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Barriers to the adoption of online supply chain solutions in ...

  1. 1. Research paper Barriers to the adoption of online supply chain solutions in small and medium enterprises Norm Archer DeGroote School of Business, McMaster University, Hamilton, Canada Shan Wang Department of Management Science, School of Business, Renmin University, Beijing, China, and Claire Kang Kingston, Canada Abstract Purpose – The objective of this paper is to identify and measure the perceived importance of barriers in the SME community to the adoption of internet business procurement and supply chain solutions. Design/methodology/approach – This was a telephone survey of a sample of 173 Canadian small and medium-sized enterprises (SMEs), stratified by size of company (small and medium) and according to whether they were distributors, retailers or manufacturers. The data were analyzed statistically through an analysis of variance approach. Findings – Few differences were found between SME internet adopters and non-adopters. There is a need for education for all SME management on the benefits and drawbacks to using e-business solutions. Inter-organizational information systems that are required to link supply chain partners can be a serious barrier to online solutions. There is a significant dependency among supply chain partners in decisions on adopting online links. Flexibility, agility and ability of SMEs can help them to use partial e-business solutions for low volumes of business, but this approach can be very ineffective when transaction volumes are large. Practical implications – The results from this paper can help to direct future efforts to encourage SMEs to adopt e-business solutions. Originality/value – This study differs from other SME e-business adoption studies, in that it includes relationships with supply chain partners that play a large role in the adoption of innovative e-business solutions, transaction volumes which, for many SMEs that have not adopted e-business, may be too small to justify automated supply chain linkages, and transaction volumes with a company’s biggest customer or supplier. Keywords Small to medium-sized enterprises, Supply chain management, Surveys, Canada Paper type Research paper Introduction adoption of e-business solutions by SMEs (Huin et al., 2002; Korchak and Rodman, 2001; McClean et al., 2002; Sadowski In 2004, internet sales by Canadian companies and et al., 2002). These studies identified some of the barriers government departments grew by almost 50 percent over experienced by companies implementing e-business. the previous year[1], but internet commerce still accounts for However, in many cases they did not address issues peculiar less than 1 percent of total operating revenues for private to SME supply chain management, where business partner Canadian business. This figure does not include the very relationships may have a significant impact on the timing and substantial level of transactions through business-to-business choice of innovations. The identification of these barriers (B2B) private networks, primarily by larger companies. While would be of great benefit in developing government and B2B supply chain management through e-business solutions business policies that enhance the adoption of e-business has been widely adopted by larger companies, small and supply chain solutions by SMEs. medium-sized enterprises (SMEs) have been slower to adopt The objective of this paper is to identify and measure the these approaches. There have been a number of studies on the perceived importance of barriers in the SME community to the adoption of internet business procurement and supply The current issue and full text archive of this journal is available at chain solutions. To accomplish this objective, data were www.emeraldinsight.com/1359-8546.htm collected in a 2003 telephone survey of 173 Canadian SMEs, through a questionnaire that was specifically oriented to supply chain activities. The study was restricted to Supply Chain Management: An International Journal 13/1 (2008) 73– 82 q Emerald Group Publishing Limited [ISSN 1359-8546] This study was supported financially through a grant from Industry [DOI 10.1108/13598540810850337] Canada. 73
  2. 2. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 independent small and medium manufacturers, distributors, drivers include efficiency (transaction cost reductions, and retailers, and did not include franchise or branch information distortion reductions), effectiveness (improved operations. Questions were addressed, not just to company information quality, improved supplier relationships, and new operations, but to company relationships and interactions organizational capabilities), competitive position, and external with business customers and suppliers, since these pressures. Adoption inhibitors included operational and relationships may have a decisive impact on the decision to infrastructural (system incompatibilities), financial, and adopt innovative approaches in supply chain management. strategic considerations such as alliances or information This paper includes a review of the relevant literature on SME sharing. Mehrtens et al. (2001) suggest that there are three innovation adoptions, a discussion of data collection, an factors that influence SME internet adoption: perceived analysis of the results, and a summary of the main findings. benefits, organizational readiness, and external pressure. A