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Using Electronic Procurement to Facilitate Supply ChainIntegration: An Exploratory Study of US-based Firms
H. Pearcy, Eastern Michigan University
Delvon B. Parker, Michigan State University
Larry C. Giunipero, Florida State University
AbstractWith ever-increasing competitive pressures, growing numbers of firms use elec-tronic procurement (e-procurement) in an attempt to reduce costs and increaseprofitability. Academicians and practitioners alike agree that one of the mostimportant benefits of e-procurement is its ability to facilitate integration withinthe firm and across the supply chain. However, there is much to be discoveredabout the prevalence of actual implementation of e-procurement. The purposeof this study is to empirically examine the extent to which firms operating in di-verse industries use nine different e-procurement tools that differ in their abilityto facilitate supply chain integration. The survey data were provided by a sampleof 142 members of the Institute for Supply Management (ISM). Factor analysisrevealed that the group of nine e-procurement tools could be categorized intotwo types: basic, single-process tools and integrative tools. A t-test of the meandifferences between each type of e-procurement tool revealed that firms usedbasic, single-process tools to a greater extent than they used integrative formsof e-procurement. To fiirther explore firms' use of e-procurement, we attemptedto ascertain whether the industry in which a firm operates impacts use. Logisticregression revealed that firm sector has an effect on the use of integrative e-procurement tools, with firms operating in the petroleum and the transporta-tion equipment sectors being less likely to use them than their manufacturingcounterparts. These findings are important, as previous research indicates thateffective supply chain integration is associated with improvements in productionplanning, inventory management, distribution, and overall supply chain perfor-
mance.
Keywords: electronic procurenfient, supply chain management, supply chain integration
IntroductionWith increasing competitive pres-
sures, supply chain management pro-fessionals must continually find waysto reduce costs, increase efficiency, andreduce lead time. How does today'ssupply chain management profes-sional accomplish all of this? Increas-ing numbers of firms use e-procure-ment in an attempt to enhance thesekey business outcomes. This comes as
no surprise, given one of the key com-petitive priorities for the 21" centuryis the maximization of Internet-basedtechnologies such as e-procurement(Monczka and Morgan 2000). Amongother things, Internet-based technol-ogies assist supply chain managementprofessionals in the sometimes ardu-ous task of linking supply chain mem-bers, which is a necessity in increasingthe speed of information transfer and
reducing non-value adding processes.Supply chain management profes-
sionals are faced vwth the challenge ofselecting and implementing the mostappropriate e-procurement tools orapplications to meet the needs of theirfirms. Some examples of available e-procurement applications include on-line auctions, e-catalogs, and e-mar-ketplaces to name a few. Whue theseand other forms of e-procurement
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can prove to be beneficial, the sup-ply chain management professional'sdecision-making process can be com-plicated by the fact that these toolsvary in many respects, including theirability to facilitate supply chain inte-gration within and across firms. Somee-procurement tools involve applica-tions within a single function (e.g.,electronic requisitions), while somefacilitate integration across multiplefunctions within a single firm (e.g..Enterprise Resource Planning [ERP]systems); others provide integrationacross organizations (e.g.. ElectronicData Interchange [EDI]).
PurposeThe opening quotes of this paper
underscore the importance of theuse of Internet-based technologies,including e-procurement in the in-tegration of supply chains. Althoughthe potential of e-procurement tocontribute to supply chain successhas generated substantial interest,Cagliano, Caniato, and Spina (2003)noted that evidence is stiU lackingwith regard to the prevalence of ac-tual implementation and effectivenessof these tools in firms. Researchershave made strides in understandingthese issues in European firms (e.g.,Cagliano et al. 2003, Fröhlich andWestbrook 2002). This exploratorystudy provides a first step in address-ing the gap in the literature regardinge-procurement implementation issuesfaced by US-based firms.
The purpose of this research is toempirically assess the extent to whichUS-based firms use nine different e-procurement tools that differ in theirability to facilitate supply chain in-tegration. Furthermore, this studyexplores the relationship (if any) be-tween the industry in which the firmoperates and the use of e-procure-ment applications. Specifically, thisstudy addresses the following researchquestions: 1) Which type of e-pro-curement application is more widelyused (applications that are relevant tosingle function/process or those that
integrate processes across functionsand/or firms)? 2) Is there a relation-ship between the industry in whichthe firm operates and the use of inte-grative e-procurement applications?It is important to answer the afore-mentioned questions because theconcept of integration is foundationalin effective supply chain manage-ment. While a supply chain consistsof at least two or more distinct enti-ties, the processes that occur betweenthem must be seamless in order to beeffective. In other words, these enti-ties must come together and operatein a unified manner in order to satisfycustomer needs. Some of the benefitsthat are associated with the integra-tion of supply chain processes includeincreased competitive advantage, low-ered operational costs, and enhanced
competitive nature of today's businessenvironment makes the effective use ofe-procurement an operational necessityfor firms; it is an important issue thatmust be confronted by purchasing/supply management decision-mak-ers now and into the future (Dooleyand Purchase 2006; Davilia, Gupta 6cPalmer2003; Carter et al. 2000). Someof the noted benefits of e-procure-ment include increased collaborationbetween buyers and suppliers, reducedpersonnel requirements, improved co-ordination, reduced transaction costs,shorter procurement cycles, lower in-ventory levels, and greater transparency(Dooley and Purchase 2006; Davila etal. 2003; Min and Galle 2003; Turbanet al. 2002; Osmonbekov, Bello & Gil-liland 2002; Rajkumar 2001; Carter etal. 2000).
