E-procurement 2

Research paper

Using e-procurement applications to achieve integration: what role does firm size play? Dawn H. Pearcy Eastern Michigan University, Ypsilanti, Michigan, USA, and

Larry C. Giunipero Florida State University, Tallahassee, Florida, USA Abstract Purpose – The purpose of this research is to empirically investigate the role of firm size in the use of e-procurement applications that vary in their ability to facilitate supply chain integration. Design/methodology/approach – The sample was drawn from members of the Institute for Supply Management (ISM). Purchasing professionals employed in 33 different industries completed a self-administered questionnaire. Findings – A total of 128 useable surveys were received. The data revealed a significant relationship between firm size and e-procurement application. Specifically, larger firms were more likely to use integrative types of e-procurement. Research limitations/implications – The study was limited in that it excluded purchasing professionals employed in the service sector. In addition, it only focused on the relationship between a single variable and e-procurement application. Practical implications – This research provides support for studies that suggest that firm size is related to IT use. In addition, it tests the framework developed in a previous research study conducted on supply chain IT. Finally, previous research has linked supply chain process integration with operational agility, lower costs, superior product/service design, and enhanced profitability. The findings of this research might prompt decision-makers to ask themselves if their firms forgo such potential benefits when integrative forms of e-procurement are not used. Originality/value – This research contributes to the understanding of an emerging phenomenon by investigating firm size as an explanatory variable in the e-procurement application decision. In addition, evidence is still lacking with regard to the prevalence of actual implementation of e-procurement in firms. This study examines actual usage of 13 different e-procurement applications across various industries. Finally, this research focuses on the use of e-procurement in achieving integration. This is important to practitioners, as effective supply chain integration has been linked to enhanced business performance. Keywords Procurement, Supply chain management, Companies, Electronic commerce Paper type Research paper E-procurement continues to grow and was projected to reach $3 trillion in transactions in 2004, up from $75 billion in 2002 (Verespej, 2002). Presutti (2003) refers to a Deloitte Consulting survey of 200 multi-national firms, which suggests the use of e-procurement is growing. Approximately 30 percent of firms in the sample had at least a basic e-procurement system in place. A total of 61 percent of the sample had planned to implement e-procurement systems or were at least considering it (Presutti, 2003). While many firms adopt e-procurement in an attempt to achieve the proposed benefits of lower costs and improved efficiency, it should be noted that the use of e-procurement does guarantee positive outcomes for buyers or suppliers. For example, Emiliani and Stec’s (2005) study of reverse auction use in the wood pallet industry found that suppliers realized few, if any benefits from participation, suppliers engaged in retaliatory pricing when the opportunity presented itself, buyers encountered unanticipated costs, and less-thanoptimal buyer-supplier relationships resulted. Some additional challenges associated with the effectiveness of e-procurement include information sharing within and across firms, overcoming the “silo mentality” within the firm, sharing proprietary information with supply chain members,

Introduction Firms in diverse industries use electronic procurement (e-procurement) in an attempt to increase the efficiency of the purchasing/supply management function and to reduce costs. Presutti (2003, p. 221) defined e-procurement as “a technology solution that facilitates corporate buying using the internet.” Min and Galle (2003) defined e-procurement as “business-tobusiness purchasing practice that utilizes electronic commerce to identify potential sources of supply, to purchase goods and services, to transfer payment, and to interact with suppliers”. E-procurement is part of a broader concept called information technology (IT), which the American Heritage Dictionary (2005) defines as “the development, installation, and implementation of computer systems and applications”. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1359-8546.htm

Supply Chain Management: An International Journal 13/1 (2008) 26– 34 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598540810850292]

26

Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

and intellectual property matters. Astute decision-makers recognize that successful implementation of e-procurement applications relies not only on the capabilities of the application itself, but also on non-technical factors such as realignment of the procurement function, integration of the e-procurement system with other relevant systems, redesign of the procurement process, realignment of the purchasing organization, and integrating suppliers at an early stage (see Puschmann and Rainer, 2005). A wide variety of Internet-based technologies are available to firms attempting to improve their business position (e.g. on-line catalogs, on-line auctions). Internet-based technologies vary in many respects, including the ability to facilitate process integration within and across firms. According to the American Heritage Dictionary (2005), to integrate is to “make into a whole by bringing all parts together; to unify or to make part of a larger unit”. Some firms adopt technologies that involve applications within a single function (e.g. electronic requisitions), while others use e-procurement applications that provide for process integration across multiple functions within a single firm (e.g. enterprise resource planning systems (ERP)), yet others use e-procurement applications that facilitate integration across organizations (e.g. electronic data interchange (EDI)).

