.
Keywords- Keywords Malaysia, Operational performance, Supply chain management, Supply chain
management practices, Supply Chain Performance
Paper type- Research Paper

Introduction
Research Background
This research focused on the supply chain practices (SCMP) that effect the supply chain performance
(SCP). Supply chain management (SCM) is an integration of various business process such as planning and
forecasting, procurement, manufacturing and assembly, distribution, management of resources and
customer-focused process management (Lummus, 1999). SCM is part of integration that link to firm
performance which will affects the capabilities in manufacturing firms especially in developing country.
Supply chain management also includes the total connectivity between the upstream (supply and
manufacturing) and downstream (distribution) value chain entities in order to achieve competitiveness. Not
only that, SCM also referred as a set of approaches that used to integrate suppliers, manufacturers, logistics
and customers to improve long time performance of the individual companies and the supply chain as a
whole.

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Role of SCM is to meet customer requirement in term of providing customer with the right product of right
quality and quantity from the right source at the right price. This will enhance the performance of an
organization to improve supply chain as it link with suppliers, customers, and other channel members.
Supply chain management practices (SCMP) is a set of activities in organization to promote effective
management of its supply chain. (Donlon, 1996) describe that SCMP include supplier partnership,
outsourcing, cycle time compression, continuous process flow and IT sharing. There are six other
dimensions of SCMP through factor analysis that are supply chain integration, information sharing (IS),
supply chain characteristics, customer services management, geographical proximity and just-in-time
capability identified by Tan et al. (2002). In order to measure SCMP, cross-functional teams, supplier base
reduction, long-term relationship, supplier involvement and communication can be use. Furthermore, it will
cover important dimensions such as upstream (SSP) and downstream (CR) of the supply chain, information
flow (IS and IQ), internal supply chain process (POS) that include agreed vision and goals, risk and award
sharing.

To be highly competitive and achieving sustainable profitability growth, supply chain management can
integrate with internal function within firm and external linkage with suppliers, customer and other channel
members. It can be achieved through effective construction of various SCMP’s (Kim, 2006). (Kim, 2006)
also stated that the efficiency of supply chain can be realized through various interaction of SCMP. It
provides evidences how SCMP could enhance organization competitive capabilities such as customer
service, cost leadership and product differentiation. The overall of this study will allow managers to
effectively utilize different components of SCMP and SCI and performance.

Research gap
SCM practices have a significant impact on firm operational performance throughout the practices along
the entire supply chain that cover upstream, internal process and downstream activities. However, it has not
been yet sufficiently studied in the literature. Additionally, previous studies are mainly focused on the direct
relationships, and thus there is a lack of examining interactions among SCM practices (Ahire, 1998).
According to Kaynak (2008), it is not comprehensive if a research model does not show the relationship
among practices. In other words, further studies need to identify the direct and indirect impact of SCM
practices on firm performance at multiple levels.
In sum, there are some research gaps that reduce the value of previous studies in the literature.
Those are:
• the inconsistency in results of previous studies;
• the role of top management support;
• the mutual interaction among practices has not been examined; and
• data analysis approach.
This study aim at filling the above voids by proposing a new framework based on structural
equation modeling (SEM) technique and validating this model by the data collected from the Malaysia
garment industry. This is a sector playing an important role in the Malaysia socio-economic development
in terms of creating huge employment, especially jobs for females, contributing as a major source of foreign
exchange accumulation for the nation and creating a tremendous integration opportunity for Malaysia in
the global economy.

Purpose and structure of the paper

In order to fill the gap in the literature, this research aims to examine the simultaneous determinants of
supplier strategic partnership, customer relationship, information sharing, information quality and risk and
reward sharing. More specifically, this research attempts to answer five questions: does supplier strategic
partnership could improve supply chain performance? Does customer relationship can influence supply
chain performance? Does information sharing can enhance supply chain performance? Does information
quality can improve supply chain performance? Does risk and reward sharing could improve supply chain
performance? This research paper is structured as follows: after the introduction, the first part of this paper

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is literature review and research hypotheses. Thereafter, the second section presents the research
methodology. The third section describes the results of the research. The fourth section presents the
implications for theory and management. The final section is the conclusion of the paper.
Literature review and hypothesis
Supply Chain Performance
Performance measurement is defined as a systematic process of effectively and efficiently quantifying a
concept or an action (Neely, 1997). There are two types of objectives which are short-term objectives and
long-term objectives. Short-term objectives enhance productivity, reduce inventory and lead time while
long-term objectives increase market share and integration (Li S. R.-N.-N., 2006b) (Lyons, 2004).
According to (Chia, 2009), for any company that has strategic implications, identifying the required
performance measures on most of the criteria is essential and it should be an integral part of any business
strategy. Not only that, SCP has been defined as a systematic process of measuring the effectiveness and
efficiency of supply chain operations (Anand, 2015). According to (Miliken, 2001) an effective SCP
measurement process is critical to ensure continuous improvement in the supply chain processes.