related adoption model (Lefebvre et al., 1991) identified four Literature review factors that could influence technology adoption in small firms: characteristics of the firm, competitive and Characteristics that lead to the adoption of innovations such management strategies, influences of internal and external as e-business in supply chain operations tend to differ parties on the adoption process, and characteristics of the new between larger companies and SMEs, even though the technologies adopted. In a recent survey, Grandon and companies participating in any given supply chain typically Pearson (2004) proposed a three-factor research model on include companies in both categories. In fact, market power perceptions of strategic value of information technologies that of the larger companies is likely to influence business partners included operational support, managerial productivity, and to adopt innovations favored by the larger companies (Bakos, strategic decision aids. They identified four factors that 1991; Cox et al., 2004), and evidence has been found that influence e-business adoption by SMEs, including supplier power (brand image and volume of transactions) may organizational readiness, external pressure, perceived ease of influence business customers in their adoption of inter- use, and perceived usefulness. organizational information systems (IOIS) (Wang and Archer, Smeltzer (2002) noted that, to obtain the maximum overall 2004). benefit from a supply chain, all companies involved should be There are many possible barriers to SME adoption of e- linked electronically. When a key company in the supply chain business supply chain solutions, and it is very important to is large, it may force its business partners to adopt online understand these barriers in order to find effective and solutions, but this may result in operational problems, unless efficient ways to overcome them. Many of these barriers arise they become genuinely involved. Certain primary out of the characteristics of SMEs. To name a few such requirements must be met to integrate the SME into the characteristics, for example, a study of manufacturing SMEs supply chain successfully: in Southeast Asia (Huin et al., 2002) found that: CEOs . low, predictable cost; tended to be heavily involved in operational decisions, . minimal change in behavior; departmental walls were “blurred”, some SMEs were . compelling benefits over alternatives; and heavily dependent on orders from large companies but some . easy, rapid, technical adaptations. sold directly to distributors, planned forecasts were often significantly different from real demand, there was a high To achieve the integration suggested by Smeltzer, technical volatility in product demand, manufacturing lead times solutions can include outsourcing through a third-party tended to be short, staff turnover was high, and there were integrator or an electronic marketplace that offers often many special demands from companies to whom they collaborative supply chain management solutions, or an served as outsourcing suppliers. internal solution that allows separation of business rules from There have been a number of attempts to relate differences the system functions. Beck et al. (2005) indicate that the between SMEs and large companies to the lag in SME diffusion of e-business solutions seems to have reached a level adoption of technological innovations in supply chain of maturity in many industrialized countries. Their SME management. For example, a UK survey by Quayle (2003) survey indicated that e-business solutions contributed suggests that both customers and suppliers of SMEs tend to substantially to the improvement of operational processes pursue the traditional product issues (quality, price, reliability, and to market expansion. support) and not the process issues which motivate supply It is clear from the literature that relationships with supply chain innovation (e-business, R&D, procurement expertise, chain partners play a large role in the adoption of innovative time to market, value analysis and value engineering). Other e-business solutions (Wang and Archer, 2004). However, approaches have included innovation adoption models. For most of the literature has studied SMEs that have already example, Myers (2000) suggests a three-stage model adopted e-business, and tend to ignore the fact that (experimentation, integration, and transformation) for the transaction volumes for many SMEs that have not adopted evolutionary development of e-business in a company. e-business may be too small to justify automated supply chain However, he notes that experimentation is normally not linkages. A related factor affecting adoption is the volume of possible in small companies due to a lack of resources. In the transactions with a company’s biggest customer or supplier. second stage, companies begin to enhance and support Automating supply chain linkages in the face of low existing business processes, thereby achieving cost reductions. transaction volumes, even with a firm’s largest business This is followed by the development of links to other partner, is further inhibited by transaction and product companies. In the third stage, there is an enhancement of complexity considerations (Archer and Gebauer, 2001) that customer service and improved customer satisfaction. may require development or modification of existing designs. Another adoption model for IOIS (Morrell and Ezingeard, Table I summarizes our findings from the literature 2002) is based on adoption drivers and inhibitors. Adoption concerning adoption influencers for innovations in supply 74
