1.1 Introduction
In business today, there is significant concern about the challenges of doing business under environmental uncertainty. Firms tend to emphasize supply chain flexibility more in times of increased uncertainty (Swamidass and Newell 1987), given that supply chain flexibility is a critical driver of supply chain performance (Vickery et al. 1999; Sánchez and Pérez 2005; Aprile et al. 2005; Stevenson and Spring 2009). It is important that critical supply chain management (SCM) issues like SCM flexibility are researched (Vickery et al. 1999), especially as firms strive for coordination and collaboration with channel partners and customers (http://cscmp.org/aboutcscmp/definitions.asp).
The Indian market is growing, thus the logistics function is expected to do even more to assist the firm to meet market requirements (Wu and Cheng 2008). Indian managers are paying more attention to supply chain initiatives due to the continued growth (approximately 12%) of the manufacturing sector in recent years and the allocation of 12–15% of firm revenues to logistics (Arshinder et al. 2007; Selko 2008). Hence we need to provide managers with suggestions to better utilize resources to succeed. In a dynamic manufacturing environment like India, achieving a competitive advantage is important. The proposed model examined the influence of information sharing and supply chain integration on supply chain flexibility and, ultimately, competitive advantage in the context of South Indian small-scale manufacturing firms.
1.2 Theoretical Framework and Hypothesis Development
The theoretical framework used in our study is based on the resource-based view (RBV) of the firm (Wernerfelt 1984), which recognizes that a bundle of resources (e.g., human, physical, and organizational capital) impact firm performance (Wernerfelt 1984). The concept of RBV has been expanded to include external capabilities by some researchers, given the realization that firms also utilize some critical external resources and that interfirm relationships contribute to the firm’s competitive advantage (McEvily and Zaheer 1999; Das and Teng 2000; Araujo et al. 1999). Mathews’ (2003) “extended resource-based view of the firm” concept suggests both internal and external assets enable a firm’s competitive advantage and a firm’s supply chain network is an important external resource. Araujo et al. (1999) concludes that the collaborative relationship between two partnering organizations impacts supply chain flexibility, provided that the firm has easy access to its suppliers’ capabilities while making operating decisions. The following sections identify the constructs employed in this study along with the proposed hypotheses.
1.2.1 Information Sharing
Information sharing refers to the amount of sensitive information that is willingly shared among partners (Monczka et al. 1998). Sharing information with both upstream and downstream partners is vital for the entire supply chain to function seamlessly (Mason-Jones and Towill 1997; Balsmeier and Voisin 1996). Researchers have found that information sharing can be a source of competitive advantage for the firm (Novack et al. 1995; Jones 1998) because it enables the partners to work as a single unit (Stein and Sweat 1998). While it is clear that improved performance can result from freely sharing information (Tompkins and Ang 1999), many managers see their company’s sensitive information as a source of competitive advantage and are reluctant to share it with anyone (Vokurka and Lummus 2000).
1.2.2 Supply Chain Integration
Supply chain integration is the extent to which the activities within the firm and among supply chain partners are cohesive (Stock et al. 1998; Narasimhan and Jayaram 1998). Supply chain integration encapsulates the following three sub-dimensions:
- 1.Functional integration: The firm’s functional areas (e.g., purchasing, logistics, or marketing) cooperate with the focus often being on cost minimization (Turner 1993; Stevens 1989).
- 2.Internal integration: The relationships between the critical sub-functions are linked into one transparent unit so each function knows what the other functions are doing to maximize customer satisfaction, while still achieving internal targets (Narasimhan and Jayaram 1998). Once internal functions are integrated, effort turns to the involvement of key suppliers and critical customers to align both groups with the firm’s objectives (Narasimhan and Jayaram 1998).
- 3.External integration: Collaborating rather than competing occurs across the entire supply chain (Vokurka and Lummus 2000) to enable a faster response to customer requirements (Magretta 1998).
1.2.3 Supply Chain Flexibility
Supply chain flexibility represents the firm’s ability to handle nonstandard orders and to adjust to changes in production levels or product functions and features. Pujawan (2004) determined that highly flexible supply chains improve firm competitiveness. Research has suggested that there are five flexibility dimensions: (1) the ability to handle alterations to customer specifications and non-standard orders, (2) the ability to produce products with many features, (3) the ability to adjust to sudden changes in customer demand, (4) the ability to reach an extensive market consistently, and (5) the ability to handle the final customer demands (Vickery et al. 1999). There is a clear need for gr...