The effect of estimated time of arrival(ETA) and
tracking data on B2B supply chain performance
Master thesis, MSc Supply Chain Management
University of Groningen, Faculty of Economics and Business June, 2017
Haijing Wang Student number: s3099113 e-mail: h.wang.31@student.rug.nl
Supervisor Jerry van Leeuwen
ABSTRACT
Most literature concerning sharing logistics information is based on information exchange within transportation and public transport field. This paper investigates the effect of sharing logistics information within B2B e-commerce field, and tests the relationship of trust, supply chain performance and sharing logistics information, which is operstionalized by ETA and tracking data. The research was conducted in building industry, based on one interview with building material wholesaler and a survey research with building companies. The findings of the interview indicate that sharing logistics information improves operational efficiency. Results of the survey research indicates that trust and sharing logistics information contribute to supply chain performance separately. But when sharing logistics information and trust interact, the positive impact of trust is mitigated and supply chain performance is mainly influenced by sharing logistics information. The survey results are discussed by referring to literature and the characteristics of building industry. Finally, advice is proposed for companies’ development of information systems. Companies should make a trade-off between the cost and effect of information sharing, and chose between efficient supply chain and responsive supply chain basing on the characteristics of its industry.
INTRODUCTION
Since the development of internet, B2B e-commerce has received considerable attention. Researchers proposed that B2B is the next major innovation in business (Kronenburg, Yue & van den Ende, 2014). B2B e-commerce helps companies to increase operational efficiency by automating processes, saving transaction costs, and improving customer service (McKnight, Lankton, Nicolaou & Price, 2017). Realizing the potential of B2B, more and more companies are implementing or planning development projects in B2B e-commerce.
It is commonly recognized that information sharing is important to supply chain efficiency, especially in B2B transactions (Cater et al., 2010). Because collaborative electronic information makes it easier to match buyers and seller and automates most transaction processes (Agnihotri, Dingus, Hu & Krush, 2016). Among the vast amount of information flows in B2B exchanges, Estimated time of arrival (ETA) and tracking data are most frequently inquired logistics information by B2B clients (Lin, Lo & Sung, 2006). Another important topic in B2B e-commerce field is the trust between trading partners. Because the services offered through B2B transactions are more intangible than traditional spot transactions (Doney, Barry & Abratt, 2007). While trust gives buyers a sense of belief on the outcome of the service and smooths the process of transaction (Jøsang, Ismail & Boyd, 2007).
There is much literature on the relationship of information sharing and B2B. Information sharing can increase the transparency and efficiency of transactions in e-commerce (Lin, Lo & Sung, 2006). However, the effect of logistics information has hardly been studied in e-commerce field. Previous studies about logistics information only focused on its usefulness in transportation and public transport field. Literature on transportation shows that ETA and tracking data make the operations of logistics activities more efficient, and tracking data in return can be used to compute more accurate ETA (Persson, 2005; Kern et al., 2015; Jakobs et al., 2001; Roy et al., 2006; Riessen et al., 2016). Literature on B2C studied the implementation of track and trace systems in B2C e-commerce, but hardly mentioned the usefulness of ETA (Angheluta & Costea, 2010; Scholten et al., 2014). Thus the implication of logistics information from B2C is also limited. Furthermore, the relationship of trust and B2B supply chain performance has been widely studied. Research shows that trust is positively related to B2B supply chain performance, because buyers tend to assign more procurement orders through electronic channel when they trust the suppliers (Ratnasingam, Pavlou & Tan, 2002; Doney, Barry & Abratt, 2007).
have hardly been studied under the environment of B2B e-commerce. Literature has shown that trust is a key factor for B2B e-commerce success. Thus, this paper purposes to investigate the benefits of sharing logistics information on B2B e-commerce, and the effect of sharing logistics information on the relationship of trust and B2B supply chain performance. It leads to the following research question:
Does sharing logistics information influence the relationship between trust and B2B supply chain performance?
The structure of this paper is as follow. Section 2 is a literature review of related concepts and provides the theoretical background for the hypotheses and conceptual model of this research. Section 3 is the methodology of a survey research that intends to hypotheses proposed in the conceptual model. Section 4 is the data analysis and discussion of the survey results. Section5 is the conclusion of this paper.
THEORETICAL BACGROUND
Conceptual model
The conceptual model of this study is formulated in Figure1. In the following part of this section, the concepts in the model will be studied in literature, and hypotheses will be proposed concerning the relationships of these concepts.
