Khalid Al-Mutawah, Vincent Lee and Yen Cheung
Clayton School of Information Technology, Monash University, Melbourne, Victoria 3800, Australia
Keywords: Corporate culture, electronic supply chain, performance measurement.
Abstract: The dynamic nature of today’s marketplace makes the survival of individual organizations too difficult.
Therefore, researchers are seeking new opportunities on forming collaborative networks like supply chains
(SCs). Nonetheless, the transition from competitive to cooperative relationships has been difficult for many
managers, as the necessary changes in corporate culture have proven quite difficult, thus organizations will
have considerable difficulties in partnering with external entities if they cannot develop a partnering culture.
Consequently, new research suggests traditional SCs with long-term relationships continue to exist, under a
new name of alliances called “e-supply chains”. One of the primary benefits of the e-SC is that it allows
firms to realize many benefits that were associated with the electronic business, yet in a SC management
context. The purpose of this research is to identify the aforementioned cultural challenge on e-SCs context.
To achieve this we will investigate two case studies; where one represents an e-SC and another for a
traditional SC. A comparison between the two cases, suggests that e-SCs are less effective by changes on
corporate culture than traditional SCs when forming SCs.
The globalization, uncertainty and dynamic nature of
today’s markets have influenced individual
businesses to move from competitive to
collaborative strategies like supply chains (SCs).
SCs encompass all activities starting from acquiring
raw materials process, throughout manufacturing
and final products delivery to end users or
customers. A supply chain management (SCM)
system integrates and manages these activities
through enhanced long-term relationships to achieve
sustainable competitive advantage (Handfield and
Nichols, 1999). Nonetheless, the use of long term
relationships ignores gaining new opportunities
because organizations are strictly engaged with
long-term contracts that are often a costly decision
to be terminated (William, Esper and Ozment,
2002). Furthermore, there is a need for an efficient
mechanism to share real-time information (e.g.
customer preferences, store capacity, orders data)
between partners (Lee and Whang, 2000). Therefore,
another form of SCM systems called electronic
supply chain (e-supply chain) has emerged. This
new form provides another variation in inter-
organization relationship philosophies. However,
this new paradigm is facing a new challenge when
linking independent organizations over the Internet.
This challenge is the impact of organization’s
corporate culture differences in the SC’s
relationships. In this paper, we attempt to address
this challenge by initially developing an e-SC
structure. Then, Compare the impacts of corporate
culture differences on traditional and e-SC systems.
Dramatic economic and strategic changes brought
about by recent advances in technology, including
the Internet, the World Wide Web, broadband, and
wireless technologies, have expanded the scope of
SCs. Consequently, e-SCM systems have emerged
to use information and communication technology
(ICT) to link organizations and outsourced functions
together to enable low cost partnership and high
flexibility. However, the e-SCM system (e-SCMS)
needs a flexible structure to facilitate the
organizations with new relationships form unlike the
tied long-term relationships
Al-Mutawah K., Lee V. and Cheung Y. (2007).
In Proceedings of the Ninth International Conference on Enterprise Information Systems - SAIC, pages 279-282
DOI: 10.5220/0002364602790282
Figure 1: Basic e-SCMS structure. The large circle
represents the rotation path for the e-SCMS while the
small circles are participants within the supply chain
network. There are 4 suppliers (S1-S4), 4 manufacturers
(M1-M4), and 2 distributors (D1-D2). A short-term link
has been made between S3, M2, and D1.
2.1 Structure of e-SCMS
Unlike traditional SCM systems, the e-SCMS is
extremely dynamic. It uses the Internet to link
organizations and match available resources with
demands. Thus, the e-SCMS acts as a dynamic ring
that keeps ‘rotating’ until it matches couples. This
concept is similar to the National Semiconductor
Company case where the company implemented a
Web tool called “Portal” that operates through the
Internet. This tool allows customers to search all
distributors until they find the matched couple that
meets their demands (see Figure 1). Furthermore,
distributors search the Semiconductor stores to
check available resources. These couples will then
preserve the link as their needs are met. However,
when costs exceed the threshold limit or the services
quality declines, it will become inadequate in
meeting customers’ satisfaction and the
organizations concerned will decouple the linkages
and the e-SCMS begins the rotation process all over
again to find another beneficial partner. This
structure of the e-SCMS provides greater
adaptability and flexibility to form partnerships than
traditional long-term systems (see Figure 2). In view
of its dynamic nature, e-SCMS are also called short-
term strategic alliances. Furthermore, the rotation
and re-linking of processes are not expensive
because the majority of the organizations are using
the Internet as a communication channel, thus e-the
SCMS offers cost reduction to setup new links. In
addition, the opportunity to improve an
organization’s services is more than that of
traditional SC systems because breaking the links
are less complicated and less costly. This set-up is
particularly useful for small to medium-sized
organizations because the required technology
expenditure is relatively low. However, long-term
relationships can be developed as needed.