  3. 3. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 Table I Influencers in the adoption of SME e-business supply chain scale ranging from strongly disagree to neutral to strongly solutions agree. Finally, part III provided for unstructured comments from participants. Factor Adoption influencers Strategic Characteristics of the firm Sampling frame Management strategy A stratified random sample of company and contact Financial (amount, predictability, ROI) information was drawn from the Canadian business disc (InfoCanada, 2003), of over 1.1 million Canadian companies. Compelling overall benefits Companies were stratified by manufacturing, distribution, Information sharing, alliances and retailing, and further divided within these categories into Organizational New organizational capabilities either medium or small companies. For the purpose of this Organizational readiness study, small companies are those companies with 1 to 49 Resistance to change employees, and medium companies have 50 to 499 Amount of change in behavior required employees. Company selections were based on standard Transactions and products Demand volatility industrial classification (SIC) codes assigned to the Transaction cost reduction companies, confirmed or corrected during the survey. Reduction in information distortion Companies that did not fit the definition of independent Improved information quality operators (e.g. franchises, branches, etc.) were not used; their Transaction volumes adoption of e-business would more likely relate to large Relative power of largest customer or business adoption influences. supplier Of the 400 company representatives contacted successfully, Transaction, product complexity 173 agreed to participate in the telephone interview, for a Environmental Special customer demands response rate of 43 percent. The length of the interviews Influence of major customers, suppliers ranged from 15 to 25 minutes. The distribution of the Improved supplier relationships number of companies successfully interviewed is shown by Improved competitive position classification in Table III. Upon completion of data collection, Long term relationships with customers, companies from which data records were not relatively suppliers complete were eliminated, leaving a total of 162 that could be Technological Operational, infrastructure incompatibilities used for statistical analysis. Characteristics of new technologies Interviewees could occupy one or more of several roles in Involvement of major partners their companies. Interviewee responsibilities, in order of the Easy, rapid technological solutions number interviewed were: purchasing (133), sales (87), technical (75), and other (27). The total of these numbers is larger than the number of company interviews because the interviewee could have more than one responsibility. While chain management. They may have either a positive or the primary goal of the survey was to collect procurement negative impact on the decision to implement such information, we also collected business-to-business sales innovation, depending on the situation, and are classified as: information where possible. Procurement information we strategic, organizational, transactions and products, collected tended to be more complete than sales information environmental, and technological factors. because quite often interviewees could not respond to Based on the adoption influencers listed in the table, we questions about sales, if this was not included in their developed a survey for SMEs that included questions based responsibilities. on these influencers. The questionnaire (in English and French) is available from the authors, and the questions that were statistically significant appear in Table II. We undertook Analysis of results a telephone survey of randomly selected Canadian SMEs, All companies based on this questionnaire. The following sections outline Data on inter-company transactions was gathered from all the study and its results. companies, whether or not they used online B2B procurement or sales. The volume of these transactions, as Data collection and analysis well as the number of these transactions with any specific business partner, are likely to influence an investment in inter- Questionnaire company computer linkages (for example, through electronic For our survey, we developed a questionnaire that covered all data interchange (EDI)) to support business transactions. the influencers shown in Table I, either directly or indirectly. Figure 1 plots the cumulative percentages of the companies The questionnaire was tested extensively through direct surveyed that reported particular weekly transaction rates. contact and interviews with a number of SMEs before we These data cover only business-to-business transactions, and undertook the full-scale survey. do not include consumer sales by retailers. The data show The questionnaire included three parts. Part I covered that 65 percent of the companies surveyed had fewer than 100 demographics and internet usage, part II included a series of sales transactions per week, while 85 percent had fewer than 39 statements that covered perceptions related to e-business 100 purchasing transactions per week. in supply chain management, derived from the influencers in A related influence on e-business supply chain solutions is Table I. Table II includes some of these statements. the percentage of transactions by value with a company’s Responses to each statement were on a five-point Likert biggest supplier and biggest customer. A major business 75