Figure1: Conceptual model
Trust
Company trust has received much attention in literature. Skjott-Larsen (2007) suggested that trust development is the main task in managing inter-organizational relationships. Jøsang, Ismail and Boyd (2007) define trust as a sense of belief , the willingness to believe a firm, and the reliability on the firm. They suggested that customers are in a vulnerable position in online transactions because they suffer
H2
Trust B2B Supply chain
Performance Sharing logistics
information
uncertainties before they receive their products. Traditional forms of transactions allow clients to get access to physical firms and products. However, there are difficulties of collecting evidence about unknown status of orders in electronic transactions. As a result, online transactions are more intangible than spot transactions (Doney, Barry & Abratt, 2007). While trust provides buyers with confidence in the outcome of the transaction, and is important for the success of e-commerce (Lin, Lo & Sung, 2006).
B2B supply chain performance
There are many different definitions of supply chain performance (Skjott-Larsen, 2007). Beamon (1999) proposed that there are three dimensions of supply chain performance: effectiveness, efficiency, and flexibility. Iyer, Germain and Claycomb (2009) define supply chain performance as the capability to generate customer value, which means the quality of customer services provided and the level of customer satisfaction. Hopp (2011) stated that supply chain performance is the competitive advantages concerning cost, quality, speed, service, and variety. Skjott-Larsen (2007) suggested that the definition and measurement of supply chain performance is often non-inclusive, and the measurement is often focused on only one or a few dimensions of supply chain performance. Since the non-inclusiveness of supply chain performance (Skjott-Larsen, 2007), this paper will focus on some commonly used dimensions in assessing the performance of B2B: customer service level, reliability, sales turnover, number of electronic orders (Hsu, Kannan, Tan & Leong, 2008; La, Pattersonm & Styles, 2009; Iyer, Germain & Claycomb, 2009).
Trust and B2B supply chain performance
proposed that higher level of trust between supply chain partners reduce the transaction and agency cost, improve production planning, reduce inventory, and reduce order fulfillment cost. Jøsang, Ismail and Boyd (2007) find that firms with strong trust have higher level of cooperation and achieve higher level of supply chain integration. Therefore, it is posited that:
Hypothesis 1: Trust has positive impact on B2B supply chain performance.
Sharing logistics data
It is commonly recognized that information sharing is important for B2B e-commerce (Cater et al., 2010). Hsu, Kannan, Tan & Leong, (2008) found that companies become closer and tend to cooperate more when sharing their information. Basically, there are three kinds of information exchanged between companies: sales information, demand information, and logistics information. Sharing sales information counter the bullwhip effect, so that companies can respond quickly to changing customer needs (Lee, Padmanabhan, & Whang, 2004). Sharing demand information is the basis for supply chain integration strategies such as Vendor-Managed Inventory and Continuous Replenishment (Ha, Tong & Zhang, 2011). Sharing logistics information such as ETA and tracking data increases the efficiency of supply chain operations, enhances the visibility of products flows, and mitigates customer concerns(Agnihotri, Dingus, Hu & Krush, 2016). Logistics information is already highly transparent in business transactions, but supply chain partners often prevent the transparent flow of sales and demand information, because they are strategic information related to long-term objectives (W. Grey, T. Olavson & D. Shi, 2005). Therefore, logistics information is often the main contributor of sense of information transparency, and this paper will focus on the effect of sharing logistics information.
logistics, and find that manpower at the warehouse can be more effectively deployed if arrival times are accurately predicted, because distribution centers and logistics providers usually use ETA data to schedule the unloading and loading crews (Jakobs et al., 2001; Roy et al., 2006; Riessen et al., 2016). A simulation of the freight flows in a sea port shows that provision of ETA increases the number of containers transshipped to the hinterland and thus decreases the congestion of the sea port, because providing ETA information at earliest time available to downstream company enables better planning and faster transshipment (Elbert, Oezgen & Walter, 2010). It can be seen from this literature that ETA and tracking data yield better decisions on the planning of subsequent activities in supply chain.
Accordingly, ETA and tracking data are important logistics information shared in B2B e-commerce. Besides, literature has proved the positive relationship between trust and B2B supply chain performance. Thus, this paper will investigate whether this relationship is altered by sharing logistics information as operationalized by ETA and tracking data. Following, it is posited that:
Hypothesis 2: Sharing logistics data enhances the positive relationship between trust and B2B supply chain performance.