Figure 2: Basic structure for traditional supply chain
systems. The participants are linked in sequence with
long-term contracts where they cannot switch links until
they terminate their own contracts.
2.2 A New Challenge for the e-SCMS
The above dynamic structure requires frequent
changes to organizations’ corporate culture to meet
the changing expectations of various stakeholders in
a SC. Corporate Culture is defined as the philosophy
that defines the relationships nature between the
organization’s units internally and between the
organization and its constituents externally.
Discovering corporate culture involves finding out
strategies for managing internal and external
business affairs as the result of members' individual
personalities, beliefs, values and experiences that
shape organizational meanings and experiences.
Culture, defined by Schein (1990, p.111) as (a) a
pattern of basic assumptions, (b) invented,
discovered, or developed by a given group, (c) as it
learns to cope with its problems of external
adaptation and internal integration, (d) that has
worked well enough to be considered valid and,
therefore (e) is to be taught to new members as the
(f) correct way to perceive, think, and feel in relation
to those problems. Corporate culture is what we
generally call the “way we are working here”, how
we co-operate and collaborate. Culture also
comprises our human relations behaviour, our
common levels of standards and procedures, and all
the initiatives for how to make the organisation
function well both professionally and socially.
Corporate culture and the management
techniques of each firm in a SC should be
compatible for successful SCM systems (Ellram and
Cooper 1990; Lambert. Stock, and Ellram 1998;
Novack. Langley, and Rinehart 1995;Tyndan et al.
1998) because it becomes alpha and omega for
success or failure of many aspects within an
ICEIS 2007 - International Conference on Enterprise Information Systems
organization particularly embedded with the
information systems. Organizational compatibility is
defined as complementary goals and objectives, as
well as similarity in operating philosophies and
corporate cultures in order to achieve sustainable
performance (Bucklin and Sengupta 1993).
Bucklinand Sengupta (1993) demonstrated that
organizational compatibility between the firms in an
alliance has a strong positive impact on the
effectiveness of the relationship (i.e., the perception
that the relationship is productive and worthwhile).
Cooper, Lambert, and Pugh (1997) also argue that
the importance of corporate culture and its
compatibility across SCs members cannot be
In this section we identify the impact of corporate
culture differences in two different case studies. The
first case represents an e-SCMS, while the second
case represents a traditional SCMS.
3.1 PeCC Supply Chain
The Project e-Commerce and Communication
(PeCC) for Healthcare was initiated in 1996 (More
and McGrath, 2002). PeCC emerged from the
Australian Federal Government’s concern over
burgeoning costs in Australia’s $40 billion health
sector. PeCC was developed to introduce e-
commerce practices into the health sector with
almost 700 suppliers, automating pharmaceutical
and other supplies to hospitals and retail pharmacies.
More and Mcgrath asserted that many
challenges have emerged from the PeCC project,
such as people’s resistance to change, political
issues relating to Australia’s Commonwealth and
State Governments, and data ownership. However,
at a macro level an essential challenge is the
corporate cultural differences between an industry
private sector’s approach and the government’s
approach, both in their management styles and
process, and the presence or absence of commercial
pressures (such as concerns with cost effectiveness,
inefficiency, levels of bureaucracy, and monies).
At the micro level, the issue of corporate cultures
can also be problematic. For example, supply
managers regard nurses’ involvement in SCM as
opposition. Others criticise the IT professionals,
pressing for them to become more client focussed
and take the issue more seriously. Some urged that
hospitals are more client and patient-oriented rather
than continuing to persistently market proprietary
systems. The mismatched corporate culture, between
a hospital such as those of administrators, healthcare
professionals, and with supply managers, also
impinges on the efficiency of the SC. SCM always
come a poor second or third in importance compared
to medical service procedures and ward dispensary
activities, because healthcare professionals give a
higher priority to delivery of urgent drugs/equipment
and other patient’s cares activities.
