An Empirical Investigation of the Impact of Business-to-business Electronic Commerce Adoption on the Business Operations of Hong Kong Manufacturers
First Monday

An Empirical Investigation of the Impact of Business-to-business Electronic Commerce Adoption on the Business Operations of Hong Kong Manufacturers by Oliver B. Yau

Abstract
An Empirical Investigation of the Impact of Business-to-business Electronic Commerce Adoption on the Business Operations of Hong Kong Manufacturers by Oliver B. Yau
This paper explores the impact of B2B e-commerce in attaining the far-reaching productivity and operational efficiency in the manufacturing industries and discusses the effect of B2B e-commerce on the management of supply chain. Attempts have been made to examine B2B e-commerce, its benefits and elements for their feasibility in Hong Kong industries. Same attention is placed to monitor the changing nature of the manufacturing industries over the last two decades and this study draws some important conclusions that may have an effect across a large section of Hong Kong business. This paper presents an attempt to empirically validate a relationship between B2B e-commerce adoption and operation performance and/or supply-chain management (SCM). Based on a survey, conducted among a cross-section of manufacturing companies in Hong Kong, this paper establishes the current adoption of B2B e-commerce and tries to project potential use in the manufacturing industries. This paper discovers that the motivating factors for the adoption of B2B e-commerce appear to be rooted in tangible economic gains such as reductions in inventory and operating costs. Intangible benefits in the form of improved supplier-manufacturer-customer relations are also perceived as important elements of B2B e-commerce adoption in the manufacturing industries.

Contents

Introduction
Prior Literature
Research Design
Analysis of Results
Conclusions and Implications

 


 

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Introduction

B2B e-commerce offers direct links between a manufacturer, its supplier and its customer, and it supports business transactions, processes and information exchange. It enables a manufacturer to bypass other middlemen and shorten the length of distribution channel. Another prominent feature of B2B e-commerce is to provide a channel to develop new products and services for both existing and new customers. It offers a manufacturer the ability to dominate the electronic channel and therefore controls the access to customers and set terms of trade. The impact of e-commerce on the B2B sector has been already manifesting itself in a number of different ways. However, the future will bring more discussion between manufacturing company and its business partners on a number of levels within the supply chain that will result in an even greater need to harness the benefits of B2B e-commerce can bring (Walters and Lancaster, 1999; Fraser and Fraser, 2000).

The manufacturing industries in Hong Kong

The manufacturing industries in Hong Kong started to develop in the 1950s. Since 1980s, Hong Kong manufacturers have relocated their production facilities to Southern China due to the shortage of labor and the raising land cost in Hong Kong. Most of the Hong Kong's labor intensive activities have now been relocated to Southern China since the economic reforms and open door policy have provided good opportunities for Hong Kong manufacturers not only to survive but to grow and expand (McIvor et al., 2000). According to a recent survey conducted by the Hong Kong Trade Development Council, roughly 60 percent of the exports of Hong Kong manufacturing and trading firms are produced and assembled in the mainland and 30 percent in southeast Asia. As a result, Hong Kong is ranked as the world's leader in the export of many consumer products ranging from toys to electronic and electrical appliances (Lee and Lau, 1999).

The scarce resource of small firms in Hong Kong and the Pearl River Delta restricts them to the production of relatively unsophisticated products and imposes severe logistics problems for small manufacturing firms to outsource technology fast enough to cope with the rapid reduction in the time-to-market. Such issues for the small and medium firms would be a lesser problem for larger enterprises, but the temptation to go for mass production and long product life cycle often mean that they cannot respond fast enough to cope with the rapid changes in market demand. The lowering of profit margin in a wide sector of industry has its origin in the oversupply and over capacity of most of the production plants worldwide (Lee and Lau, 1999). In today's highly competitive global environment, manufacturing companies must consider an open, productive, dynamic information system and to make strategic adjustments that are consistent with the demands of its environment (Yasin and Wafa, 1996). By the end of 2000, there were 21,248 manufacturing establishments in Hong Kong, employing 226,205 persons (see Table 1).