  4. 4. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 Table II Statistical analysis of responses to statements in questionnaire part II Statements (ordered by significance) Agree t-value Disagree t-value Long-term relationships with business customers and suppliers are very important 21.51 * * * Good procurement practice is very important in our overall business 11.48 * * * Developing trust with trading partners requires seeing and talking to them 9.33 * * * E-business can improve customer service and help us to find new customers 8.51 * * * It is critical to share useful information with our supply chain partners 8.19 * * * The amount and quality of communications in our procurement process is high 7.21 * * * Our employees prefer the old ways of doing business 5.90 * * * Digital network technology requires major adjustments to current approaches 3.58 * * Long-term benefits of network technology and process investment are high 3.20 * * E-business can reduce our transaction costs (note 1) 2.67 * * Our top management understands e-business benefits very well (note 1) ns Major trading partners may refuse to deal with us if we use e-business 214.81 * * * Technologically, e-business is too sophisticated for us (note 2) 2 6.40 * * * We have competitive pressures to use e-business applications 2 5.57 * * * Our customers are interested in online sales and supply chain interaction with us 2 5.50 * * * We have had bad experiences in implementing information systems 2 5.34 * * * Online systems suggested by our various trading partners are incompatible 2 4.85 * * * We have problems hiring people with the necessary technical skills 2 4.57 * * * We have problems training workers not familiar with computers 2 4.47 * * * Most businesses in our industry use digital networks for procurement and supply chain interactions 2 3.92 * * * Our suppliers promote online procurement and supply chain interactions 2 3.55 * * * It is easy to procure our major needs and to sell our major products online 2 3.19 * * We know what kind of e-business solution is right for us 2 2.78 * * E-business can reduce the price of the products we purchase 2 2.09 * Notes: Significance levels: * , 0.05; * * , 0.01; * * * , 0.001; ns ¼ not significant; 1. Non-internet adopters were significantly less in agreement with these statements (0.05 level) than internet adopters; 2. Non-internet adopters were significantly more in agreement with this statement (o.001 level) than internet adopters Table III Distribution of companies interviewed Table IV lists the percentage use of e-business applications, weighted according to the total number of companies and the Small Medium Total average number of employees of companies in each database Retailers 33 27 60 stratum. Note that these data indicate that the responding Distributors 30 25 55 companies had some activity but not necessarily all their Manufacturers 28 30 58 activities online in the categories mentioned. Applications are Total 91 82 173 listed under the general headings of web searches, website presence, and interactions with business suppliers and customers. The top usage in the three categories was partner’s adoption or non-adoption of e-business solutions “searching for potential suppliers and/or product availability information”, “advertising company and product may affect an SME’s adoption of similar technologies. Results information”, and “e-mail”, respectively, for both small and in Figure 2 show the cumulative percentage of transactions medium companies. Results could total more than 100 with biggest suppliers and customers plotted against the percent in each category, since more than one application percentage of companies at this level. This plot shows, for could be checked for each business surveyed. As expected, example, that 85 percent of SMEs transact 50 percent or less adoption of e-business was higher for medium companies of their business by value with their biggest business than for small companies. However, there is an exception for customer, and almost 70 percent transact 50 percent or less “purchasing from suppliers through central electronic of their business by value with their biggest supplier. marketplaces”, which is higher for small companies. This may be the result of purchases or sales through eBay or other electronic marketplaces, which was mentioned by several of Companies with online access the companies in the survey. A total of 140 or 80.9 percent of the 173 companies had We elicited data on the percentage of information gathering internet access of some kind. However, only 135 or 78.0 and communications, procurement transactions by value, and percent of these companies claimed to use the internet for sales transactions by value that the companies with network business applications. In detail, 49 percent of the companies access actually conduct online. Note that, since the data cover had DSL or dedicated high-speed links, 5 percent ISDN, 27 only business-to-business transactions, the data does not percent dialup, and 19 percent had no internet access. include sales by retail companies. Figure 3 shows the results, 76