METHODOLOGY
Data collection
In order to answer the research question and test hypotheses, this research mainly used the survey method. The research was developed in four steps. First, an interview with Stiho (a Dutch wholesaler of building material) was conducted to study the real context of B2B e-commerce. Second, a pool of survey items was developed by reviewing literature on information sharing, trust, and supply chain performance. Finally, survey questionnaires were distributed by a web-based survey to a large sample of building companies in the Netherlands. The companies were contacted by an e-mail requesting their participation. A reminder was sent one week later.
The sample
rate was 3% (88 out of 3384 surveys emailed). Finally 74 responses were used to do the data analysis, because the rest 14 responses are not using B2B e-commerce.
Measure development
The construct Sharing logistics information is operationalized by items describing the extent to which the ETA and tracking data are shared and utilized. The items for this construct were generated based on previous literature on information sharing and logistics operations (Hsu, Kannan, Tan & Leong, 2008; Lin, Lo & Sung, 2006). The construct Trust is operationalized by items reflecting how much customers trust in their suppliers. The items of this construct mainly focus on contract based trust and long-term relationship (Johnston., McCutcheon, Ian Stuart & Kerwood, 2004; Ian Stuart, Verville & Taskin, 2012; Bernardes & Zsidisin, 2008). The construct B2B supply chain performance is operstionalized by item indicating the extent of customers satisfaction, operational efficiency, and finance performance. Since the non-inclusiveness of supply chain performance (Skjott-Larsen, 2007), this research just focus on this three dimensions of supply chain performance. Trust mainly contributes to customers satisfaction and finance performance (La, Pattersonm & Styles, 2009; Iyer, Germain & Claycomb, 2009). Sharing logistics information has impact on operational efficiency (Jakobs et al., 2001; Roy et al., 2006; Riessen et al., 2016). The items of this research were all measured on a five-point Likert scale. The survey items are shown in Table1.
Table1: Survey items Sharing
logistics information
How do you agree with the following issues in your firm’s supply chain management efforts?
(5=strongly agree, 4=agree, 3=neutral,
2=disagree,1=strongly disagree)
SLI1. We purchase our materials and components through the internet.
SLI2. We have a compatible information system with our suppliers.
SLI3. Our suppliers provide ETA (Estimated Time of Arrival) information of our orders.
SLI4. The accuracy of ETA is high compared to actual time of arrival.
SLI5. We use ETA information to plan the activities in the warehouse or the construction sites.
SLI6. Our suppliers provide tracking data of our orders. SLI7. We use tracking data to get more control of our purchasing orders.
Trust How do you agree with the following issues in your firm’s relationship with suppliers?
(5=strongly agree, 4=agree, 3=neutral,
2=disagree,1=strongly disagree)
T1. We have long-term relationship with our major suppliers.
T2. We have long-term contracts with our major suppliers. T3. We have strong business confidence in our suppliers. T4. We can always rely on our suppliers.
T5. We trust in the delivery of our purchasing orders. T6. Our major suppliers often conduct business in a manner which is in accordance with the terms of the contracts.
(Johnston.,
McCutcheon, Ian Stuart & Kerwood, 2004) (Ian Stuart, Verville & Taskin, 2012) (Bernardes & Zsidisin, 2008)
B2B supply chain
performance
On what level have you achieved the following issues in your supply chain management?
(5=very high, 4=high, 3=neutral, 2=low, 1=very low) SCP1. Being satisfied with suppliers’ service. SCP2. Overall control of purchasing orders.
SCP3. Plan the activities in warehouse or construction sites in advance.
SCP4. Profit growth.
SCP5. Overall competitive position. SCP6. Purchase more through the internet.
(La, Pattersonm & Styles, 2009) (Iyer,
Germain &
DATA ANALYSIS
Findings of interview
Stiho is a wholesaler of building materials and building supplies in the Netherlands. The company does import from Indonesia and Malaysiafor some special woods and plates, and has some European suppliers as well. The interviewee is the logistics consultant of Stiho. The interview was intended to study Stiho’s relationship with its suppliers and customers, and how sharing logistics data impact these relationships and supply chain performance.