"While a supply chain consists of at least two or more
distinct entities, the processes that occur between them
must be seamless in order to be effective. "
coordination and collaboration amongsupply chain members (Themistocle-ous, Irani & Love 2004).
In order to examine this topic, areview of the existing literature one-procurement and supply chain inte-gration is presented. The literature re-view is followed by an explanation ofthe research methodology and results.The paper concludes with a discussionof the findings, conclusions, and op-portunities for future research.
Literature ReviewE-procurement
While a number of definitions ofe-procurement exist. Min and Galle's(2003, 227) definition of electronicprocurement as "business-to-businesspurchasing practice that utilizes elec-tronic commerce to identify potentialsources of supply, to purchase goodsand services, to transfer payment, andto interact with suppliers" was adoptedfor this research because it is compre-hensive. Many agree that the intensely
Giunipero and Sawchuck (2002)noted that the Internet can be used asa research tool, allowing the purchas-ing professional to "shop around" andcompare suppliers' capabilities and toperuse online catalogs. Second, theInternet can be used to generate sav-ings. Purchasing via the Internet is aneffective way to reduce otherwise hightransaction costs for low-value itemssuch as maintenance, repair, and oper-ating items. Third, Internet-based pro-curement tools can be used not only toreduce transaction costs, but as a meansof reducing prices paid for purchasedgoods/services. The buying firm canuse the Internet to solicit bids from awider range of potential bidders thanis possible using traditional methods.This could increase the firm's chancesof getting a better price. Fourth, thebuying firm can use an e-marketplaceand participate in online auctions, bothreverse (where a buying firm makes itspurchase needs known online) and for-ward (where a selling firm puts goods/services up for sale on-line). Finally, e-
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procurement can be used as part of aneffort undertaken by the entire supplychain, from the final customer back toa firm's suppliers.
The Importance of Integrationin Effective Supply ChainManagement
In order to understand the im-portance of integration in effectivesupply chain management (SCM),one must first examine how SCMhas been conceptualized and defined.The term SCM first emerged in theliterature in the early 1980s and hasgained increasing prevalence over thelast two decades. Pagh and Cooper(1998) described SCM as a methodof integrating and performing logisit-ics and manufacturing activities. Tanet al. (1999) defined SCM as "the si-multaneous integration of customerrequirements, internal processes, andupstream supplier performance". Fi-nally, Lambert and Cooper (2000,66) defined SCM as "the integra-tion of key business processes fromend user through original suppliersthat provides products, services, andinformation that add value for cus-tomers and other stakeholders". Al-though SCM has been defined dif-ferently among scholars, a commontheme clearly exists: the importanceof integration.
Internal and external integrationare ñindamental to superior supplychain performance. Firms achieveinternal integration by effectivelycoordinating processes on an en-terprise-wide basis. The ability ofdistinct functions working togetherto create seamless interfaces acrossprocesses is fundamental to firm andsupply chain success (Narasimhanand Kim 2002). This requires deci-sion-makers to reject the traditionalschool of thought in which the vari-ous functional-level managers' pri-mary concern focuses on their owndepartments (Rajagopal 2002). Ex-ternal integration entails recognizingsuppliers as an integral part of thesupply chain and engaging in collab-
orative efforts with these firms (Nar-asimhan and Kim 2002). Integrationat this level is imperative because itincreases the overall performance ofthe supply chain (Speckman, JW &Myhr 1998; Gattorna 1998).
The Role of IT
in Integrating Supply ChainsThe use of IT provides the basis for
supply chain integration by providingefficient, timely, and transparent busi-ness information to the appropriateparties (Cagliano et al. 2003). Someof the relevant types of informationinclude operations, logistics, and stra-tegic planning information. Sharingof this information enables multiplefirms to engage in synchronous deci-sion making and can lead to improve-ments in production, planning, inven-tory management, and distribution(Sanders 2005). Due to its ability toprovide vital information to the appro-priate parties, Sanders (2005) dubbedIT the "backbone of supply chain busi-ness structure."
Zeng and Pathak (2003) suggestedthat supply chains advance when theyprogressively integrate multiple func-tions into the process. This progres-sion is driven by the development, ad-vancement, and implementation of IT,which allows coordination of activitiesand processes between supply chainmembers (Zeng and Pathak 2003).In addition, Daugherty, Germain, andDroge (1995) assert that the greatestvalue associated with the use of ITmay be its ability to allow users to de-velop networks that reach beyond theborders of the individual firm.
Categorizing Typesof E-procurement Applications
A number of researchers havedeveloped classification schemes ortaxonomies to categorize Internet-based tools (e.g., DeBoer, Harink 6cHeijboer 2002; Kehoe and Bough-ton 2001; Whitaker et al. 2001;Brynjolfsson and Smith 2000). Thiscategorization is necessary becausee-procurement tools differ in many
Pearcy, Parker and Giunipero
respects including costs, benefits,goals, and as previously noted - inte-grative ability.