  5. 5. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 Figure 1 Cumulative average transactions per week for companies surveyed Figure 2 Cumulative transactions by value with biggest customer and supplier with level of activity plotted against the percentage of neutral to strongly agree. Interviewees from organizations that companies with online access. It is clear that some had not as yet adopted e-business applications were asked to companies are supporting a large percentage of activities respond according to their perceptions of e-business and why online, but it is equally obvious that a substantial number are their companies had not adopted it. Interviewees from involved in few, if any, online transactions. However, online organizations that had been using e-business applications information gathering and interaction seems to be fairly were asked to respond according to their experience, and any widely used. barriers to adoption of more advanced systems. Some of the Figure 4, instead of relating to the percentages of activities statements suggested barriers to e-business adoption, but conducted online, shows the percentage of all companies others attempted to indicate the types of solutions that might surveyed that conduct at least some of their activities online. or might not work well. We believe this is an important characteristic, because it is an Data were analyzed statistically through one way analysis of indicator of movement towards more inclusive use of variance, to determine with which statements interviewees e-business in supply networks. were significantly more in agreement (above “neutral”) than disagreement (below “neutral”), and vice versa. T tests were Data analysis used to compare reactions from adopters with non-adopters All interviewees were asked to respond to a structured to each statement. The relevant results from these analyses are questionnaire, which included 39 statements related to summarized in Table II. business-to-business interactions, based on the adoption Statements from the questionnaire are listed in the table in influencers listed in Table I. Each statement had five order of statistical significance of the responses, rather than possible responses, ranging from strongly disagree through the order they appeared in the questionnaire. More positive 77
  6. 6. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 Table IV Percent usage of online applications Application Percent usage (small) Percent usage (medium) I. Web searches (a) Gathering general market information 42 66 (b) Searching for potential suppliers and/or product availability information 47 78 (c) Searching for potential customers 20 49 II. Web site presence (a) Advertising our company and product information 41 81 (b) Online catalogue of our products and/or services 21 53 (c) Online sales transactions through our website 13 30 (d) Sales and service support 8 33 III. Interactions with our organization’s business suppliers and customers (a) E-mail 51 79 (b) Negotiating contracts online (e.g. online auctions) 8 27 (c) Purchasing through online supplier sites 23 32 (d) Electronic data interchange (EDI) 3 35 (e) Purchasing from suppliers through central electronic marketplaces 18 12 (f) Tracking order and delivery information online 27 43 (g) Supply chain coordination systems (e.g. planning, forecasting) 4 21 (h) Online collaboration systems (product co-design, R&D) 4 9 IV. Integration of internal and external systems (b) Our systems link directly with business suppliers’ or customers’ systems 8 11 Figure 3 Proportion of information, procurement, and sales activities through digital networks by companies with online access “t values” in the table indicate a higher level of agreement 15 of the statements in part II of the questionnaire were, on with the statement (see “agree t value” column in the table), average, in neither agreement nor disagreement and are not on average. More negative t values in the table indicate a reported here. The value of this analysis is in the extent of higher level of disagreement with the statement (see “disagree agreement or disagreement, given by the t value associated t value” in the table), on average. Statistical levels of with the statement. significance are identified as highly significant ( * * *), very Key statements with which there was highly significant significant ( * *), and significant ( *). One statement included agreement include: the importance of long term relationships in the table is not statistically significant (ns), and is included between business customers and suppliers, the importance of in the table for other reasons explained below. Responses to good procurement practice, developing trust with trading 78
  7. 7. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 Figure 4 Percentage of companies surveyed that had some form of online interaction with business partners partners, improving customer service, sharing information Summary and discussion with supply chain partners, amount and quality of communications in the procurement process, and employee Barriers and non-barriers identified from survey preferences for the old ways of doing business. Statements findings with which there was very significant agreement included: the Perceptions need for major adjustments to current approaches required by Many of the barriers we identified in this study are not digital network technology, the long term benefits of network necessarily barriers, but are common perceptions of what technology and process investment, and e-business reduction e-business can or cannot do in a supporting role for an in transaction costs. organization. In supply chain