Strategic Supplier Partnership

SSP defined as the long term relationship designed to laverage the strategic and operational capabilities of
individual participating organization to achieve significant benefits to each party (Li S. R.-N.-N., 2006b)
(Li S. R.-N., 2005). According to (Boddy, 2000) and (Bordonoba, 2009) viewed supply chain partnering in
the broader concept as crucial asserting that such strategic collaboration will definitely enhance
performance among supply chain collaborative partners. From another perspective, SSP is the firm’s ability
to coordinate and integrate resources with their perspective partners.
H1. Strategic Supplier Partnership influences supply chain performance positively

Customer Relationship
(Tan, 1998) defined CR as the practice to manage customer complaints, build long-term relationships with
customers, and improve customer satisfaction. It helps organization to differentiate its product from
competitors and dramatically extend the value it provides to its customers and sustain customer loyalty
through customer satisfaction (Cox, 2004) and (Dadzie, 2007).
H2. Customer relationship influences supply chain performance positively.

Information Sharing
Concept of information sharing as an area of cognitive science. Information sharing is defined here as the
process by which speakers depend on ‘given’ information (i.e., information already shared with the hearer
from previous communication) when they convey ‘new’ information (i.e., information assumed to be new
to the hearer). Information sharing is a key concept in linguistics and philosophy, where it is related to
notions like presupposition, anaphora, focus, and indexicality. It is also perceived as crucial in various areas
of language engineering because computer-based processing of language and speech relies heavily on the
computer's ability to distinguish between given and new information (Kees Van Deemter., 2002).
H3. Information sharing supply chain performance positively.

Information Quality
Information quality plays an important role in supply chain performance. In order to make smarter use of
global resources, the companies should pay attention to the quality of information to provide better services
to their customers. This will examines the factors influencing information quality and investigates the
influences of information quality on supply chain performance. The information quality is classified into
four types: accuracy, completeness, consistency, and timeliness. The influencing factors include
technological, organizational, and environmental characteristics. Supply chain performance is measured
based on financial and nonfinancial indices. It can be found that the extent of information quality will
increase supply chain performance and the extent of information quality is influenced by technological,
organizational, and environmental characteristics (Zailani S. &., 2007).

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H4. Information quality influences supply chain performance positively.

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Risk and Reward Sharing
Mention the term 'self-directed team' these days and it conjures up visions of a dedicated group of
employees in team uniforms assembling in manufacturing firms. It is also planning, controlling, and
improving their own work processes. Risk can be defined as a “combination of probability or frequency of
occurrence of a defined hazard and magnitude of the occurrence” (BS, 1991). Building on several authors
that have defined supply chain risk (Choi, 2006), (Zsidisin, 2004) they conceptualize supply chain risk as
an event that adversely affects supply chain operations and hence its desired performance measures, such
as chain-wide service levels and responsiveness, as well as cost. Regardless of the area of interest, risk is
associated with an undesirable loss, i.e. an unwanted negative consequence, and uncertainty. Even though
the assessment and management of risk in supply chains is more of a recent phenomenon, studies exist that
explored risk management approaches from a variety of angles (Charette, 1989).
H5. Risk and reward sharing influences supply chain performance positively.

Strategic Supplier Partnership (SSP)

Customer Relationship (CR)

Information Sharing (IS) Supply Chain Performance

Information Quality (IQ)

Risk and Reward Sharing (RR)