Despite the cultural differences between
the PeCC’s organization there is still a continues
electronic communication channel that moderate the
negotiation and strength the links between partners,
because SC’s communication is facilitated by an
Internet-based platform, allowing more efficient
interaction between the pharmaceutical and
healthcare products industry’s outlets (retail and
hospital pharmacies), wholesalers, suppliers and
manufacturers. Therefore, PeCC’s SC continues
operating with some cultural differences that might
affect the SC’s performance, but a complete
compatibility is not crucial.
3.2 Japanese Logistics
Manufacturing practices popularized by the
Japanese, such as total quality management and just-
in-time procurement, have become the worldwide
gold standard for producing high-quality products.
Many authors attributed this golden reputation on
supply chain management to its timely delivery
which in Japan means 100% of deliveries precisely
on time, and high quality means zero defects
manufacturing. One might expect the same results
can be obtained when Japanese methods of logistics
management (planning and arranging the transport
and storage of goods and materials) are applied
internationally. However, research shows that
Japanese-owned logistics companies in Europe
struggle to meet those expectations. A study has
been performed to investigate the corporate culture
clash that outcome from the recent extension of
Japanese firms’ supply chains to Western Europe
supply chains.
The report (Smagalla, 2004) survey 65
manufacturers' European distribution centres with
Japanese logistics management. The Japanese
logistics subsidiaries failed to deliver superior
logistics support. In follow-up interviews, the
Japanese managers described a clash of cultures
underlying their operations. Non-Japanese staff was
frustrated that, among other things, proposals moved
slowly through multiple channels before decisions
could be made. In Japanese corporate culture a new
proposal must go through multiple levels before
making any decision. Therefore, decision making
process is a slow process. However, once a formal
decision has been made the action are taken very
quickly and collectively without any delay,
objections or hesitations, because all management
levels from bottom to up have been involved from
the beginning. On the other hand, in Western Europe
corporate culture oral discussion is allowed, and
decision-making process does not follow a bottom-
up structure, thus it is made faster.
Moreover, in Japanese culture more commitment
is given for operational excellence where making
mistakes is extremely not acceptable action.
Therefore high-ranking Japanese managers spent too
much time apologizing for service failures and
focused less on planning. On the other hand, in
European corporate culture accept that humans can
make mistakes, thus allowed to argue with
customers. The interviews also revealed that
European managers did not fully understand the
ultimate payoff of the Japanese service strategy.
Hence, applying the Japanese logistics within
Western firms is a difficult task with continues exit
of cultural differences, and absence of compatibility.
In this case corporate culture is mediating the SC’s
performance, thus cultural differences has more
impact than the PeCC case.
In summary, this research article contends that the
value and relative importance of corporate culture
and strategic alliances have changed, as we migrate
from the traditional SCM approach to the e-SCM
perspective. Hence, this research suggests that
corporate culture is less effective when managing
cultural differences on e-SC environment. The
rationale behind this proposition is that the Internet
and electronic commerce, combined with supply
chain-related opportunities, have given way to an
environment where the benefits of both the dynamic
e-SC structure to form inter-organizational relations
and the traditional SCM philosophy can be jointly
realized. The focus on corporate culture also
provides management with a guideline for assessing
potential cultural changes necessary to reap fully the
benefits of operating in the e-SCM environment.
The proposed structure of e-SC partnerships and
alliances provides a framework for further research
into SC relationships, and ultimately the ever-
changing and dynamic e-SC environment. The next
step in the process of researching partnerships and
alliances, as well as corporate culture, in e-supply
chains is empirically to test the propositions
developed in this article. Such tests will allow for
increased academic knowledge on the impact of the
corporate culture on the management of SC
organizations with a better understanding of the
cultural changes necessary to manage the e-SC
organization effective. Overall, this research
contributes to the understanding of the dynamic and
volatile electronic commerce marketplace by
focusing on the corporate culture differences’
management necessary in this environment
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