Fröhlich and Westbrook (2002)surveyed a sample of UK-based firmsin order to investigate the extent towhich they used Internet-based tech-nologies to integrate supply chainactivities such as inventory planning,order taking, and demand forecast-ing. The authors categorized the re-spondents' usage into four groups:
1. web-based, low integration (In-ternet-enabled focus on the firmonly)
2. web-based supply integration(Internet-enabled integrationbetween the firm and its sup-pliers)
3. web-based demand integration(Internet-enabled integrationbetween the firm and its cus-tomers)
4. web-based demand chain (In-ternet-enabled integration be-tween the firm, its suppliers,and its customers)
Fröhlich and Westbrook (2002)found that the majority of firms (63%)engaged in web-based, low integra-tion. The web-based demand chaingroup was the smallest segment, withonly 4% of the respondents in thiscategory.
Cagliano et al. (2003) conducteda study on a sample of Europeanmanufacturing firms and identifiedfour clusters of respondents basedon their use of Internet-based tech-nologies. The authors categorizedthe firms in the following manner:traditionalists (55% of the sample)did not use Internet-based technolo-gies within the supply chain, e-sellers(23% of the sample) used Internet-based technologies for sales and cus-tomer care only, e-purchasers (14% ofthe sample) employed Internet-basedtechnologies extensively, but only for
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the purpose of making purehasesfrom suppliers. Finally, e-integrators(7% of the sample) used Internet-based teehnologies in every aspeetof their supply chain processes. Thisincluded use in internal operations,procurement, and sales.
Previous research has establishedthat e-procurement tools can beclassified on the basis of a number ofcharacteristics, including an abilityto facilitate integration. Based on thefindings of Fröhlich and Westbrook(2002) and Cagliano et al. (2003),the foUowing is proposed:
P I : The use of less integrative e-procurement applications willbe more prevalent among thesample firms than the use ofe-procurement applications thatfacilitate integration acrossdepartments and/or firms.
The Relationship betweenFirm Sector and the Use ofE-procurement Applications
In an attempt to fiirther under-stand e-procurement use, the authorsexamined previous research on the re-lationship between firm sector and theadoption of technology. The resultsof a multi-sample survey of Span-ish firms operating in various sec-tors, which was conducted by Ortega,Martinez, and DeHoyos (2006), pro-vided support for the premise that thesector in which a firm operates playsa role in the acceptance of technolo-gies. Ortega et al. (2006) found therewere factors that influenced technol-ogy adoption such as perceived ease ofuse and usefiilness of the technology,but their effect was contingent uponthe sector in which the firm operated.Specifically, the authors found thatfirms operating in the IT industrynot only perceived on-line manage-ment applications (the technology inquestion) to be more usefiil and easierto use; they also had higher adoptionintentions and intensity of use thanfirms operating in the primary, indus-trial, and services sectors.
While a number of studies sug-gest that firm sector plays a role intechnology adoption, researchershave taken somewhat different ap-proaches to explaining this relation-ship. Ortega et al. (2006) noted thatsome industries are characterizedby greater experience in technologyuse, which facilitates the adoptionof additional technological applica-tions (including e-commerce).
Additional research suggests thatindustries that are more technologi-cally advanced promote greater andmore effective use of the appropri-ate technologies (Chewlos, Benba-sat & Dexter 2001; Dyer, Cho &Chu 1998; Goodacre and Tonks1995). Thatcher and Foster (2002)support this notion in their analysisof how information technology has
evolved in firms operating in vari-ous industries. The authors noted,for example that industries such astextiles tend to be less technologi-cally advanced than other sectorssuch as electricity companies, whichtend to be in the forefront of tech-nology adoption.
Motiwalla, Khan, and Xu (2005)undertook a study to identify thefactors that impact the adoption/useof e-business across three differentsectors. The researchers concludedthat similarities in the level of ITadoption were identified withinsectors because engaging in a par-ticular activity prompts firms to de-velop similar behavior patterns.Thiswould explain why firms engaged ininformation-intensive activities aremore likely to accept new techno-
Table 1Survey Items and Descriptive Statistics
We use Internet-based technologies to:
Plan and schedule production
Collaborate with suppliers on product design issues
Place orders on suppliers' web sites
Search for suppliers that will help us differentiate our offerings
Achieve cross-functional coordination
Check suppliers' finances
Develop an integrated supply chain
Access electronic marketplaces
Use the software services of an electronic purchasing solutionsprovider
Search for low-cost suppliers
Access on-line catalogs
Visit suppliers' web sites
Mean
2.80
2.88
2.91
2.94
3.08
3.31
3.32
3.33
3.44
3.62
3.63
3.85
StandardDeviation
1.16
1.21
1,21
1,19
1,06
1.16
1,08
1,12
1,14
1,10
1,10
1,03
1 = strongly disagree, 5 = strongly agree
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logical innovations. These firms doso primarily because using advancedtechnologies provide greater stra-tegic benefits for them (Yap 1990;Min and Galle 2003).