Figure 1: Research Framework

Research Methodology
Variables and measures
This research aims to examine the determinants of strategic supplier partnership, customer relationship,
information sharing, information quality and risk and reward sharing on supply chain performance. Given
this, this research involved six latent variables, namely, strategic supplier partnership, customer
relationship, information sharing, information quality and risk and reward sharing and supply chain
performance. Diamantopoulos et al. (2012) and Wen et al. (2005) argued that a latent variable should be
measured by using multiple items. Given this, the variables were measured using multiple items. As
recommended by Buil et al. (2012) and Sekaran and Bougie (2010), the multiple items were derived from
relevant literature in order to assure the content validity of the research variables.
Other than that, precise measurement in business research requires a careful conceptual definition,
an operational definition and a system of consistent rules for assigning scores or numbers. Scales means a
continued spectrum or series of categories. The purpose of scaling is to represents, usually quantitatively,
an item, a person etc. In business research there areas create many scales or number systems. It is traditional
to classify scales of measurement on the basis of mathematical comparisons that are allowable with these
scales. Scaling can be divided into two that is comparative and non-comparative scaling (Sundram, et al.,
2016).
Non probability sampling relies on the personal judgments of the researcher rather than a chance
to select a sample element (Sundram & Chandran, 2010). In this study, a purposive sampling has been done
in an attempt to obtain a sample of purposive element. In this sampling, usually would have one or more
specific predefined group to be sampled (Sundram, Rajagopal, & Bhatti, 2013). More specifically, Table I
shows the indicators of the variables. The research instrument employed seven-point Likert scale ranging
from “strongly disagree (1)” to “strongly agree (5).”

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Construct validity and reliability
Factor analysis was performed in order to check the construct validity of research variables. Three criteria
were used to evaluate the construct validity: Kaiser Meyer Olkin value ⩾ 0.5; p-value of Bartlett test of
sphericity ⩽ 0.05; and factor loading value (for each indicator) ⩾ 0.5 (Sundram, Chandran, and Bhatti,
2012). The results of factor analysis can be seen in Table I. Based on Table I, it can be concluded that all
variables fulfills the construct validity criteria.
Variables and indicators KMO Bartlett’s factor test of Loading
sphericity (sig.)

STRATEGIC SUPPLIER PARTNERSHIP 0.768 0.000

1. Organization considers quality as number one 0.710
criterion in selecting suppliers
2. Organization regularly solve problems jointly with 0.889
its suppliers
3. Organization helps its suppliers to improve their 0.712
product quality
4. Organization has continuous improvement programs 0.867
that include its key suppliers
5. Organization include its key suppliers in its planning 0.78
and goal setting activities
6. Organization actively involves its key suppliers in 0.765
new product development processes.

CUSTOMER RELATIONSHIP 0.876 0.000

1. Organization frequently interacts with customers to 0.710
set its reliability, responsiveness and other standards
2. Organization frequently measures and evaluates 0.873
customer satisfaction
3. Organization frequently determine future customer 0.762
expectations
4. Organization facilitates customers’ ability to seek 0.867
assistance from it
5. Organization periodically evaluates the importance 0.78
of its relationship with its customers.

INFORMATION SHARING 0.785 0.000

1. Organization informs its trading partners in advance 0.794
of changing needs
2. Organizations trading partners share proprietary 0.765
information with your organization
3. Organizations trading partners keep your
organization fully informed about issues that affect 0.74
its business
4. Organizations trading partners share business
knowledge of core business processes with your 0.72
organization
5. Organization and its trading partners exchange
information that help establishment of business 0.785
planning
6. Organization and its trading partners keep each other
informed about events or changes that may affect the 0.767
other partners

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 INFORMATION QUALITY 0.872 0.000
1. Information exchange between organization and its 0.76
trading partners is timely
2. Information exchange between organization and its 0.67
trading partners is accurate
3. Information exchange between organization and its 0.79
trading partners is complete
4. Information exchange between organization and its 0.84
trading partners is adequate
5. Information exchange between organization and its 0.784
trading partners is reliable

RISK AND REWARD SHARING 0.762 0.000

1. Supply chain members share risk and reward\ 0.76
2. Supply chain members share research and
development costs and results with each other 0.67
3. Supply chain members help each other financial
capital investment 0.79
Table 1: The results of construct validity testing
The reliability of the variables was assessed based on the value of Cronbach α coefficient. Table II shows
the coefficient of each variable. Based on Table II, the Cronbach α coefficients range from 0.773 to 0.880.
The values exceed the recommended cut off value of 0.6, which means the reliability of each variable was
confirmed (Bhatti & Sundram, 2015).

Sampling
The intended population of this study is the industry players of supply chain industry in Malaysia. Given
the true characteristic of the intended population was unknown; convenience sampling was performed
(Sekaran U. B., 2010). Furthermore, I am also used convenience sampling because this research aims to
test the relationships of variables. According to Sekaran (2013), convenience sampling can be performed
in a research intended to test the relationships of variables.