 

Table 1: Analysis of manufacturing industry in Hong Kong, 1998-2000
Source: Census and Statistics Department, Hong Kong, 2001. http://www.info.gov.hk/censtatd/eng/hkstat/fas/labour/employment/labour4_index.html, accessed 1 June 2001

Year
Month
Number of manufacturing establishments
Year-to-year change (percentage)
Number of persons engaged
Year-to-year change (percentage)
1998
December
22,414
-12.9
245,457
-15.0
1999
March
23,566
-5.3
248,613
-11.4
 
June
24,609
3.5
253,453
-6.7
 
September
23,079
-2.3
244,532
-4.9
 
December
23,553
5.1
244,720
-0.3
2000
March
22,106
-6.2
233,679
-6.0
 
June
22,581
-8.2
238,826
-5.8
 
September
21 509
-6.8
229,445
-6.2
 
December
21 248
-9.8
226,205
-7.6

 

Research objective

The purpose of this paper is to examine the impact of B2B e-commerce adoption on the support of operations management of manufacturers in Hong Kong. The framework of this paper is based on the results of a larger study of about 187 (with response) manufacturing companies in Hong Kong. The study focuses on what the manufacturing companies perceived as their operations performance with the adoption of B2B e-commerce. This paper reports findings relating to the adoption of B2B e-commerce and related impacts on operations management. In addition, the results and interpretations have some implications for managers in their determination of the appropriateness of deploying B2B e-commerce strategies to achieve operational efficiency.

The reminder of the paper is organized as follows. The first section summarizes a review of related literature. This will be followed by a description of the survey instrument and the research methodology adopted for this study. In section three the author presents the results of a survey administered of manufacturing companies. As relevant within this section, the author highlights the preliminary implications from the empirical data with regards to the main research issues. The main goals of this survey are to identify the importance of B2B e-commerce, its major features, and the roadblocks that manufacturers face when applying and implementing B2B e-commerce solutions. Finally, the author concludes the paper with an overall summary of the results and implications, together with an analysis of the minits of this research and some directions for future investigations.

 

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Prior Literature

The literature review suggests that information exchange is a valuable resource in the management of supply chain. The flow of information has been recognized alongside the importance of materials and products flows in the whole distribution channel. There has been discussion about the existing adoption of EDI as well as the idea that physical inventories can be substituted by information exchange to some extent, such as vendor managed inventory. This section starts by reviewing the literature on B2B e-commerce and exploring connections with aspects of operations management such as SCM (supply chain management) together with a briefing on the conceptual framework of B2B e-commerce adoption.

SCM is a major issue in many industries as the firms realize the importance of creating an integrated relationship with their suppliers and customers. Managing the supply chain has become a way of improving competitiveness by reducing uncertainty and enhancing customer service (Chandra and Kumar, 2000). Lummus and Vokurka (1999) summarize SCM as "all the activities involved in delivering a product from raw material through to the customer including sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, delivery to the customer, and the information systems necessary to monitor all of these activities".

Some researchers suggested that effective SCM has become one of the key areas of activity in the operations management field and tremendous changes have occurred in supplier management practice (Ahn et al., 1999; Akkermans et al., 1999). The process of SCM can include the link to end customers, the channels of distribution, the production processes and the procurement activity in such a way that customers service expectations are satisfied at a lower total cost than the competitors.

B2B e-commerce supports the transactions between organizations. A network-based form of organizations is enabled, where small and flexible firms rely on their partner-companies for component supplies, product distribution, etc. in order to satisfy their customers more effectively. These collaborative links between companies are often called integrated or extended SCM (Kalakota and Whinston, 1997).

One of the principal objectives of using B2B e-commerce is to achieve efficiency in communicating the needs of the manufacturers' production lines to the suppliers of component parts. Electronic trading was expected to bring about a number of benefits to the industry, including improved manufacturing supply chain, increased productivity, improved product quality, enhanced customer service, and a movement towards lower inventory requirements as manufacturers moved towards just-in-time production. Through this industry cooperation, individual companies were placed in a better position to compete for overseas contracts to supply parts to other than their local customers, thus gaining a competitive advantage directly from their adoption of B2B e-commerce.