activities, a general perception Key statements with which there was highly significant of online support is that it should not interfere with, but can disagreement include: refusal of major trading partners to actually be used to reinforce: deal with companies using e-business, that e-business is too . long-term relationships; sophisticated to deal with, there are competitive pressures to . good procurement practice; use e-business applications, customers are interested in online . developing trust with trading partners; sales and supply chain interactions, the company had bad . improving customer service; and experiences in implementing information systems, there was . sharing useful information with supply chain partners. incompatibility of online systems suggested by trading A perception of SME firms from this study is that e-business partners, problems hiring people with the necessary functions can also support the amount and quality of technical skills, problems training workers not familiar with communication in procurement processes, seen as high. In computers, the use of digital networks for procurement and supply chain interactions by businesses in the industry, and addition: . major trading partners do not tend to refuse to deal with the promotion of online procurement and supply chain interactions by suppliers. Statements with which there was adopting companies; very significant disagreement include: the ease of procuring . online systems suggested by trading partners do not tend major needs and selling products online, and knowing the to be incompatible; right kind of e-business solution. Finally, there was significant . there is no tendency for problems in hiring people with disagreement with the statement that e-business can reduce necessary technical skills; the price of products being purchased. . there is no tendency for problems in training workers not There are two notes indicated in capital letters within Table familiar with computers; and II and defined directly below the table. These refer to . companies have not had bad experiences implementing comparisons made between the responses of e-business information systems. adopters and non-adopters. In only three of the 39 Opposing perceptions are: statements tested was there a significant difference. Note 1 . It is not seen as easy to procure major needs and sell major refers to the statement that e-business could reduce products online. transaction costs, and the statement that top management . Firms often do not know what kind of e-business solution understands e-business benefits very well. In both cases, non- is right for them. adopters were significantly less in agreement with the . Employees prefer the old ways of doing business. statements than adopters. Note 2 refers to the statement that technologically e-business is too sophisticated for the Informal comments from some interviewees also indicated company, and non-adopters were highly significantly more in certain perceived barriers, including: agreement with this statement than adopters. . adapting to supplier or customer needs; 79
  8. 8. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 . face to face or extensive interaction needed; statement “we know what kind of e-business solution is right . bad past experience; and for us”. This speaks to the need for education about . preference for the old ways of doing business. e-business applications. However, the atmosphere in an SME tends to be less formal than a large company, with employees Economic perceptions include: and managers often handling multiple roles and being . long-term benefits of network technology and process involved in a cross section of company activities. This is an investment are high; advantage when innovations are being considered, since there . e-business can reduce transaction costs; and is a smaller circle of people than there is in a large company . e-business does not tend to reduce the price of products that needs to be informed and motivated. But a disadvantage purchased. is that the potential champion of such a change is often short Informal comments from more than a few of the interviewees of time and resources to learn about its benefits. indicated some concerns: Frequently SME e-business adoption is an incremental . cost/benefit requirements; process that involves on-the-job learning. This means that . lack of knowledge of e-business benefits; companies beginning to do some online purchasing and sales . security; are educating their staff through experience. Experience will . technology barriers; accumulate and companies will move towards more online . timing and/or time required to implement e-business; and activities as they and their business partners become more . worker training requirements. experienced, but 100 percent solutions are unlikely over even the long term, until cost-effective online systems with the Perceived need required flexibility and ease of use become available for It is clear that SMEs generally lack a perceived need to adopt SMEs. Unfortunately such an approach is often not founded e-business supply chain solutions: on a solid business strategy if SME owners and managers do . There is little or no competitive pressure to use e-business not devote the time, expertise and resources to develop a applications. suitable strategy. Therefore, education is only viable if time, . Business customers are not particularly interested in expertise, and resources are available to make use of it. online sales