Dyer et al. (1998) found thatfirms operating in a particular sectorrequire similar levels of efficiency ofmanagers, which can be facilitatedby various levels of technology use.Similarly, Premkumar and Rob-erts (1999) examined the intensityof competitive pressure within thefirm's sector as a determining fac-tor in the adoption of technologies.The authors maintain that firmsthat engage in more competitiveeconomic activities are driven to
employ increasingly sophisticatedtools. Consequently, the adoption/use of higher levels of technologyhas become strategically vital forfirms belonging to sectors such astelecommunications or distribution(Premkumar and Potter 1995).
Based on previous research, whichsuggests that the industry in whichthe firm operates impacts the adop-tion of technology in general and e-commerce specifically, the followingis proposed:
P2: A significant relationship willexist between firm sector andthe use of integrative e-pro-curement applications.
Table 2Respondents' Demographic Information
Number of years employed in pur-chasing/supply management
Annual business unit revenues*
Dollar amount of purchases forwhich respondent is responsible*
N
140
128
126
Min.
1,00
4,50
1,00
Max.
31
45,000
17,000
Mean
11,68
5,487,35
516,98
StandardDeviation
765
7,104,88
1,568,63
Ten Most Frequently Reported Position Titles (N = 140)
Title
Purchasing Manager
Senior Buyer
Director
(Strategic) Sourcing Manager
Commodity Manager
Vice President
E-procurement Manager
Buyer
Supply Chain Manager
Supply Manager
Percentage
19,7
14,8
14,1
8,5
77
5,6
5,6
4,9
3,5
2,8
' in millions of dollars
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MethodologySurvey Participants and Mailing
The Institute for Supply Man-agement provided a list of potentialsurvey participants in eleven differ-ent standard industrial codes. Theindustries were: food products, pa-per products, chemicals, petroleum,rubber, primary metals, transporta-tion equipment, fabricated metals,computer equipment, measuring andanalyzing instruments, and electricalequipment. One thousand, twenty-five surveys were mailed to purchas-ing/supply management profession-als with a cover letter explaining theobjective of the research and a post-age-paid return envelope. Follow-uppostcards were sent to all potentialparticipants two weeks later in an at-tempt to increase the response rate.
The InstrumentThe instrument contained basic
demographic questions and items in-tended to assess e-procurement tooluse. The scale to assess "e-procure-ment tool use" was developed by theresearchers. The survey items reflectedInternet-based activities discussed inthe SCM literature and the popularbusiness press, along with general sug-gestions by Porter (1980, 1985) in adiscussion of ways to achieve competi-tive advantage (applied in the contextof Internet-based technologies). Thescale was anchored with the statement"we use Internet-based technologiesto..." followed by a list of e-procure-ment applications. The e-procurementapplications assessed were as follows:plan and schedule production, collab-orate with suppliers on product designissues, place orders on suppliers' websites, search for suppliers that will helpus differentiate our offerings, achievecross-functional coordination, checksuppliers' finances, develop an inte-grated supply chain, access e-market-places, use the software services of ane-purchasing solutions provider, searchfor low-cost suppliers, access on-linecatalogs, and visit suppliers' web sites.Each item was measured on a Likert
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Pearcy, Parker and Giunipero
scale ranging from 1 = "strongly dis-agree to 5 = "strongly agree". Table 1contains the scale items along withdescriptive statistics.
Response Rateand Sample Demographics
Of the 1,025 surveys mailed, a totalof 142 useable surveys were received- resulting in a 14 percent responserate. While this response rate may ap-pear somewhat low. Min and Emam(2003) note that response rates lessthan 20 percent are not uncommonin the supply chain management lit-erature when the research methodinvolves mail surveys (see Petersen,Ragatz ÔC Monczka 2005; Claycomband Frankwick 2004; Wisner 2003;Carter and Narasimhan 1996). It ispossible that the response rate wasimpacted by the fact that the surveywas only relevant to firms that use atleast one type of e-procurement ap-plication listed. If a firm did not useany of the nine e-procurement appli-cations listed on the survey, it couldnot be included in the sample.
In order to assess the potentialof non-response bias, the research-ers implemented a commonly usedtechnique advanced by Armstrongand Overton (1977). Multivariatet-tests were performed on each itemto determine if there were statisti-cally significant differences betweenearly and late respondents. The firsttwenty questionnaires received wereconsidered early responses and thelast twenty received were consideredlate. No statistically significant dif-ference existed between early andlate respondents. Thus, non-responsebias did not pose a threat to the studyresults.