The Conceptual framework

As manufacturing environments become more complex and competitive, the need for tools to assist in business-to-business collaboration increases. One of the biggest opportunities and challenges faced by manufacturing companies in the 21st century is the deployment of B2B e-commerce with Web-based technologies. As a new channel for business transactions, B2B e-commerce may contribute to the new sources of revenue and opportunities for manufacturers with carefully structured strategies.

Networked B2B-EC applications, especially on the Internet and through inter-organizational information systems, have resulted in many changes in the way B2B transactions can be carried out. Benefits from such approaches include rapid data exchange, low inventories and quick response time. All these require a high degree of interaction and some degree of system integration between supplier and customer (Archer and Yuan, 2000). A key challenge for B2B-EC is to overcome the difficulty in data interchange between supplier and customer. Traditional ways of B2B e-commerce, such as by EDI, seems beyond the resource capacity of many small and medium-sized manufacturers, but it is often a requirement for doing business with a large company. The innovative B2B-EC provides a means of achieving a desired degree of interconnectivity without a huge investment on time, money and sophisticated technology. The diagram below shows the environment that manufacturers are currently facing (see Figure 1).

 

Figure 1: The Changing manufacturing environment (Yau, 2001)

 

The significance of Internet-based B2B e-commerce is clearly highlighted in the management literature (Angeles, 2000). B2B e-commerce may replace some of the traditional activity in the "manufacturing supply chain". One great advantage to manufacturers is that the information exchange between them and their customers and suppliers can be direct and quick. A manufacturer can design, develop and deliver products to its customers quickly. This in turn may allow a manufacturer to move away from a production-oriented culture to customer-oriented ones. Such focus may remove the need for a manufacturer to hold a large stock of finished goods, thus avoiding the problem of being left with obsolete stock in an environment of fast-changing consumer products.

The potential benefits of B2B e-commerce include online communication integrated with information systems of business partners, which may lead to customized products and services; a more diversified global market; better understanding of customer needs; accurate real-time information exchange; and, cost-efficient productivity. In the future, B2B e-commerce may influence supply chain systems in various ways. First, it can be used as a fast and efficient means of communication between companies in the whole value chain. Customer orders, order confirmation, transport booking and invoicing may increasingly use B2B e-commerce. The same applies to planning information - sales forecasts, production plans, up-to-date sales figures, and stock levels, for example; any may be accessed online by strategic partners (Skjoett-Larsen, 2000).

According to Lucking-Reiley and Spulber (2000), expectations about productivity gains from B2B e-commerce can be usefully divided into four areas:

  1. possible efficiencies from automation of transactions;
  2. potential economic advantages of new market intermediaries;
  3. consolidation of demand and supply through organized exchanges; and,
  4. changes in the extent of vertical integration of companies.

The power of B2B e-commerce is that it allows a manufacturer to reduce costs, and more importantly, manipulates information from all sectors along the chain to exploit growth opportunities (Keeffe, 2001).

A conceptual model of B2B e-commerce for manufacturing industries that illustrates the improved relationships of manufacturers and their strategic partners by improving information exchanges that streamline the manufacturers business operations is outlined in Figure 2 (below).

 

Figure 2: A Conceptual framework of B2B e-commerce (B2B-EC) for manufacturing industries (Yau, 2001)

 

B2B e-commerce may enhance supply chain efficiency by providing real-time information regarding to product availability, inventory levels, shipment status, and production requirements. B2B e-commerce may have a vast potential to facilitate collaborative planning among supply chain partners by sharing information on demand forecasts and production schedules that dictate supply chain activities. Furthermore, B2B e-commerce may effectively link customer demand information to upstream supply chain functions such as manufacturing, distribution and sourcing and subsequently facilitate demand-driven supply chain operations in the shifting environment from mass production to mass customization.

 

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Research Design

Data generation

Regarding the method for data collection, a mail questionnaire allows a researcher to secure a large sample with wide coverage at a relatively low cost (Hussey and Hussey, 1997). It allows the respondent to complete the questionnaire in his or her own time, ensuring that responses are free from any possible interviewer interference. Questionnaires are mailed to a predetermined set of respondents with a covering letter that informs the recipient on the nature of the study, its importance, its usage, the time taken to complete the questionnaire, the date by which the questionnaire should be returned and the benefits to be gained from participating. It invariably guarantees anonymity to the respondent and offers incentives such as a copy of the final report. A good cover letter increases response rate. A good questionnaire should be highly structured, with questions being predominantly closed-ended. Meanwhile, it should be simple to complete and not too lengthy, preferably completed in less than 20 minutes. All these factors are important determinants of enhancing response rate.