Dimensions Cronbach’s a
Strategic supplier partnership 0.554
Customer relationship 0.730
Information sharing 0.516
Information quality 0.906
Risk and reward sharing 0.620
Supply Chain Performance 0.941
Table 2: The results of reliability testing
The data collection was performed using survey. The sample of this research is 150 industry players
in supply chain industry in Malaysia. The sample size exceeds the requirement of multiple regression
analysis, the statistical analysis tool that we used (Bhatti & Sundram, 2015). To ensure the completion of
the survey, phone calls and e-mail reminders were sent exactly a week after the first attempt to contact
them. At the end of the data collection period, a total of 150 questionnaires were collected. However, only
100 fully completed questionnaires were used for data analysis. Therefore the size use in this study is 100.
The entire respondents selected are experts in the supply and distribution industry. In addition, participants
were assured of confidentiality and anonymity of their returned questionnaires. The selection of appropriate
respondent is done at the time of data collection (fieldwork) process. More completely, Table 3 shows the
respondents’ demographic profile.

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Data analysis
The data analysis was done using multiple regressions. Multiple regression analysis was performed due to
its ability to test the simultaneous effect and partial effect of four independent metric variables on one
dependent metric variable (Hair, 2006). The validity and reliability tests and the multiple regression analysis
were conducted with the support of SPSS 17.
Frequency analysis on the subject under study illustrates the number and percentage of respondents
for each category of demographic factors. The analysis of data will begin with the discussion about the
demographic factors will be presented. The demographic factors including of job title, job function, industry
category and years involve in business. The frequency analysis will then be followed by Skewness and
kurtosis analysis.
Skewness and kurtosis refer to the shape of the distribution, and are used with interval and ratio
level data (Coakes, 2013). Values for Skewness and kurtosis are zero if the observed distribution is exactly
normal. Positive value for Skewness indicate a positive skew, while positive value for kurtosis indicates a
distribution that is peaked (leptokurtic). Negative values for Skewness indicate a negative skew, while
negative values for kurtosis indicate a distribution that is flatter (platykurtic).

Results and discussion

Results
The results of the multiple regressions analysis are shown in Table IV. Visually, the results of the multiple
regressions analysis can also be seen in Figure 2. The F-statistic value is 7.596 with p-value (p= 0.000)
lower than 0.05. This means that the regression model can be used to predict supply chain performance.
The first finding of this research showed that strategic supplier partnership positively and significantly (B
=0.460, p-value =0.000). Hence, the first hypothesis was accepted. Furthermore, this finding support some
empirical researches on other contexts than strategic supplier partnership that also found the positive impact
of operational performance (Jharkharia, 2006).

Respondent’s Profile
Frequency Percentage
Gender
Male 60 60%
Female 40 40%
Age
20-29 years 20 20%
30-39 years 25 25%
40-49 years 35 35%
50 years and above 20 20%
Job Title
Head of Department 3 3%
Managers 23 23%
Executives 15 15%
Non-executives 34 34%
Others 25 25%
Department
Marketing 15 15%
Purchasing/Procurement 25 25%
Manufacturing 25 25%
Distribution 10 10%
Transportation 20 20%
Others 5 5%
Industry Category
Manufacturing 40 40%
Process industry 20 20%

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 Services 25 25%
Others 15 15%
Years of Services
Less than 2 years 15 15%
2-5 years 25 25%
6-10 years 35 35%
More than 10 years 25 25%
Table 3: The respondents’ demographic profile

The second finding of this research showed that the unstandardized B coefficient of customer relationship
is positive (B= 0.294) and the p-value is lower than 0.05 (p-value =0.000). This means the customer
relationship support supply chain performance positively and significantly. Thus, the second hypothesis
was accepted. Furthermore, this finding supports the finding of Dow (1999), (Rahman, 2005) and (Sila,
2005).
The third finding of this research showed that the unstandardized B coefficient of information sharing
is positive (B= 0.566) and the p-value is lower than 0.05 (p-value =0.000). This means information sharing
influence supply chain performance positively and significantly. Thus, the third hypothesis was accepted.
The fourth finding of this research showed that information quality influence supply chain performance
significantly (B=0.347, p-value=0. 000). Hence, the fourth hypothesis was accepted. This finding supports
the previous basic assumption that information quality do influence supply chain performance.
The fifth finding of this research showed that risk and reward sharing influence supply chain
performance positively (B=.560, p-value=0.000). hence, the fifth hypothesis is accepted which the risk and
reward sharing influence the supply chain performance.

Theoretical implication
Supply chain management practices are the important elements in and improving the firms’ operational
performance so that the supply chain performance objectives can be achieves at the highest level. Most of
the respondents agreed that the determinant that affecting supply chain performance is information system.
Based on the finding, the recommended solution should well address to improve information system and a
bit in risk and reward sharing, information quality, customer relationship and strategic supplier partnership.
In existing literature, there is no study that specifically investigated the simultaneous determinant of
information system, risk and reward sharing, information quality, customer relationship and strategic
supplier partnership on supply chain performance. Given this, the paper have fulfilled the gap in the
literature by developing and testing a firms’ supply chain performance model that included by information
system, risk and reward sharing, information quality, customer relationship and strategic supplier
partnership on supply chain performance. The results of this research showed that firms’ supply chain
performance is influenced by strategic supplier partnership, customer relationship, information system,
information quality and risk and reward sharing.