The respondent possessed con-siderable experience in purchasing/supply management and had sig-nificant responsibilities within theirfirms. The mean doUar amount ofpurchases for which the respondentwas responsible and the respondents'annual business unit revenues variedwidely. The respondents were em-
Table 3Respondents' Primary Line of Business
Industry
Manufacturing
Food
Automotive parts
Petroleum/gas
(Tele)communications
Chemicals
Transportation equipment
Pharmaceuticals
Metals/mining
Paper/paper products
Consumer products/packaged goods
Lawn and garden
Electronics
Consumer plastics
Inertial instruments
Medical equipment
Self-test diagnostic systems
Utility/power
Aircraft
Optical components
Semi-conductor
Industrial equipment
Tires
Computer (hardware and software)
Office equipment
Personal care
Convenience store
AC/CE equipment
Agricultural products
Heating, ventilation, and air conditioning
Cans
Total
Frequency
28
12
11
10
8
7
7
7
6
4
3
3
3
3
3
3
2
2
2
2
2
2
2
2
2
1
1
1
1
1
1
142
Percent
19,7
8,5
7,7
7,0
5,6
4,9
4,9
4,9
4,2
2,8
2,1
2,1
2,1
2,1
2,1
2,1
1,4
1,4
1,4
1,4
1,4
1,4
1,4
1,4
1,4
,7
,7
,7
,7
,7
,7
100.0
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Table 4Rotated Component Matrix
SURVEY ITEMWe use Internet-based technologies to:
Develop an integrated supply chain
Plan and schedule production
Collaborate with suppliers on product design issues
Achieve cross-functional coordination
Search for suppliers that will helpus differentiate our offerings
Search for low-cost suppliers
Visit suppliers' web sites
Access on-line catalogs
Place orders on suppliers' web sites
Component
1
.70
.70
.85
.81
.62
-.14
-.10
-.01
-.04
2
.28
.06
-.03
-.02
-.10
.68
.77
.88
.64
Extraction Method: Principal Component AnalysisRotation Method: Varimax with Kaiser Normalization
Total Variance Explained
Component
1
2
Eigenvalues
Total
3.10
2.97
% of Variance
25.80
24.75
Cumulative %
25.80
50.55
Extraction Method: Principal Component Analysis
ployed in thirty-three different in-dustries, with manufacturing beingthe most commonly reported.The ex-tent to which each industry reportedwas representative of the number ofsurveys mailed varied widely, with alow of 4 percent for paper and alliedproducts to a high of 20 percent forboth transportation equipment andmeasuring/analyzing instruments.The mailing resulted in no responsesfrom those employed in the "fabri-cated metals" industry. Table 1 con-tains a summary of the respondents'demographic information and Table3 lists the respondents' primary lineof business.
Data AnalysisIn order to test the first proposi-
tion that the use of less integrativee-procurement tools would be moreprevalent among the sample firmsthan the use of integrative e-procure-ment tools, the data were analyzedusing the Statistical Package for theSocial Sciences (SPSS 13.0). Whenthe "e-procurement tool use" scale wasdeveloped, it was believed that firmsused two general types of e-procure-ment applications: applications thatare relevant to one fianction/process orapplications that help firms integrateacross functions and/or firms. Thissuggested the scale would be com-
posed of two underlying factors. Con-trary to that presumption, the initialexploratory factor analysis (EFA) onthe 12-item scale revealed three fac-tors. The first factor was composed offive items with factor loadings rang-ing from .59 to .84. Four items com-prised the second factor, with factorloadings ranging from .61 to .86. Thethird factor only contained two items,"we use Internet-based technologiesto: access e-marketplaces" and "usethe software services of an e-pur-chasing solution provider". The itemshad factor loadings of .90 and .66respectively. Using Tabachnick andFideU (1996) as a guide in approach-ing two-item factors, correlationswere examined. The correlation be-tween the aforementioned items didnot exceed .7 (r = .44), nor were theyrelatively uncorrelated with the otheritems. Consequently, the items weredeleted. An additional item, "we useInternet-based technologies to checksuppliers' financial status," failed toload on any factor, with factor load-ings of only .16, .28, and .29. Accord-ing to Comrey and Lee (1992), factorloadings less than .45 are consideredpoor; therefore this item was also de-leted.
Factor analysis was performed onthe remaining nine-item scale. Therotated solution revealed two fac-tors. The first factor was composedof five items and had factor loadingsranging from .62 to .85. Four factorscomprised the second factor and hadfactor loadings ranging from .64 to.88 (see Table 4).
Next, an attempt was made to la-bel the factors. The first factor, whichincluded items such as, "we use In-ternet-based technologies to: achievecross-functional coordination andcollaborate with suppliers on designissues," was labeled "integrative e-procurement tools". The second factor,which included items such as, "weuse Internet-based technologies to:search for low-cost suppliers and visitsuppliers' web sites," was labeled "ba-sk, single-process e-procurement tools."
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In order to determine if each of theaforementioned sets of items could betreated as distinct scales, discriminantvalidity was tested. Within each set,the items exhibited significant corre-lations (ranging from .27 to .69) andwere uncorrelated across sets. Thissuggested that discriminant validityexisted. In addition, both sets of itemswere found to be reliable based onthe assessment of Cronbach's alpha(Cronbach 1951). Cronbach's alphafor the "basic, single-process e-pro-curement tools" scale was .77; it was.80 for the "integrative e-procurementtools" scale.
The next step in testing PI was toascertain which type of e-procure-ment tool use was more prevalent.To accomplish this, summated scaleswere developed for each set of itemsand t-tests were conducted to deter-mine if significant differences existed.The data indicated that significant dif-ferences existed between the means ofthe "basic, single-process e-procure-ment tools" and the "integrative e-procurement tools" (means = 3.50 and3.01 respectively, t = -6.77, p<.0001).Table 5 contains the data related tothis analysis.
In order to test P2, that firm sectorhas an effect on the adoption of inte-grated e-procurement applications, itwas first necessary to categorize thefirms included in the study accord-ing to their e-procurement usage.Cluster analysis was selected as theappropriate method for categoriza-tion, as it is commonly used to groupindividual observations into clusterscharacterized by high homogeneitybased a set of relevant characteristics(Hair et al. 2006).