There is no logistics information shared with Sitho's suppliers and customers. For one thing, the logistics operations of building materials is relatively complex. Because of big size and weight, building material requires special transportation equipment and the transportation time is long. The uncertainty of sea transportation and road condition makes it hard for companies to estimate and promise time of arrival. In international business, the company who supply it is usually not the company who deliver it, which makes it hard for customer to reach to the right person for tracking data. For another, the information technology is not widely used in building industry. Most of the processes are paper based not informationized, which makes it hard to share logistics information between companies. Despite these difficulties, Stiho makes improving information systems and sharing logistics information one of its development goals. As the logistics consultant mentioned, ETA helps to plan activities and organize staffs in the warehouse in advance, while tracking data reflects the status and changes of order delivery and enhance the control of the orders. Therefore, Stiho wants to share logistics information with its suppliers to improve the logistics operations. Besides, Stiho has received claims from customers who want them to share logistics information so that they can plan the events at construction sites. According to the interview, sharing logistics information may have the effect of improving the efficiency of logistics operations. As for trust, the logistics consultant suggested that trust between trading partners is good for now. The trust has been based on years of transactions and product quality. Thus the impact of sharing logistics information on trust may be limited.
Measurement Quality Assessment
Figure2: Eigenvalues
The Rotated Component Matrix (Table2) shows the factor loading for each item, and loading values greater than 0.4 were highlighted. It is seen in Table2 that the first 5 items load strongly on factor 1 (Sharing logistics information), item T1 through T6 all load strongly on factor 2 (Trust), and item SCP1 through SCP6 all load strongly on factor3 (Supply chain performance). Each item only loads strongly on and belong to its predefined construct, which means the scales measure the intended constructs, thus supporting convergent validity. No item loads strongly on more than one factors, thus supporting discriminate validity.
Table2: Rotated Component Matrix
T3 0.235 0.733 0.182 T4 0.100 0.805 0.062 T5 -0.003 0.748 0.116 T6 0.228 0.546 0.244 SCP1 0.131 0.231 0.620 SCP2 0.271 0.119 0.682 SCP3 0.098 -0.096 0.778 SCP4 -0.013 0.143 0.489 SCP5 0.015 0.133 0.777 SCP6 0.165 0.014 0.601
For the reliability, values of Cronbach’s Alpha are all larger then 0.7 (Table3), which suggests that items in a construct are consistent and the measurement scales are reliable (Cronbach, 1951).
Table3: Descriptive statistics and Cronbach’s Alpha
Variables Mean Cronbach’s Alpha Sharing logistics information 2.69 0.82 Trust 4.15 0.76 B2B supply chain performance 3.24 0.72 Hypotheses tests
analysis was conducted using the interaction variable (β=-1.96, p=0.061). In order to interpret the result of interaction effect, Figure3 was drawn based on the regression coefficients of interaction variable and standardized moderator which shows a two-way interaction of Sharing logistics information on the relationship of Trust and Supply chain performance. For a low level of Sharing logistics information, the slope indicates a strong and positive relationship. However, for a high level of Sharing logistics information, the slope indicates no relationship between Trust and Supply chain performance. Therefore, Sharing logistics information mitigates the relationship between Trust and Supply chain performance, and Hypothesis 2 is not supported.
Figure3: Moderation effect
Figure4: relationships of variables
DISCUSSION
In the following part of this section, the results of data analysis will be interpreted and the relationship of Sharing logistics information, Trust and B2B Supply chain performance will be discussed. Advice will be proposed for Stiho’s development of information systems.
As shown in the results of hypothesis tests, Trust has a significant impact on B2B supply chain performance, but this relationship is mitigated by Sharing logistics information. In order to understand how Sharing logistics information influences the supply chain, the direct effect between Sharing logistics information and Supply chain performance was also tested. First, the result shows that Sharing logistics information also has a positive effect on Supply chain performance. Actually, Sharing logistics information impacts supply chain performance directly not enhancing the relationship between Trust and Supply chain performance as posited. Thus, both Trust and Sharing logistics information are important success factors of supply chain performance. Second, the regression analysis shows that the positive effect of Sharing logistics information on Supply chain performance is more significant than that of Trust. As the moderation effect can be interpreted as the interaction between independent variable and the moderator (Baron & Kenny, 1986), when the level of sharing logistics information is high and both variables interact, the impact of Sharing logistics information dominates, and the impact of Trust is mitigated. In short, Sharing logistics information and Trust contribute to Supply chain performance separately, but when both factors interact, Supply chain performance is mainly impacted by Sharing logistic information.