and supply chain interactions. . Most businesses in the industry do not use digital E-business as a set of support tools for communication and networks extensively for procurement and supply chain collaboration interactions. It is very clear from the study that e-business is used quite . Suppliers do not appear to promote online procurement extensively by some companies with Internet access to and supply chain interactions. communicate and collaborate with their business partners . The SME may see itself as too small to benefit from (see Figure 4). But for some non-adopters, perceptions that e-business supply chain solutions. e-business prevents them from working closely with suppliers . The nature of the industr y does not lend itself to or customers still needs to be overcome, and they must be e-business solutions. shown that e-business is more of a set of tools to help improve . Some companies are only interested in doing business these interactions. locally, so do not see e-business as helpful. Inter-organizational information systems Major findings Previously we alluded to statistics gathered on the number of The following summarizes our major findings. transactions per week by companies in the survey, and the relative value of transactions with largest suppliers or Differences between internet adopters and non-adopters customers (Figures 1 and 2). Data from these questions can One result that came through from our survey is that there are be used to evaluate the need of SMEs for implementing very few differences between the opinions and perceptions of automatic inter-organizational computer links (IOIS) to Internet adopters and non-adopters of online supply chain handle transactions with their business suppliers or solutions. However, from notes 1 and 2 in Table II, non- customers. These are already in place in some companies adopters were significantly less in agreement with the two (particularly medium sized, see Table IV), since electronic statements “e-business can reduce our transaction costs” and data interchange (EDI) involves a form of IOIS. But not “our top management understands e-business benefits very surprisingly, typical SME transaction volumes tend to be low. well” (note 1). Non-adopters were very significantly more in So transplanting large company supply chain solutions such as agreement than adopters with the statement “technologically, EDI and enterprise resource planning (ERP) systems to the e-business is too sophisticated for us” (note 2). There were no SME environment in most cases is not viable economically, significant differences between these two groups in their because of their high cost, low transaction volumes, and the responses to the other 36 statements in the questionnaire. We need for manual intervention to handle products specialized believe that the differences that do exist between adopters and for specific businesses and functions. The latter is a barrier non-adopters relate to the learning that occurs when a often referred to by our interviewees as the “nature of the company adopts e-business in one or more of its forms. This industry”. We found no statistical correlation between may emphasize the need for education of the SME transaction volume and adoption or non-adoption of IOIS community on the potential applications and benefits of e- solutions. However, we did observe, in onsite visits with business. SMEs, a number of cases where, instead of total procurement Need for education or sales automation, a combination of traditional and online Some of the informal comments we received indicated that solutions are used for procurement. For example, one there is a lack of knowledge of e-business and its benefits and, company, a value-added retailer (VAR), would search the from Table II, respondents disagreed significantly with the Web sites of several possible suppliers when procuring 80
  9. 9. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 equipment for a project, but would then use the telephone to enable improved supply chain operations. The wider and fax to negotiate and finalize the order. adoption of more fully automated approaches by SMEs awaits Some supply chain solution vendors offer outsourced or the availability of standardized systems that are inexpensive, application service provider (ASP) solutions to SMEs. These easy to implement, and easy to use. systems have the advantage that the adopting company does Those companies choosing not to adopt online supply chain not have to install and support them internally, and there is approaches have a range of reasons including lack of little initial investment, with companies paying monthly rates knowledge, resistance to change, and no perceived need to based on usage. However, an important consideration is that a do so. For these companies, education about e-business could company adopting such a solution still has to adapt and help them to make better-informed adoption decisions. integrate its internal processes and win acceptance of the new approach by its employees (a barrier noted in Table II). Note Supply chain decision dependency on business partners 1 Statistics Canada 2004 Survey of Electronic Commerce in A characteristic that is evident when dealing with supply chain Canada (www.statcan.ca/Daily/English/050420/d050420b management is that SMEs cannot usually make independent .htm). decisions affecting supply chain operations without considering impacts on their business partners. This was emphasized by the finding that