Hair et al. (2006) recommendusing both empirical analysis andtheoretical judgment to determinethe proper number of clusters in thesolution. It was proposed that twogroups were present in the samplecollected for this study: 1) Firmsthat use e-procurement applicationsprimarily for basic processes withina single function and 2) Firms that
Table 5Test for Equality of Means
Construct
Single-process e-procurement tools
Integrative e-procurement tools
N
141
141
Mean
3.50
3.01
StandardDeviation
.85
.85
Mean Difference(single-process vs. integrative)
.49
t
-6.77
df
140
Sig.
p<.0001
use e-procurement applications forthe purpose of integration acrossmultiple, internal functions and/oracross firms. To test this proposi-tion, we clustered observations usingWard's linkage, a hierarchical cluster-ing method, with squared Euclideandistance as the measure of similarity.Ward's linkage was selected becauseit is recommended as an initial stepfor determining the proper number ofclusters and generating cluster seedsfor use in non-hierarchical methods(Johnson and Wichern, 2002).This isconsistent with the combination (hi-erarchical/non-hierarchical) methodof generating clusters recommendedby Hair et al. (2006).'Ihis methodbegins with each of n observations asits own cluster, and in stepwise fash-ion, combines observations based onthe similarity measure until all ob-servations are combined into a sin-gle cluster. Each step s represents asolution o£ n - s clusters. Results ofthis analysis suggested that a two-cluster solution was appropriate.The Calinski/Harabasz pseudo-F (aratio of within cluster similarity tobetween cluster similarity) was usedas the deciding criterion. Higher val-ues indicate superior separation anduniqueness of clusters. The two-clus-ter solution had a Calinski/Harabaszpseudo-F = 32.12, the highest valuewithin the range of theoretically fea-sible solutions (1 to 4 clusters).
The centroids (i.e., mean vectors) ofthe two-cluster solution were checkedto evaluate the interpretability ofthe resulting clusters, and found tobe consistent with our hypothesizedgroupings (see Table 6, panel A).
The next step in establishing clus-ters involved using a non-hierarchicalclustering method to optimize thegrouping of observations (Hair et al.2006). We employed K-means clus-tering, which uses the centroids gen-erated from the hierarchical approachas starting points, then systematicallyassigns observations to the clusterwhose centroid is nearest (Johnsonand Wichern, 2002). The method fur-ther optimizes grouping by reassign-ing observations, as necessary, basedon updated centroids that are recal-culated as observations are added toexisting clusters. Application of thismethod resulted in our final clustersolution (see Table 6, panel B). Thefirst cluster, labeled "Basic E-procure-ment Tool Users", consists of 66 firmswho average moderate to high usageof basic, single-process e-procurementtools, but low usage of integrative e-procurement tools.The second cluster,labeled "Integrative E-procurementTool Users," consists of seventy-fourfirms who average moderate to highusage of both basic, single-processand integrative e-procurement tools.
With validated groups in place,we were able to proceed with our ex-
American Journale/BusinessSpring 2008 • Vol. 23, No. 1
TableéCluster Centroids
Variable
Search for lowcost suppliers
Visit suppliers'Web sites
Access on-linecatalogs
Place orderson Web sites
Develop integrated SC
Plan and scheduleproduction
Collaborate with supplierson product design
Achieve cross-functionalcoordination
Search for suppliers todifferentiate
Panel A
Cluster 1(n = 44)
4.00
4.09
3.75
2.91
2.77
1.84
1.75
2.20
2.34
Cluster2(n=96)
3.45
3.73
3.56
2.92
3.58
3.26
3.41
3.50
3.20
Diff.
0.55***
0.36**
0.19
0.01
0.81***
1.42***
1.66***
1.30***
0.86***
Panel B
BasicTool Users
(n=66)
3.62
3.82
3.48
2.86
2.70
2.08
1.89
2.35
2.33
IntegrativeTool Users
(n=74)
3.62
3.86
3.74
2.96
3.89
3.47
3.77
3.76
3.46
Diff.
0.00
0.04
0.26
0.10
1.19***
1.39***
1.88***
1.41***
1.13***
*p<0.01 **p<0.05
amination of the influence of industryon the use of basic versus integrativee-procurement tools. We began byconstructing a dummy variable rep-resenting group membership {l=Inte-grative Tool Users; O=Basic Tool Users).Next, the thirty-three industries rep-resented in the study w ere coUapsedinto fifteen industries, using broaderSIC designations. This was followedby construction of a set of fourteendummy variables to represent the fif-teen industries present in the sample{Manufacturing was designated as thereference group). Given the depen-dent variable is binary, logistic re-gression was selected as the methodof analysis. Unlike linear regression,which evaluates the effect of marginalchanges in independent variables on
the value of the dependent variable,logistic regression evaluates the effectof marginal changes in the indepen-dent variables on Û\& probability of thepresence of a certain attribute, condi-tion, or state (Gujarati 2003; Kutner,Nachtsheim & Neter 2004). Addi-tionally, it is customary to report oddsratios in logistic regression, as opposedto regression coefficients typicaUy re-ported in linear regression.^
Results of logistic regression of firmsector on group membership are listedin Table 7 . The model is significant,with a Likelihood Ratio Chi-Squarestatistic of 19.00 (p = 0.04). Resultsindicate that firm sector has an effecton the use of integrative e-procure-ment applications, with evidence ofstatistically significant differences be-
Pearcy, Parker and Giunipero
tween both the petroleum and trans-portation equipment sectors with thereference group, manufacturing at asignificance level of 0.05. Odds ratiossuggest that firms in the petroleumindustry are 15 percent as likely touse integrative e-procurement appli-cations as manufacturing firms, whuefirms in the transportation equipmentsector are only 12.5 percent as likelyto use integrative e-procurement toolsas manufacturing firms.