Survey methodology

In order to avoid any possible problems with the survey instrument in this study, a pilot test was conducted using five manufacturing companies. Modifications were made to the questions wherever necessary to increase the clarity of the survey instrument. None of the firms that participated in the pre-test was included in the sample. The purpose of the pilot test was to refine the questionnaire so that respondents wouid have no difficulty in answering the questions and that there would be no problem in recording the data.

In order to study Hong Kong manufacturers' opinions on the impacts of B2B e-commerce on operational efficiency and SCM in the manufacturing industries and to test these hypotheses, a three-page questionnaire for a cross-sectional field survey was designed after reviewing the B2B e-commerce literature and the related empirical survey studies conducted in other countries. A full record was drawn from all industry types on the master list of the Members' Directory 2001 of the Federation of Hong Kong Industries (FHKI); 2,046 chief executive officers (CEOs) or similar position were each mailed a questionnaire asking them about the impact of B2B e-commerce adoption on operation management. A cover letter was attached explaining the academic aims of the study and procedures for completing the questionnaires, and a postage-paid reply envelope was enclosed to facilitate the return of the questionnaire. The questionnaire was anonymous as the firm could not be identified unless the CEO elected to do so. CEOs were requested to complete the questionnaire as they are the most knowledgeable about their organization's strategies. To increase the response rate, reminders (included a postcard requesting respondents to complete and return their questionnaires) were sent to all CEOs three weeks after the questionnaires were mailed. Of the 196 returned questionnaires, nine had not been properly completed and were excluded from the analysis. Therefore, for data analysis, only 187 responses were found useful, for a response rate of approximately 8.7 percent.

The questionnaire asked respondents to rate each criterion on a 1-5 Likert scale by circling the number that represents his/her organization's point of view. On a five-point Likert scale (1=no extent, 2=little extent, 3=some extent, 4=great extent, 5=very great extent) the respondents were asked to indicate the extent of impact of B2B e-commerce adoption on the business operation that the organization had perceived to gain from the following list (see Table 2), generated from an extensive search of the literature.

 

Table 2: Attributes and sources of reference for the measures of B2B-EC adoption.
Source: Ang, 2000, p. 46.

Measures of B2B-EC adoption
Attributes
References
Operation efficiency
1. Improves manufacturability Fisher, 2000
  2. Maintains quality information systems Swan et al., 2000
  3. Provides information to management Mackay and Rosier, 1996
Cost saving
4. Reduces cycle time Lee and Lau, 1999
  5. Increases marketability Spekman et al., 1998; Trappey and Trappey, 1998
  6. Reduces administration costs Ramaseshan, 1997
Inventory control
7. Reduces stock holding Lewis et al., 1997
  8. Leads to just-in-time purchasing Ng et al., 1997
  9. Provide flexible manufacturing system Little et al., 2001
Manufacturing supply chain
10. Improves communication & coordination Mason-Jones et al., 2000
  11. Builds up a global logistics/distribution network Lummus and Vokurka, 1999
  12. Provides integrated information systems Little, 1995
Customer focus
13. Makes products/services database available to global customers Han, 1997
  14. Improves customer support Chandra and Kumar, 2000; Olumolade and Norrie, 1996
  15. Helps to identify global market trends Scribbins, 1994
Supplier relationship
16. Helps to identify alternative supply sources on a global basis McIvor et al., 2000; Min and Galle, 1999; Tucker and Jones, 2000
  17. Helps to link its main suppliers through information systems Ahn et al., 1999; Akkermans et al., 1999
  18. Shares product or service (e.g. specification, design, quality, etc.) related information with their major suppliers Leminen, 2001; Loughlin, 1999

 