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 Model Unstandardized Coefficients Standardized t Sig.
Coefficients
B Std. Error Beta
(Constant) 2.268 .210 10.588 .000
SSP .460 .058 .276 7.475 .000
CR .294 .070 .222 3.790 .000
IS .566 .089 .509 6.845 .000
IQ .347 .065 .357 5.674 .000
RR .560 .080 .489 6.930 .000
7.569
F value
Sig .000
Adjusted R2 .976
R2 .976
Table 4: The results of multiple regressions

Strategic Supplier Partnership (SSP)

Customer Relationship (CR)

Information Sharing (IS) Supply Chain Performance

Information Quality (IQ)

Risk and Reward Sharing (RR)

Figure 2: The regression model

Managerial implication
The theoretical literature on supply chain management suggest direct causal link between SCMPs and
performance . In this study, a number of theoretical contributions have been made. The theoretically
integrated perspective provides a better framework for understanding the complex relationship between
SCMPs and SCP. The roles of SCMPs are revealed to understand the possible means to appropriate SCP.
This information is very crucial especially in the age of globalization where increasingly firms intensify
SCMPs processes both internally and externally of SCP. Managerial implications are twofold. The findings
suggest that managers can take advantage their existing SCMPs to stimulate and consequently influence
their firm performance level. In addition, managers, now, are able to identify which SCMPs will likely to
benefit more in enhancing SCP. Greater benefits are likely to be more if managers improve practices in
areas such as information quality, customer relationship, information sharing while risk and reward sharing
practices. If managers are considering investment in supply chain management, obviously managers should
invest in SCMPs to extract the most benefit for SCP. Such investment decision should not be an independent
activity considering only practices because It’s imperative that managers highlight this to the top
management for any budget allocation for the purpose of investment in supply chain management activities.
Supply chain managers in the manufacturing firm could use these key supply chain practices and transform
them into industrial critical success factors. As such, these critical success factors will be identified as the
key result area to formulate key performance indicator to measure the effectiveness and efficiency of the
organizational resources and supply chain as a whole. Further, managers will also have several options in

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selecting the right SCMPs ranging from upstream, downstream, internal and across supply chain which
could better the performance of SCMPs.

Conclusion
In this research or study, there are five factors that had been identified that will lead to the increases the
buyer’s dependence on its suppliers at various company of supply chain in Malaysia which are independent
variable such as strategic supplier partnership, customer relationship, information sharing, information
quality and risk and reward sharing. This research was been done due to researcher observation from the
extracted data and the issues that researcher heard to increase supply chain performance and requirement
in certain practices that implemented by the organization.
Based on the hypothesis result in Chapter 4, five variables are significant. The significant variable
is supply chain practices which consist of strategic supplier partnership, customer relationship, information
sharing, information quality, and risk and reward sharing. The variable significant means there is a
relationship between supply chain practices with supply chain performance. The alternate hypothesis is
accepted because the hypothesis is significant.
Strategic supplier partnership, customer relationship, information sharing, information quality and,
risk and reward sharing are the factors that affecting supply chain performance at supply chain and logistics
industry. This is because these kinds of supply chain practices should be connected to suppliers who meet
the requirements and have significant role in industry' value creation. The organization needs to focus on
information sharing and knowledge transfer as most effective preconditions affecting learning in supply
chain relationships, hence professional experience and tacit knowledge is shared in tight buyer-supplier
collaboration. The organization needs to focus on information sharing and knowledge transfer as most
effective preconditions affecting learning in supply chain relationships, hence professional experience and
tacit knowledge is shared in tight buyer-supplier collaboration (Sundram et al., 2016). The power and
dependence strongly influence the nature of the buyer – supplier relationship (Batt, 2004; van Weele, 1999)
Besides that, according to (Nyaga, 2013) the quality of the relationship enhances firms’ willingness to
engage in collaborative activities with their supply chain partners.
As a conclusion, early supplier involvement, inter-firm learning and supplier orientation are
influence increases the buyer’s dependence on its suppliers. This is because the organization will refer to
the all that variable. Moreover, the organization has to up to date information system that are integrated
within the organization to inform each and all of them.

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