Themistocleous and Love, 2004). Patterson et al. (2003) noted, “integration of supply chain activities and the technologies to accomplish it have become competitive n e c e s s i t i e s i n m o s t i n d u s t r i e s ” . I f I T, i n c l u d i n g e-procurement has the potential to play a pivotal role in business outcomes and competitiveness, it is critical for managers to understand which e-procurement applications best suit their firms’ goals in achieving intra – and inter-firm integration. In addition, some purchasing/supply managers might simply employ e-procurement in an attempt to achieve the proposed benefits of reduced administrative and purchasing costs. By considering the different types of e-procurement applications investigated in this study, managers might also recognize a need within their firm to employ e-procurement applications that make the task of integration easier. Finally, this research provides information that allows managers to compare the type(s) of e-procurement used in their firms to e-procurement use in firms of comparable size. In order to examine this topic, a review of the existing literature is presented along with the research hypothesis. This is followed by an explanation of the methodology, results of the research, and a discussion of the findings. The paper concludes with managerial implications, limitations, and opportunities for future research.

Purpose

Literature review

The fact that firms adopt e-procurement applications that differ in the ability to facilitate supply chain integration prompted the researchers to examine a possible explanatory variable in the e-procurement adoption decision, namely firm size. Therefore, the purpose of this study is to empirically investigate the role of firm size in the adoption of e-procurement applications that vary with respect to their ability to facilitate supply chain integration. The underlying research question is as follows: “Is there a significant relationship between firm size and the type (more or less integrative) of e-procurement application adopted?”

The importance of supply chain integration The integration of key business processes is essential to effective supply chain management (see Lambert et al., 1998) and the extent to which e-procurement applications facilitate integration is an important focus of this study. The importance of integration in supply chain management (SCM) can only be fully appreciated with an understanding of how SCM has been conceptualized. The term became popular in the early 1980s and interest in SCM on the part of academicians and practitioners has grown over the last two decades. Themistocleous and Love (2004) indicated that SCM involves the integration of businesses, information flows, and people. Metz (1998) described SCM as “a processoriented, integrated approach to procuring, producing, and delivering products and services to customers . . . .” Finally, Lambert and Cooper (2000, p. 66) defined SCM as “the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders”. While different definitions exist, it is clear that integration is a key aspect of SCM. Intra- and inter-firm integration of processes is imperative because it can increase the overall performance of individual firms and the supply chain (Vickery et al., 2003; Spekman et al., 1998; Gattorna, 1998). Internal integration is achieved when firms effectively coordinate multiple processes on an enterprise-wide basis. Narasimhan and Kim (2002) noted the ability of distinct functions working together to create seamless interfaces across processes is fundamental to the success of the firm and the supply chain. To achieve integration across enterprises (external integration), firms must recognize the importance of suppliers as an integral part of the supply chain and engage in collaborative efforts with them (Narasimhan and Kim, 2002). Some potential benefits of effective supply chain integration include efficiency in

Significance of the research Researchers’ interest in the factors that impact adoption of innovations/technology has spanned several decades, with Rogers (1967) providing the foundation for later study. In an attempt to explain e-procurement adoption decisions, previous research has examined factors such as organizational readiness (Min and Galle, 2003), supplier support (Deeter-Schmelz et al., 2001), degree of centralization (Moon, 2005), competitive environment (Wu et al., 2003), and the firm’s technical capabilities (Zahay and Handfield, 2004). Clearly, developing an understanding of the factors that impact e-procurement adoption decisions is important, and strides have been made in the academic literature. However, e-procurement is an emerging technology and much remains to be discovered about additional factors impacting adoption. This research contributes to the academic literature in that it investigates a potential explanatory variable (firm size) in e-procurement adoption decisions. This study is important to practitioners because previous research suggests that supply chain integration has the potential to positively impact operational efficiency, revenue growth, coordination, and collaboration (Rai et al., 2006; 27

Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

interaction among supply chain members, increased supply chain visibility, and operational efficiency (see Rai et al., 2006; Power, 2005). Sanders (2005) asserted that the advent and growth of various forms of IT (including e-procurement) has played a vital role in allowing supply chain members to achieve inter-firm coordination and integrate business processes. The use of IT has the potential to promote supply chain integration by providing efficient, timely, and transparent business information to the appropriate parties (Cagliano et al., 2003). It should be noted that integration within and across firms alone does not guarantee improved overall supply chain performance. A key factor contributing to enhanced supply chain performance is strategic fit. A firm should seek to build supply chain capabilities (including the selection of various eprocurement applications) that support the overall corporate strategy (Wisner et al., 2005). Without this consistency, improved performance cannot be achieved. According to Wisner et al. (2005), additional factors that impact supply chain performance include decisions in the areas of facilities (location, number, capacity), inventory (economies of scale, ability to meet demand), and transportation (mode, network). While the use of e-procurement applications can assist firms in achieving integration, it also has the potential to impede supply chain coordination, cooperation, or integration. In fact, a key concern about on-line reverse auction use among practitioners and academicians (e.g. Emiliani and Stec, 2005; Brittan, 2001; Porter, 2000) is that suppliers might become less cooperative because they view this e-procurement application as a means for the buyer to extract price reductions, often to the detriment of their own profit margins. For example, Pearcy et al. (2004) found under certain circumstances, the use of on-line reverse auctions was significantly related to a lack of supplier cooperation in assistance with designing processes that reduce cost, cycle time, and time to market.

and sales departments). The fourth category, labeled “enterprise integration process” includes IT, which is used to integrate business processes across the entire organization (e.g. ERP systems). The final category identified by Wang et al. (2004) was “B2B integration/collaborative business”. IT systems in this category span firms and allow communication, collaboration, and integration among multiple supply chain members, including suppliers and customers. The relationship between firm size and IT adoption in the SCM literature Patterson et al. (2003) developed a conceptual model of the factors impacting adoption of supply chain technologies. The model included key environmental and organizational factors, including firm size. The authors noted that larger firms not only have access to greater financial resources, but are also better positioned to assume the risk of investing in various technologies and to take advantage of the benefits of economies of scale from adoption (e.g. Grover and Gosler, 1993). Patterson et al. (2003) further cited previous research that has consistently revealed a positive relationship between firm size and the adoption of technology (e.g. Daugherty et al., 1995; Dawe, 1994; Germain, 1993; Rogers, 1990; Dewar and Dutton, 1986). Consistent with previous research, Patterson et al. (2003) hypothesized that a positive relationship exists between firm size and the adoption of supply chain management technologies. The researchers did not test the proposed model. However, they developed a survey to evaluate the adoption of supply chain technologies that ranged from basic to integrative (e.g. bar coding and ERP, respectively). Lancioni et al. (2003) examined internet use in several supply chain decision areas, including purchasing and procurement. While the Lancioni et al. (2003) study considered seven purchasing and procurement applications, the current study investigates 13. Of the e-procurement applications analyzed in the present research, only two were also included in the Lancioni et al. (2003) study. Lancioni’s research involved data collection in two separate studies to compare changes in internet use by firm size over a two-year period. The survey data were collected from approximately 190 Council of Logistics Management (CLM) members. The authors established firm size by considering the number of employees and the firms’ annual sales. Firms with less than 500 employees were considered small, while firms with more than 500 employees were classified as large. Firms whose sales volume was under $250 million were considered small, those with sales exceeding $250 million were considered large. In both the 1999 and 2001 studies, smaller firms (using sales volume) were more likely to use the Internet to communicate with suppliers on finished goods inventory levels and on outof-stock issues. Conversely, Lancioni et al. (2003) found that larger firms used the internet to make on-line catalog purchases and provide suppliers with evaluations of carriers’ performance. In addition, the researchers found that larger firms (using employment figures) were more likely to use Internet-based technologies to communicate with customers on order status and to manage the outsourcing of customer service functions. The research of Wang et al. (2004) made a unique contribution to the understanding of the firm size-technology adoption relationship. The premise behind Wang et al.’s (2004) research was that firm size impacts which type of