Survey questionnaire formulation

Two research questions were developed from the review of the literature. The first concerns the relationship between B2B e-commerce adoption and operation performance. The second explores further the relationship between B2B e-commerce adoption and SCM. In order to test the relationships between the adoption of B2B e-commerce and operational efficiency and/or SCM, a conceptual model of B2B e-commerce was established (Yau, 2001). Essentially, what the model establishes are the significant factors affecting the benefits possible by organizations using B2B e-commerce including improvements in operation efficiency, cost saving, inventory control, total supply chain, customer focus, and supplier relationship. In light of emerging themes in the literature and a database created from a survey of the manufacturing companies in Hong Kong, the author proposes the following arguments:

    Argument 1: B2B e-commerce adoption improves operation performance in terms of operation efficiency, cost saving, and inventory control.
    In the literature of operations management, it is well accepted that the consistency between production capabilities and market requirements is one of the major keys to business performance (Fisher, 2000; Lee and Lau, 1999; Ng et al., 1997; and, Little et al., 2001).

    Argument 1.1: B2B e-commerce adoption improves operation efficiency.
    The development of the Internet has provided a potential solution. B2B e-commerce is similar to EDI in the way that it enhances business transaction processing and information exchange. The application and potential of B2B e-commerce is wider than EDI as it is not limited to information exchange between several business parties connected to an EDI network. Its application is "Internet based" and the users can interact globally, exchanging information with other potential business parties that also have Internet tools. A consequential advantage is that B2B e-commerce reduces the huge expense involved in being electronically hooked up to an EDI network. Using B2B e-commerce involves a lower cost compared with EDI usage.

    Argument 1.2: B2B e-commerce adoption improves cost saving.
    B2B e-commerce innovations aim to reduce the cost of procurement before, during and after the transaction. At every stage, B2B e-commerce avoids the need to translate computer files into paper documents, a process that generally involves errors, delay and costly clerical personnel. B2B e-commerce automates this process by mediating transactions through Websites and EDI (Lucking-Reiley and Spulber, 2000). By reducing clerical procedures and eliminating paper handling, B2B e-commerce can accelerate ordering, delivery, and payment for goods and services while reducing operating and inventory costs (McIvor et al., 2000). Manufacturers, especially small and medium-sized enterprises, increasingly rely on international networks of suppliers, distributors, and customers, frequently via the Internet, to improve their global competitiveness through reducing fixed and operating costs (Graham and Hardaker, 2000). In fact, electronic businesses are attempting to use the Internet to seamlessly integrate enterprise systems, databases, and workflows across organizational boundaries and planning frameworks. Organizations have been investing significantly in building information links with their suppliers and buyers in order to reduce costs, lead times and quality problems, and improve time customized delivery (Prasad and Tata, 2000).

    Argument 1.3: B2B e-commerce adoption improves inventory control.
    Focusing on the flow of information in the supply chain often brings opportunities to improve response time dramatically and hence reduce inventory, working capital and therefore cost (Wilding and Newton, 1996). Inter-organizational information systems (IOS), the computer based communication between buyers and sellers, can improve inventory management and control as well as reduce costs for all participants (Wilson and Vlosky, 1998). Inventory reduction can be achieved through closer integration with customers and suppliers. By maintaining closer relationships with suppliers, manufacturers can eliminate the need for raw material warehousing. Similarly, finished goods on hold can be minimized if the needs of customers can be accurately determined. Such determination of customer requirements can be possible if the company has achieved system integration through B2B e-commerce.

    Argument 2: B2B e-commerce improves SCM.
    Manufacturer involves both buying and selling and as such, development of supplier-manufacturer-customer relationship has greatly revolutionized supply chain management in recent times, and it should apply to the manufacturing environment as well. Both SCM and B2B e-commerce have been widely researched over recent years. However, there has been no well-founded empirical research on the two together on how B2B e-commerce can support SCM practices.

    Argument 2.1: B2B e-commerce improves manufacturing supply chain
    The main objective of SCM is to integrate all key business activities through the improved relationships at all levels of the supply chain including internal operations, upstream supplier networks and downstream distribution channels. Shared information between supply chain partners can only be fully leveraged through process integration. By process integration means collaborative working between buyers and suppliers, joint product development, common systems and shared information. This form of co-operation in the supply chain is becoming ever more prevalent as companies focus on managing their core competencies and outsource all other activities. In this new world a greater reliance on suppliers and alliance partners becomes inevitable and, hence, a new style of relationship is essential (Christopher and Towill, 2000).