Discussion andConclusions
The survey data indicated that,of the nine e-procurement applica-tions explored, responding firms wereleast likely to use e-procurementapplications to plan and scheduleproduction. On the other hand, thefirms'most prevalent use of e-pro-curement was visiting suppliers'websites. These data are reflective of thefinding that firms in the sample usedbasic, single-process e-procurementapplications to a greater extent thanthey used integrative e-procurementtools. This finding is consistent withprevious research conducted withEuropean firms (e.g., Cagliano etal. 2003; Fröhlich and Westbrook2002). Specifically, respondents inthis study indicated that they usedInternet-based technologies to searchfor low-cost suppliers, visit suppliers'websites, access on-line catalogs, andplace orders on suppliers' websitesto a greater extent than they did todevelop an integrated supply chain,plan and schedule production, col-laborate vwth suppliers on productdesign issues, or achieve cross-fianc-tional coordination.
The primary benefits associatedwith the use of these basic, single-process e-procurement applicationsstem from lower administrative costsand purchase prices. While reducingthese costs is important, previous re-search indicates that using integrativee-procurement applications not onlyhas the potential to lower costs and
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Pearcy, Parker and Giunipero
Table 7Logistic Regression Results
Dependent Variable is Group (i= Integrative Tools; 0 = Basic Tools)
Manufacturing is the reference group for Industry Dummy VariablesNo. of obsv.t =
LRx^(io) =
Prob > x' =
Pseudo R =
Log likelihood =
135
19.00
0.0402
0.1019
-83.77
Independent Variable
(Industry)
Chemicals
Electronics
Food
Measuring andAnalyzing Instruments
Paper
Petroleum
Primary Metals
Rubber
TransportationEquipment
Wholesale
Odds Ratio
.2625
.56
.7
1.05
.1166667
.15
.175
.525
.125
.4666667
Std. Err.
.1827203
.4029888
.4914265
.9734601
.1441289
.122693
.1699264
.5318306
.0851731
.3248361
z
-1.92
-0.81
-0.51
0.05
-1.74
-2.32
-1.80
-0.64
-3.05
-1.09
p-value
0.055
0.420
0.611
0.958
0.082
0.020**
0.073
0.525
0.002**
0.274
95% Conf. Interval
.0670853
.1366608
.1768163
.1706225
.0103605
.030189
.0260924
.0720913
.0328787
.1192627
1.027144
2.294733
2.771237
6.461634
1.313751
.7453055
1.173713
3.823274
.4752324
1.826034
+Five observations/industries could not be analyzed due to low representation (< 2 firms)
**p<0.05
increase profitability, but also to in-crease operational agility and contrib-ute to superior product design (Foli-nas et al. 2004). It is probable that thelatter outcomes wiU prove to be moreenduring and influential with respectto overall supply chain performancethan mere cost reductions to the buy-ing firm alone.
Of the ten broad industries ex-amined in this study, two exhibitedsignificant differences with respect totheir likelihood to adopt integrativee-procurement applications relative tothe "manufacturing" reference group.Specifically, the data indicated thatrespondents whose firms operated in
the petroleum and the transportationequipment industries were less likelyto adopt integrative e-procurementapplications than were those in themanufacturing sector.
Based on our findings, it appearsthat the petroleum and transporta-tion equipment industries possesscharacteristics that make them lesslikely to use integrated e-procure-ment tools than their manufacturingcounterparts. The petroleum sector ischaracterized by more vertical inte-gration than most other industries inthe sample, hence fewer external sup-pliers and less need for e-procurementapplications that span organizations.
In addition, the petroleum industryis relatively stable; therefore the po-tential for long-standing relationshipsand business practices exist betweenbuying firms and external suppliers. Inthe same vein, relative to other sectorsexamined in the study, the petroleumindustry, which is characterized by alimited number of firms, is not highlycompetitive. Consequently, firms op-erating in the petroleum sector mightfind little need to deviate from existingbusiness practices, including the useof basic e-procurement applications.Furthermore, competitive pressureslead to the use of more sophisticatedtechnologies (Ortega et al. 2006). In
American Journal e/ BusinessSpnng2008''Vol. 23, No. 1
the absence of these industry-levelcompetitive pressures, it is quite pos-sible that firms operating in the pe-troleum industry perceive less need toemploy more sophisticated, integra-tive e-procurement applications.