Types of e-procurement applications This research focuses on the impact of firm size on the adoption of 13 e-procurement applications that vary in the ability to facilitate supply chain integration. Given the differences in e-procurement applications, a number of researchers have developed taxonomies to classify them based on differences in their characteristics, benefits, and goals of use (e.g. Frohlich and Westbrook, 2002; deBoer et al., 2001; Kehoe and Boughton, 2001; Whitaker et al., 2001). The following describes a classification scheme that provides for the categorization of e-procurement applications on the basis of integrative capacity. Wang et al. (2004) recognized that internet-based supply chain technologies vary in the ability to facilitate process integration. The researchers identified five categories of IT adoption. The first category was labeled “essential functions”. This category included IT that is used to carry out tasks such as documentation using basic software packages. The second category was identified as “single department/operation process”. This category included computer-based information systems that are relevant to one particular function or process (e.g. accounting information systems). Wang’s third category of IT adoption was “cross departments/ multi-processes integration”. IT adoption at this level allows firms to integrate processes across several functions or departments (e.g. transportation, inventory management, 28

Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

e-procurement application is adopted. Specifically, Wang et al. (2004) hypothesized that firm size is positively related to the implementation of more integrative types of IT. The data, which were collected from a sample of 121 Taiwanese firms, provided support for the research hypothesis. The present study of the relationship between firm size and e-procurement application builds on previous research including the classification framework of Wang et al.’s (2004). Therefore, the following is hypothesized: H1. A significant relationship will exist between firm size and e-procurement use. Specifically, larger firms will be more likely to use integrative e-procurement applications.

applications (Table I contains a list of the survey items). The respondents assessed each item on a five-point Likert scale from 1 ¼ strongly disagree to 5 ¼ strongly agree. The questionnaire was pre-tested on a group of supply management professionals and academicians with experience in scale development. The survey was evaluated for comprehensiveness and minor changes were made based on their recommendations. A total of 1,025 surveys along with a cover letter explaining the purpose of the study and a postage-paid envelope were mailed to potential participants at the addresses listed with ISM. In an attempt to maximize the response rate, follow-up postcards were sent to potential respondents two weeks after the initial mailing.

Methodology Results

Survey participants The sampling frame consisted of members of the Institute for Supply Management (ISM), an organization that is composed of supply management professionals and academicians in the US. The potential survey participants were drawn from 11 different standard industrial codes, including: food products, paper products, chemicals, petroleum, rubber, primary metals, transportation equipment, fabricated metals, computer equipment, measuring and analyzing instruments, and electrical equipment. The data used in the present study were collected as part of a larger investigation of on-line reverse auction use. Therefore, it was necessary to identify and select firms that used the technology. The firms were identified by an extensive review of the trade literature, informal discussions with individuals who were experienced with on-line reverse auction use (including reverse auction providers), and a review reverse auction providers’ web sites that make reference to the names of their clients.

Response rate and sample demographics Of the 1,025 surveys mailed, a total of 128 useable surveys were received, resulting in a 12.5 percent response rate. The respondents possessed an average of nearly 12 years of experience in the purchasing/supply management function and were employed in 33 different industries including petroleum/gas, transportation, telecommunications, pharmaceuticals, industrial equipment, and metals/mining to name a few. The three most commonly reported lines of business were manufacturing (26 percent), food (12 percent) and auto parts (11 percent). The respondents held a variety of positions, with purchasing manager being the most common (18.8 percent), followed by senior buyer (20 percent) and director of e-business (19 percent). Six of the seven most frequently reported position titles suggested that the purchasing/supply management professionals had significant responsibilities (e.g. Director, Vice President). Annual revenues for the respondents’ business unit ranged from $4.5 million to $45 billion, with a mean of $5.49 billion. The dollar amount of purchases for which the respondents’ were responsible ranged from $1 million to $17 billion, with a mean of $57 million.