    The Internet has the potential to transfer complex information accurately and to reduce the delays as information passes both upstream and downstream of the supply chain (Elliman and Orange, 2000). Good SCM is essential for a successful company. SCM can reach beyond the boundaries of a single company to share that information between suppliers, manufacturers, distributors, and retailers. This is where the Internet plays a central role (Graham and Hardaker, 2000).

    The objective of a B2B e-commerce strategy in SCM is to provide purchasing managers with better control over their companys purchasing habits and relationship with suppliers. Continuous improvement of an organizations supply chain is directly related to its performance, and B2B e-commerce applications are being used in procurement processes more and more frequently to achieve this end. The advantages of B2B e-commerce in SCM include access to a wide range of suppliers and effective use of organizational resources that are essential for implementing just-in-time manufacturing systems (Warren and Hutchinson, 2000).

    Argument 2.2: B2B e-commerce adoption can help a manufacturer to maintain a better relationship with its customers.
    B2B e-commerce provides effective and efficient ways in which customers can gather information rapidly about available products and services, evaluate and negotiate with manufacturers, implement order fulfillment over communications links, and access post-sales services (Archer and Yuan, 2000). In todays business environment, the relevance of customer-manufacturer relationship is further enhanced by the advances in information technology and the ongoing development of B2B e-commerce.

    Web-based customer service offers the potential to enrich customers. Using pictures, video, and audio, company personnel can literally show a customer a product, explain how to use a product or solve a problem, and explain things in much the same way that are done in face-to-face interaction with the customers (McGaughey, 1999). Customers provide manufacturer with information about current inventory status of products and future orders. In addition, customers should provide manufacturers with timely and accurate information regarding feedback from their final customers about their experiences with the product, quality problems and performance of their products in relation to the competition.

    Argument 2.3: B2B e-commerce adoption can help a manufacturer to maintain a better relationship with its suppliers.
    Meanwhile, supplier-manufacturer relationships are becoming customized with the emphasis on reducing the number of suppliers and reducing the overall costs. The most important is how to match the competences of the supplier to that of the manufacturer, so that the benefits of these more effective relationships can be passed on to the customer. However, this customization cannot be achieved under the old systems of command and control, i.e. material requisition planning (MRP), manufacturing resources planning (MRPII), and enterprise resources planning (ER).

Traditionally, EDI provides integrated solutions on data exchange and enhances business transaction processing. This improves supplier-manufacturer relationships and creates a competitive advantage. However, wider diffusion of EDI is discouraged by the huge expense of setting up a network, limiting it as a solution for global suppliers or manufacturers.

Besides impacting the external trading arrangements between manufacturers and suppliers, B2B e-commerce is affecting as well the traditional roles betwemanufacturers and suppliers. For example, electronic commerce is allowing purchasing professionals to move from merely clerical activities, such as invoice processing and expediting, to more interesting and complex tasks such as integrating suppliers into new product development processes and joint involvement in total cost analysis (McIvor et al., 2000).

 

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Analysis of Results

A number of statements on different aspects of B2B e-commerce adoption were developed based on the literature review. Respondents were asked to indicate their opinion on these statements on a five-point Likert Scale ranging from "no extent" to "very great extent". A summary of responses is provided in Table 3.

 

Table 3: Impact of B2B e-commerce adoption on business operation (survey results).
Source: Ang, 2000, p.46.
Keys: NE = no extent; LE = little extent; SE = some extent; GE = great extent; VGE = very great extent.