A large amount of literature has found that information sharing can improve the overall performance of a supply chain (Yu, Yan & Edwin Cheng, 2001; Hsu, Kannan,
+
(β =0.371, p=0.02)
Trust B2B Supply chain
Tan & Leong, 2008; Cater et al., 2010; Agnihotri, Dingus, Hu & Krush, 2016). Companies are trying to optimize their performance based on the goals of their own, but the goals of companies may conflict. Without information sharing, the whole system of supply chain can hardly achieve the optimum performance even though each member optimizes its own performance (Yu, Yan & Edwin Cheng, 2001). If each member of the supply chain has more information about other member, companies will make decisions basing on the context of the supply chain and it would be easier to achieve an optimum performance of the supply chain. Logistic information is mainly studied in transportation field and has been proved to improve operations efficiency (Persson, 2005; Elbert and Walter, 2014; Kern et al., 2015). In e-commerce, logistics operations is an important part to complete the transactions. Thus sharing logistics information will impact B2B supply chain performance directly by improving the efficiency of logistics activities.
The reason why the effect of Sharing logistics information is stronger than Trust may due to the B2B context of this research. E-commerce allows customers to buy products from all over the world. But uncertainties arise due to a lack of access to physical firms and products. Customers are expecting more information to assess the products, select suppliers and control product follows before receiving their products (Pauline Ratnasingam & Dien D. Phan, 2003). As all the contacts and transactions are based on information technology, customers rely more on the information shared to assess the outcome of the transaction than merely a sense of trust. Therefore, in B2B e-commerce, sharing logistics information contributes to supply chain performance more than trust does.
the result of trust but the decisions of managers. That is why trust does not impact on sharing logistics information in this research. Moreover, several literature suggests that sharing information can lead to more trust (Merrilees, Rundle-Thiele & Lye, 2011; Iyer, Germain & Claycomb, 2009). Because the using of information technology support shows the competence of a company, and information sharing makes transactions more tangible and creates a good business experience, resulting in the sense of trust. But there are many more source of trust such as financial strength, reputation, professional skills, honesty. The result of this research may suggest that sharing logistics information just accounts a small part of trust building.
Besides B2B e-commerce, another important context factor of this research is the building industry. As shown in Table 2, the mean of Sharing logistics information, Trust and Supply chain performance are 2.69, 4.15, and 3.24 respectively. The rate of Sharing logistics information is relatively low, which indicates sharing logistics information is not so common in building industry. The reason is related to the nature of building material. Building material is relatively traditional and functional product because of its long product life cycle, low product variety, low cost of stock-out and long lead time (Fisher, 1997). According to Fisher’s (1997) theory, functional product is more suitable for efficient supply chain and innovative product is more suitable for responsive supply chain. In other words, reducing operational costs is a better strategy than improving responsiveness for building industry. Sharing logistics information increases both efficiency and responsiveness of the supply chain, but the cost of installing and implementing information systems is high. Another barrier to sharing logistics information is the incompatibility of information systems (Voordijk, 1999). Many smaller firms simply do not have a compatible information system with their suppliers to receive information from suppliers properly.
CONCLUSION
This paper attempts to investigate the effect of sharing logistics information on B2B supply chain performance. A survey research in building industry was performed to study the relationship of trust, supply chain performance and sharing logistic information, which is operstionalized by ETA and tracking data. The results show that trust has strong and positive impact on supply chain performance, while sharing logistics information mitigates this relationship. Hypothesis 1 is supported and Hypothesis 2 is not supported. In addition, sharing logistics information positively impact on supply chain performance. The conclusion is that sharing logistics information and trust impact on supply chain separately, and when sharing logistics information and trust interact, supply chain performance is mainly influenced by sharing logistics information. Furthermore, sharing logistics information and trust are not related. As many literature has proved the positive relationship between trust and information sharing, the contributor may be deeper level of information sharing such as demand information and sales information rather than logistics information. The survey results are discussed by referring to literature and the characteristics of building industry. Building material is functional product and is suitable for efficient supply chain. Therefore this research suggests a trade off between costs and effects of information sharing. This trade off can also be extended to other industries. In functional products industry, companies should enhance information sharing with suppliers and between departments to improve operational efficiency and reduce operations costs. In innovative products industry, companies should focus more on information sharing with customers to improve responsiveness to customers. Since sharing logistics information is not so common in building industry, future research can test the moderation effect in other industries.
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