Questionnaire and mailing Previous studies have taken different approaches to measuring firm size, including assessment of: total assets (e.g. Wang et al., 2004); number of purchasing employees (e.g. Min and Galle, 2003); purchase volume (Min and Galle, 2001); and the number of warehouses and factories (e.g. Daugherty et al., 1995). For the purpose of this study, firm size was established using business unit revenues. Firm revenues or sales were also used as an indicator of firm size in studies conducted by Wagner and Hansen (2005), Lancioni et al. (2003), Dresner et al. (2001), and Carr and Smeltzer (1999). The rationale behind the use of business unit revenues is that it provides an indicator of firm resources, which previous research has found to be related to the adoption and use of technology (e.g. Zaheer and Venkatraman, 1994). Firm size was assessed by asking the respondent to indicate (in millions of US dollars) the approximate annual revenues of his/her business unit. The set of items used to assess “electronic-procurement use” was developed by the researchers. The survey items were developed using 13 different internet-based procurement applications as identified by Antonette et al. (2002). The authors identified these e-procurement applications through an extensive review of the trade and academic literatures as well as numerous in-depth case studies of firms operating in widely diverse industries. Respondents were asked to respond to the following: “We use internet-based technologies to . . .” This statement was followed by a list of the 13 e-procurement

Hypothesis test In order to make comparisons of e-procurement applications based on firm size, firms whose annual revenues exceeded the median of $3.5 billion were placed in category I. Firms whose annual revenues were below the median were placed in category II. According to the Fortune 500 list, the firm which holds the number one position (in terms of annual revenues) had revenues of $339.9 billion and the firm in the number 500 position had $3.9 billion in revenues (www.money.cnn. com, April 17, 2006). Therefore, the firm holding the 500th position had annual revenues approximately equal to the sample median of $3.5 billion. Importantly, firms with revenues sufficient enough to be placed on the Fortune 500 list exhibit common characteristics, including the fact that academicians and practitioners scrutinize these firms to learn about best (and sometimes worst) business practices. Thus, it appears that a split at the sample median of $3.5 billion is reasonable. Testing the research hypothesis that larger firms are more likely to use integrative e-procurement applications involved two steps. The first step was to classify each application according to its ability to facilitate supply chain integration. The goal was to distinguish between more and less integrative 29

Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

Table I T-test for equality of means category I firms vs category II firms n

We use the internet-based technologies to . . . Search for low-cost suppliers Visit suppliers web sites Participate in reverse auctions to reduce purchase prices Check suppliers’ financial status Place orders on suppliers’ web sites Access e-marketplaces Use software services of an e-purchasing provider solution Search for suppliers that will allow our firm to differentiate our offering from competitors Develop an integrated supply chain Plan and schedule production Collaborate with suppliers on product design issues Achieve cross-functional coordination Access suppliers’ on-line catalogs

Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category Category

II I II I II I 62 II I II I 62 II I II I II I II I II I II I II I II I

65 62 66 62 66 4.44 66 62 66 2.82 66 62 66 62 65 62 66 62 66 62 66 62 66 62 66 62

Mean

SD

3.68 3.63 4.00 3.77 4.37 0.91 3.48 3.16 3.06 1.30 3.48 3.19 3.50 3.37 2.94 2.85 3.30 3.63 2.88 3.31 2.79 3.15 2.76 3.40 3.83 3.44

1.00 1.19 0.98 1.09 0.91

Mean Diff.

t

Sig.