Measures of B2B-EC adoption
Attributes
NE
LE
SE
GE
VGE
Operation efficiency
1. Improves manufacturability  
13
49
37
6
  2. Maintains quality information systems  
9
35
45
16
  3. Provides information to management
1
4
24
63
13
Cost saving
4. Reduces cycle time  
13
31
41
14
  5. Increases marketability
1
13
33
41
17
  6. Reduces administration costs
1
16
31
43
14
Inventory control
7. Reduces stock holding
5
7
33
46
14
  8. Leads to just-in-time purchasing
2
10
31
49
13
  9. Provide flexible manufacturing system
3
11
32
37
22
Manufacturing supply chain
10. Improves communication & coordination  
6
16
56
23
  11. Builds up a global logistics/distribution network
2
4
31
43
21
  12. Provides integrated information systems  
3
27
47
24
Customer focus
13. Makes products/services database available to global customers
1
7
26
46
21
  14. Improves customer support
2
7
21
53
18
  15. Helps to identify global market trends
2
9
31
32
27
Supplier relationship
16. Helps to identify alternative supply sources on a global basis  
8
27
46
20
  17. Helps to link its main suppliers through information systems
2
12
23
45
19
  18. Shares product or service (e.g. specification, design, quality, etc.) related information with their major suppliers
3
11
24
37
26

 

Examining respondents by industry type (Table 4) provides some indication of the nature of manufacturing activities in which respondents are involved. The table suggests that respondents represent a wide range of industries. The "other " category includes a number of firms operating in building, energy and power, furniture and fixtures, printing and jewelry manufacture. Although each of the major categories within the manufacturing industries is represented, it can be seen that the majority of the responses are obtained from electrical & electronics (58) and metal & plastics (32). These two industry segments have the potential adoption of B2B e-commerce to a great extent.

 

Table 4: Impact of B2B e-commerce adoption on business operation (survey results).
Source: Ang, 2000, p.46.
Keys: NE = no extent; LE = little extent; SE = some extent; GE = great extent; VGE = very great extent.

     
Operation management & control
 
Supply chain management
Industry type
Number sent
Number of replies
Imnplemented
Planned
Not planned
 
Imnplemented
Planned
Not planned
Chemical & pharmaceuticals
110
4
0
0
4
 
0
0
4
Electrical & electronics
523
58
18
18
22
 
21
11
25
Metal & plastics
519
32
7
9
16
 
6
6
19
Food & beverages
66
10
5
1
4
 
5
1
4
Toys & games
182
19
7
6
6
 
7
5
7
Textiles & garments
397
27
6
8
12
 
3
9
13
Others
249
37
7
11
18
 
8
9
19
                   
Total
2,046
187
50
53
82
 
50
41
91

 

A second concern with mail surveys is assuring that the respondent is in fact the intended key informant; that the intended informant (the CEO or similar position) has not "assigned" the job to another person in the organization, say the secretary. To address this concern information was collected on the suitability of each informant, as indicated in Table 5. These data indicate that the characteristics of the respondents, as well as the firms and products, were consistent with the study's sample objectives. A more detailed categorization is shown in Table 5 under the heading "Respondents' titles". This table shows that the majority of the respondents (144) are CEOs or similar position. The table also shows that 35 respondents are senior executives such managers.

 

Table 5: Respondent profile.

Respondent's Title
Frequency (number of responses)
Percentage (%)
CEO
39
21%
VP or CIO
32
17%
Director
73
39%
Manager
35
19%
Other
8
4%
Total
187
100%

 

Company size

The size of each manufacturer was taken in the survey in terms of the number of employees. The majority of respondents employed between 10 and 50 employees with the largest category, representing 64.1 percent (see Table 6). Less than 500 employees may be considered representative of small manufacturing firms in some countries; for example, U.S. studies define small manufacturers as having less than 500 employees. However, "small" appears to be representative of Hong Kong manufacturing companies. In Hong Kong, only 3.7 percent of the surveyed manufacturers employ more than 50 employees.

 

Table 6: Employee information.

Number of employees
Frequency (number of responses)
Percentage (%)
Less than 50
25
64.1%
50 to 500
9
23.1%
More than 500
5
12.8%

 

Reliability analysis

This research followed Nunnally's (1978) guidelines in developing items and pretesting them for clarity and appropriateness. In general, multi-item scales were designed to capture the common construct. To assess the reliability of the measures, the most general method of using reliability coefficient such as Cronbach alpha coefficient was used. For each set of items measuring a specific scale, Cronbach alpha was computed. An alpha value of more than 0.70 was considered appropriate for the analysis (Bhatt, 2000; Serakan, 2000).

 

Table 7: Reliability analysis for the measures of B2B-EC adoption.
Source: Ang, 2000, p. 53.