long-term relationships with References business partners was ranked as the most significant positive Archer, N. and Gebauer, J. (2001), “B2B applications to statement of those presented to interviewees (Table II). support business transactions: overview and management However, our study also found that there was not a significant considerations”, in Warkentin, M. (Ed.), Business-to- relationship between adoption and non-adoption and the Business Electronic Commerce: Challenges and Solutions, Idea percentage of purchases or sales to their single largest supplier Publishing Corp., Hershey, PA, pp. 19-44. or customer (a proxy for business partner power). Clearly, the Bakos, Y.J. (1991), “A strategic analysis of electronic adoption of e-business is not being held back by these marketplaces”, MIS Quarterly, Vol. 15, September, relationships, as indicated by company tendencies to disagree pp. 295-310. with the statement “major trading partners may refuse to deal Beck, R., Wigand, R.T. and Konig, W. (2005), “The diffusion with us if we use e-business” (Table II). This may be because and efficient use of electronic commerce among small and “major trading partners” tend to be larger companies that are medium-sized enterprises: an international three-industry more likely to have adopted or to be moving towards e- survey”, Electronic Markets, Vol. 15 No. 1, p. 38. business applications. Cox, A., Watson, G., Lonsdale, C. and Sanderson, J. (2004), Flexibility, agility, and ability to use ad hoc solutions “Managing appropriately in power regimes: relationship SMEs are characterized by their flexibility, agility, and ability and performance management in 12 supply chain cases”, to use ad hoc solutions when necessary to adapt to the Supply Chain Management, Vol. 9 No. 5, pp. 357-71. business environment, and this tends to set them apart from Grandon, E.E. and Pearson, J.M. (2004), “Electronic larger firms. But if this approach is used to handle large commerce adoption: an empirical study of small and volumes of business transactions, it may result in an inefficient medium US businesses”, Information and Management, combination of labor-intensive and error-prone manual Vol. 42 No. 1, p. 197. processes, including paper-based record keeping, phone Huin, S.F., Luong, L.H.S. and Abhary, K. (2002), “Internal calls, e-mails, and faxes. In turn this time-consuming supply chain planning determinants in small and medium- approach leads to other problems, such as limited financial sized manufacturers”, International Journal of Physical reporting, lack of easily accessible information, low-level Distribution & Logistics Management, Vol. 32 No. 9, vendor compliance, and frequent unauthorized spending. pp. 771-82. Driving forces behind maintaining the traditional methods of InfoCanada (2003), Canadian Business Disc, InfoCanada, interacting with business customers include “developing trust Mississauga. with trading partners requires seeing and talking to them” Korchak, R. and Rodman, R. (2001), “eBusiness adoption (Table II). Any online solution that does not support or among US small manufacturers and the role of improve this ability or perceptions about it would not be manufacturing extension”, Economic Development Review, acceptable to SME owners and managers. Vol. 17 No. 3, pp. 20-5. Lefebvre, L., Harvey, J. and Lefebvre, E. (1991), “Technological experience and the technology adoption Conclusions decisions in small manufacturing firms”, R&D This study addressed a range of SME issues in adopting e- Management, Vol. 21 No. 3, pp. 241-9. business for supply chain solutions. Our findings indicate that McClean, R.J., Johnston, D.A. and Wade, M. 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  10. 10. Barriers to the adoption of online supply chain solutions Supply Chain Management: An International Journal Norm Archer, Shan Wang and Claire Kang Volume 13 · Number 1 · 2008 · 73 –82 Myers, J. (2000), “B2B case studies: presentation of Solon’s About the authors survey”, paper presented at the E-commerce Conference, Brussels, December 4-5. Norm Archer is a professor emeritus in the DeGroote School Quayle, M. (2003), “A study of supply chain management of Business, McMaster University, Canada. His research practice in UK industrial SMEs”, Supply Chain interests are in topics in e-business, including business-to- Management, Vol. 8 No. 1, pp. 79-86. business implementations, mobile applications, knowledge Sadowski, B.M., Maitland, C. and van Dongen, J. (2002), management, and the human-computer interface. Norm “Strategic use of the internet by small- and medium-sized Archer is the corresponding author and can be contacted at: companies: an exploratory study”, Information Economics archer@mcmaster.ca and Policy, Vol. 14, pp. 75-93. Shan Wang is a faculty member at Renmin University in Smeltzer, L. (2002), “Small and medium enterprises in the Beijing, China. She holds a PhD in Business from McMaster supply chain”, Global Supply Chain. University, Canada, an MA in Economics from Queen’s Wang, S. and Archer, N. (2004), “Strategic choice of University, Canada, and a BA in Economics from Wuhan electronic marketplace functionalities: a buyer-supplier University, China. relationship perspective”, Journal of Computer Mediated Claire Kang holds a B. Comm. degree from the DeGroote Communications, Vol. 10 No. 1. School of Business, McMaster University. To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints 82

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