0.05

0.25

0.81

0.23

1.23

0.22

20.07

20.59

0.56

1.19 1.13 1.12

0.32

1.57

0.12

0.24

1.11

0.27

1.12 1.19 1.23 1.06 1.17 1.19 1.19 0.99 1.14 1.08 1.21 1.17 1.00 1.16 1.01 1.22

0.29

1.49

0.14

0.13

0.63

0.52

0.09

0.40

0.69

20.33

22.25

0.03 *

20.43

22.79

0.02 *

20.36

22.24

0.03 *

20.64

26.56

0.001 *

0.39

2.01

0.05 *a

Notes: Category I=annual revenues . $3.5 billion; Category II=annual revenues , $3.5 billion; 1=strongly disagree; 5=strongly agree; *Statistically significant at a ¼ 0:05; aDifference not in hypothesized direction

forms of e-procurement. As previously noted, the categorization used in this study builds on the work of Wang et al. (2004). Table II illustrates the categorization using Wang et al.’s (2004) taxonomy. Of the 13 e-procurement applications examined in the research, nine were classified as single department/operation processes (non-integrative) and four were classified as either enterprise integrative or B2B integrative/collaborative commerce (see table one). While not specifically addressed in the research hypothesis, it is notewor thy that the means for the non-integ rative e-procurement applications were higher than those of the integrative ones. This suggests that these applications were more widely used by the respondents overall. The next step in testing the research hypothesis was to conduct t-tests between firms in category I (annual revenues exceeding $3.5 billion) and category II (annual revenues less than $3.5 billion) for each of the 13 types of e-procurement applications. T-tests revealed significant differences in use across firm size in five of the 13 e-procurement applications. Four of the five differences were in the hypothesized direction (i.e. the resulting mean for category I (larger) firms was higher than that of category II firms). Significant differences in the hypothesized direction were identified in the use of Internetbased technologies to: develop an integrated supply chain, plan and schedule production, collaborate with suppliers on design issues, and achieve cross-functional coordination (see Table I). Importantly, each of the e-procurement applications exhibiting significant differences across firms size were

Table II Classification of e-procurement applications using the taxonomy of Wang et al. (2004) E-procurement application Use of the internet to: Search for low-cost sources of supply Visit suppliers web sites Access suppliers’ on-line catalogs Check suppliers’ financial status Place orders on supplier’s web sites Access e-marketplaces Use software services of an e-purchasing solution provider Search for suppliers with offerings that will allow our firm to differentiate our products/services from our competitors Participate in reverse auctions to reduce purchase prices Plan and schedule production Achieve cross-functional coordination Collaborate with suppliers on product/service design issues Develop an integrated supply chain

Category 2 2 2 2 2 2 2

2 2 4, 5 4 5 5

Notes: 1 ¼ essential functions (documentation); 2 ¼ single department/ operation process; 3 ¼ cross departments/multi-process integration; 4 ¼ enterprise integration process; 5 ¼ B2B integration/collaborative commerce

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Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

classified as integrative according to the taxonomy of Wang et al. (refer to Table II). Therefore, the research hypothesis was supported by the data.

classification schemes for e-procurement applications (e.g. Antonette et al., 2002; deBoer et al., 2001) by examining adoption patterns across different types of e-procurement applications. While Antonette et al. (2002) conducted case studies to develop their framework, the present study provides survey data across industries about actual usage of a variety of e-procurement applications. Third, this study contributes to an important stream of literature that examines the relationship between e-procurement use and supply chain integration, but does not examine the role of firm size in this relationship (e.g. Rai et al., 2006). Finally, Wang et al. (2004) e x a m i n e d t h e r o l e o f fi r m s i z e i n t h e a d o p t i o n o f e-procurement applications that varied in their ability to integrate supply chain processes. However, the researchers examined this relationship only within the IT and manufacturing sectors in Taiwan. This research examines the relationship between firm size and the adoption of e-procurement applications that differ with respect to their ability to facilitate integration in a sample of US-based firms operating in widely diverse industries. The prevalence of on-line reverse auction use in this sample is not surprising. Garcia-Dastugue and Lambert (2003) noted that the ease of use and potential to provide lower purchase prices make the reverse auction a popular e-procurement application among managers. In most instances, the reverse auction is used in a transactional manner; that is to engage in a one-time business interaction for a good or service at a specific price. Garcia-Dastugue and Lambert (2003) refer to this e-procurement application as a market mechanism. Garcia-Dastugue and Lambert (2003) classified another group of e-procurement applications as coordination flows. Coordination flows, on the other hand, are implemented to facilitate ongoing relationships. With coordination flows, managers have already made purchasing decisions and the goal is to share information that will ensure the flow of products (e.g. production planning or product development). The distinction is made here because managers who prefer e-procurement applications that provide for price bargaining must recognize that they are achieving “situational” or temporary integration. When market mechanisms are used, the concept of integration or “to make whole by bringing all parts together; to unify or make part of a larger unit” occurs on a temporary basis for the single transaction. After the transaction has been completed the buyer and supplier are no longer unified. Conversely, implementation of coordination flows allows managers to achieve integration on a sustainable basis.