Firms operating in the transporta-tion equipment sector include compa-nies that provide railroad equipment,aircrafts, and aircraft parts/supplies.As with the firms operating in the pe-troleum industry, these types of firmsalso face relatively lov* levels of com-petition, thus they possess less needfor more sophisticated, integrativeforms of e-procurement. In addition,Cagliano et al. (2005) noted that cer-tain sectors, including the automo-tive industry (which encompasses thetransportation equipment sector) hadadopted and invested substantial re-sources in EDI and other proprietaryinfrastructures prior to the popular-ization of e-procurement. This mightexplain why the respondents whosefirms operate in the transportationequipment industry are less likely toadopt more integrative (and more re-source dependent) types of e-procure-ment.
It is possible that the use of basic,single-process e-procurement appU-cations is more prevalent in the sam-ple overall than the use of integrativetools because the former are easilyemployed, require minimal financialinvestment, and involve little risk.Visiting suppliers' web sites, access-ing on-line catalogs, placing orderson suppliers' web sites, and searchingfor low-cost suppliers are all simpletools firms can use to get started withe-procurement. Conversely, achievinginter- or intra-firm integration is morecomplicated and risky. For example,firms looking to collaborate with sup-pliers on design issues face a numberof challenges and risks, including un-certainty about the supplier's capabiU-ties, sharing proprietary information,and issues surrounding intellectualproperty. Achieving cross-ñinctionalcoordination may be challenging be-cause it requires individuals from var-
ious departments within a single firm,with diverse perspectives to work to-ward a common end. FmaUy, develop-ing an integrated supply chain is themost challenging because it involvesmultiple firms. A fiilly integrated sup-ply chain is characterized by exten-sive sharing of information and highlevels of trust (Folinas et al. 2004),which in many instances is not easily
Pearcy, Parker and Giunipero
In other words, why do firms adoptcertain e-procurement applications?Further, no attempt was made to as-sess whether firms that currently usebasic, single-process e-procurementapplications have plans to adopt moreintegrative e-procurement tools inthe future. This would be helpful inassessing the rate of adoption acrossindustries. Finally, this exploratory
"...the petroleum and transportation equipmentindustries possess characteristics that make them lesslikely to use integrated e-procurement tools than theirmanufacturing counterparts. "
attainable, particularly when multiplesuppliers and multiple customers areinvolved. Each of the aforementionedintegrative activities is complex, evenwhen executed by "traditional" means.When considering the use of Inter-net-based technologies to accomplishthese activities, firms face additionalchallenges that may cause reluctance.These additional challenges includetraining of employees, incurring coststo implement e-procurement applica-tions, willingness of trading partnersto invest in technology, and securityissues related to the electronic transferof data.
Future ResearchThe scope of the research is lim-
ited in that no attempt was made toexamine the relationship between theuse of the various e-procurement ap-plications and business outcomes.Future research could examine the re-lationship between the use of integra-tive e-procurement applications andbusiness outcomes such as increasedcommunication, operational agil-ity, improved product/service design,and overall supply chain performance.In addition, our understanding of e-procurement use could be furtherenhanced by the assessment of firms'motivations for adopting particular e-procurement applications over others.
study relies on speculation with re-spect to the impact of firm sector one-procurement use. The role of firmsector could be fiarther examined byasking respondents to what extentindustry characteristics such as com-petitiveness, need for efficiency, andoverañ technology acceptance impacte-procurement use.
Academicians and practitionersalike express great interest in the valueof Internet-based technologies in im-proving supply chain performance. Inaddition, an extensive research streamregarding the essential role of inter-and intra-firm integration in effec-tive supply chain management exists.Nevertheless, investigation of the useof Internet-based technologies toachieve supply chain integration hasbeen primarily limited to the studyof European firms. Further, previousstudies on e-business resulted in clas-sification schemes founded on a con-ceptual basis or on evidence from casestudies. While this study is explor-atory, it provides valuable, preliminaryempirical data to support the notionthat e-procurement tools can be cat-egorized by their ability to facilitatesupply chain integration and contrib-utes to the literature by examiningthe actual e-procurement practices ofUS-based firms across a wide varietyof industries.
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Pearcy, Parker and Giunipero
Notes1. The odds ratio is a ratio of the probabil-
ity of the presence of an attribute to theprobability of its absence.
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Pearcy, Parker and Giunipero
About the AuthorsDavfn H. Pearcy is an Associate Profes-
sor of Marketing at Eastern Micinigan
University. She earned a Ph.D. from
Florida State University. She teaches
undergraduate and graduate courses
in supply chain management and mar-
keting. Her research interests include
e-procurement and fair trade. Dr.
Pearcys research has been published
in several academic journals and pro-
ceedings of national and international
conferences.
Delvon B. Parker is a doctoral candi-
date in Operations Management at
Michigan State University. He earned
his Bachelor of Science degree in
Chemical Engineering and has done
post graduate study in Manufacturing
and Innovation. Mr. Parkers current
research interests include organization-
al integration, modular systems and
supply chain design.
Larry C. Giunipero is Professor of
Purchasing/Supply Chain Manage-
ment at Florida State University. He
teaches and consults in the area of
supply management. He holds a Ph.D.
from Michigan State University. He
has published numerous articles in aca-
demic journals and performed consult-
ing/training projects for over 30 differ-
ent corporations. His research interests
include e-procurement and supply
chain sourcing strategies.
American Journal"/BusinessSpring 2008 • Vol. 23, No. 1