Dimension
Original item numbers
Number of items
Items deleted (by number)
Alpha
Operation efficiency
2.1 - 2.3
3
none
0.717988
Cost saving
2.4 - 2.6
3
none
0.762652
Inventory control
2.7 - 2.9
3
none
0.868302
Manufacturing supply chain
3.10 - 3.12
3
none
0.780521
Customer focus
3.13 - 3.15
3
none
0.837528
Supplier relationship
3.16 - 3.18
3
none
0.842359

 

The reliability coefficients (Table 7) ranged from 0.7180 to 0.8683, indicating a strong reliability. None of the items was removed (Ang et al., 2000).

 

++++++++++

Conclusions and implications

In this paper the author presents the B2B e-commerce model to aid traditional manufacturers, especially small and medium sized enterprises, in improving operation performance and supplier-manufacturer-customer relations. A major feature of the model is its recognition of the importance of inter-organizational information systems (IOS) to improve operational performance in today's manufacturing environment. This recognition is not only based on literature, but also on a survey conducted prior to the methodology development. In conclusion, the results of this study provide some interesting insights into the effect of B2B e-commerce adoption on operational efficiency. Literature and results of empirical validation indicated that adoption of B2B e-commerce has dependent relationships with operation performance and SCM. The survey results indicate that the adoption of B2B e-commerce may definitely improves the operational efficiency and significantly influences the manufacturing supply chain. While it might be perceived that well-developed B2B e-commerce systems might be evaluated more positively, the evidence does positively support that conclusion.

Managerial implications

The findings of this research have significant managerial implications for business practitioners in the manufacturing industries in Hong Kong. First, this is the first empirical study to establish the relationship between B2B e-commerce adoption and operations management in the manufacturing supply chain. Despite the growing emphasis on Internet and e-commerce, researchers have been unable to empirically and systematically pinpoint its impact on operations management. Most journals refer to e-commerce as EDI-based since 1960s. However, this paper establishes a conceptual framework and tests empirically the impact of Internet-based B2B e-commerce on operations management in the manufacturing industries in Hong Kong.

B2B e-commerce applications improve operational efficiency because information flow is improved by eliminating the need of data input from paper documents and thus prevents clerical errors. Adoption of B2B e-commerce results in system integration and information exchange. Hence a manufacturer establishes intimate linkages with its suppliers and its wholesale buyers. Such integration produces inventory and coordination savings for the manufacturer especially when it purchases in bulk. Cost savings arise because system integration results in more consolidation and the use of a smaller number of suppliers. This implies less time and paper work associated with coordinating and dealing with suppliers. In addition, the adoption of B2B e-commerce significantly impacts the order cycle time between the manufacturer and its customers. A reduction in purchasing lead times allows for smaller orders to be placed more often resulting in lower inventory holding costs. The B2B e-commerce enables physical distribution networks to be simplified to move the material directly from the material supplier to the manufacturer and product directly from the manufacturer to its customer. This will eliminate some of the "middlemen", and thus the related cost.

Future research

This research can be regarded as the first of its kind. Future research is obviously needed, as these results can only be viewed as preliminary, especially in view of the nature of the sample and its size. This research can act as a stepping stone for future research, the findings need to be further explored based on a larger sample, and might usefully include larger firms than those sampled here. The majority of firms examined were small and medium-size companies. It might be of interest to see whether larger firms enjoy benefits from even more extensive resources. In the future, a series of case studies and empirical tests on B2B e-commerce adoption are suggested for corporations with various stages of implementation. The focus should be on business cases of the corporations, and on the critical factors that show how the companies have gone through B2B e-commerce implementation. End of article

 

About the Author

Oliver B. Yau is a Doctoral candidate in the International Graduate School of Management at the University of South Australia.
E-mail: oliver@hongkong.com

 

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Editorial history

Paper received 31 July 2002; accepted 14 August 2002.


Contents Index

Copyright ©2002, First Monday

Copyright ©2002, Oliver B. Yau

An Empirical Investigation of the Impact of Business-to-business Electronic Commerce Adoption on the Business Operations of Hong Kong Manufacturers by Oliver B. Yau
First Monday, volume 7, number 9 (September 2002),
URL: http://firstmonday.org/issues/issue7_9/yau/index.html





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