Discussion and conclusions Given the significant difference in use across the integrative e-procurement applications, the data suggest that firms in category II (with revenues less than $3.5 billion) are not as likely to use integrative e-procurement applications as firms in category I. Consequently, these firms might forego the potential benefits of integrative types of e-procurement such as operational agility, lower costs, superior product/service design, and enhanced profitability (Folinas et al., 2004). The literature provides overwhelming support for the notion that effective SCM relies heavily upon integration and coordination across functions and enterprises (see Vickery et al., 2003; Narasimhan and Kim, 2002; Spekman et al., 1998). Now more than ever, firms rely on internet-based technologies to achieve this integration. Ultimately, firms who fail to adopt integrative e-procurement applications might find themselves competitively disadvantaged. Wang et al. (2004) supports this view when the authors asserted that disparate levels of IT adoption and integration capabilities in the supply chain contributes to “gaps” across firms’ borders. Furthermore, Wang et al. (2004, p. 86) cite the work of Pant and Ravichandran (2001) and state, “implementing supply chain management requires a higher level of IT adoption (adoption of integrative forms), computer applications and infrastructure that leverage inter- and intra-firm process and systems integration”. While the potential benefits of e-procurement use have generated substantial interest on the part of practitioners and scholars, Cagliano et al. (2003) noted that evidence is still lacking with regard to the prevalence of actual implementation of e-procurement in firms. This research examines differences in actual usage patterns across a widely diverse sample of firms and provides valuable information to both academicians and purchasing/supply management professionals regarding the state of e-procurement use. Over the years, researchers have sought to explain adoption patterns across various supply chain technologies (e.g. EDI). Given the emerging nature of e-procurement, research on the factors impacting its adoption is still growing. This study contributes to the understanding of the adoption of a wide range of e-procurement applications by examining the role of firm size. The findings also provide support for previous research indicating that a significant relationship exists between firm size and technology adoption. This study contributes to the knowledge base of e-procurement use in the academic literature and differs from previous research in a number of ways. First, this research empirically examines the role of firm size in the adoption of 13 different e-procurement applications, whereas previous research resulted in the development of a conceptual model (e.g. Patterson et al., 2003), investigated fewer types of supply chain technologies (e.g. Daugherty et al., 1995), or did not focus on the ability of e-procurement tools to facilitate integration (e.g. Lancioni et al., 2003). One similarity between the present study and Lancioni et al. (2003) is that both studies revealed that smaller firms were more likely to access or make purchases from suppliers’ on-line catalogs. Second, this work extends previous research that developed

Managerial implications With increasing emphasis on improving firm performance through effective supply chain management, purchasing professionals continually search for ways to cut costs, reduce cycle time, and improve product/service quality. Although this study did not test outcomes of e-procurement use, it highlights the importance of supply chain integration, the use of integrative e-procurement applications, and the differences in e-procurement use patterns. Purchasing professionals who make e-procurement adoption decisions might consider this research and contemplate how (more) integrative e-procurement applications could be used to potentially improve the performance of their supply chains. 31

Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

Purchasing professionals interested in maximizing the benefits of increased supply chain integration through e-procurement use could first consider their firm’s existing state of e-procurement adoption. Use of a classification system such as Wang et al. (2004) would assist managers in the assessment of current e-procurement practices. The next step would be to decide which type of e-procurement application is most appropriate for each business situation. According to Garcia-Dastugue and Lambert (2003), some of the bases for selecting the “right” e-procurement application include asset specificity, transaction risk, operational performance risk, frequency of purchase, and item value. Finally, managers must ascertain whether the use of integrative e-procurement applications has been inhibited by factors such as difficulty of use, required financial commitment, and/or (perceived) risk. Non-integrative types of e-procurement such as accessing on-line catalogs, placing orders on suppliers’ web sites, and searching for low-cost suppliers are simple to employ and do not require significant financial investments. This would explain why the present study revealed no significant differences in use of these e-procurement applications across firm size and the fact that firms were more likely to use them than integrative applications. Firms of any size with access to the Internet can easily engage in these inexpensive, low-risk e-procurement activities. Conversely, the use of e-procurement applications to achieve inter- or intra-firm integration poses more challenge and risk (e.g. collaborating with suppliers on product/service design issues). As previously noted, some of these challenges associated with the adoption and effectiveness of e-procurement applications include information sharing within and across firms, overcoming the “silo mentality” within the firm, sharing proprietary information with supply chain members, and intellectual property matters. Decision-makers plans to overcome these and other challenges should include effective methods to: garner top management support, provide employee training, secure the necessary financial resources, address security issues, and encourage trading partners to invest in the required technologies. This research addresses actual implementation of 13 different e-procurement applications. The findings of this research are also valuable to suppliers of e-procurement solutions (e.g. A.T. Kearney Procurement, Procuri, Commerce One). Given firms whose revenues are less than $3.5 billion annually (category II firms) are not as likely to adopt integrative forms of e-procurement as larger firms; this category of firms represents a market growth opportunity for suppliers of e-procurement applications. While revenues in category II firms are less than those of category I firms, this category still includes companies with substantial revenues and associated resources. Therefore, these companies might be positioned to adopt more integrative e-procurement applications if they choose to do so. In this case, e-procurement solution suppliers could specifically target these firms with information about the availability and benefits of various applications. Importantly, purchasing professionals must recognize that the use of e-procurement is just one component in achieving supply chain integration. Power (2005) supported this view and indicated that the “formula” for supply chain integration is multi-faceted and complex. Accordingly, Power (2005)

asserted that supply chain integration efforts are optimized by an appropriate combination of information transfer, streamlined physical logistics, and collaboration among supply chain members. It should be further noted that effective intra- and inter-firm supply chain integration also relies heavily upon the implementation of sound corporate strategies and policies as well as the day-to-day practices of decision-makers and front-line personnel. While this research explores e-procurement as an important aspect of supply chain integration, managers are cautioned that implementation of any technology alone is not a panacea for achieving integration nor does it ensure enhanced supply chain performance.

Limitations The study was limited with respect to the types of respondents that were included. Purchasing/supply management professionals employed in the service sector were not surveyed, which somewhat limits the generalizability of the data. In addition, the scope of the research was relatively narrow. The focus was strictly the role of firm size in e-procurement tool adoption. Finally, use of a random sample in academic research is ideal. However, the survey was not relevant to firms who did not engage in e-procurement. Therefore, the researchers concluded that use of a judgment sample was a practical and valid method to collect the data while maximizing the response rate.

Directions for future research It is important for academicians and practitioners to understand the role that e-procurement plays in vital business outcomes. This research could be extended by investigating whether differences in outcomes such as cost savings, profitability, and product/service quality exist between firms that use integrative e-procurement applications and those who use less integrative ones. In addition, an examination of a broader range of variables in e-procurement adoption such as characteristics of the technology, environmental factors, individual adopter factors, and organizational factors such as innovativeness, company policies, corporate strategy, and management behaviors would provide additional insight in this area. Finally, the survey respondents in this research were purchasing/supply management professionals. Supply-side practitioners could also provide valuable insight into the implementation of eprocurement. Specifically, it is important to ascertain whether suppliers find that various e-procurement applications facilitate coordination flows (sustained integration), market mechanisms (bargaining), or both.

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Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

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Using e-procurement applications to achieve integration

Supply Chain Management: An International Journal

Dawn H. Pearcy and Larry C. Giunipero

Volume 13 · Number 1 · 2008 · 26 –34

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Corresponding author Dawn H. Pearcy can be contacted at: dawn.pearcy@ emich.edu

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