Supply Chain Content
Supply Chain Content
Supply Chain Content
Supply Chain Management (SCM) practices and firm performance: A Survey of the
ON Semiconductor Electronic firm in Seremban, Negeri Sembilan
By
Velaitham Narinasamy, Asian University Malaysia (AEU)
Abstract
Supply chain management (SCM) has become a fundamental element in the electronic
industry to improve the efficiency and productivity in recent decades. Supply chain
management (SCM) is the integration and strategic alliance involving all the value-creating
elements in the supply, manufacturing, and distribution processes from raw material
extraction, the transformation process, and end user consumption. This paper explores the
supply chain management (SCM) activities carried out by ON Semiconductor electronic
firm in Seremban, Negeri Sembilan and determines the correlation between SCM practices
and firm performance. A self-administrated questionnaire based survey technique was
employed to ascertain the status of SCM adoption and the practices in SCM that are
significant for ON Semiconductor electronics firms top and middle management. The
findings suggest that the adoption of SCM activities is reasonably moderate. Anyhow, there
are some solutions can be proposed for the effective use of SCM for optimum the firms
performance as well as emphasizing some crucial points avoiding optimum efficiency and
productivity in the business.
1.0 INTRODUCTION
As competition in the 1990s intensified and markets became global, so did the
challenges associated with getting a product and service to the right place at the right time at
the lowest cost. Organizations began to realize that it is not enough to improve efficiencies
within an organization, but their whole supply chain has to be made competitive. The
understanding and practicing of supply chain management (SCM) has become an essential
prerequisite for staying competitive in the global race and for enhancing profitably (Suhong
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Effective supply chain management (SCM) has become a potentially valuable way of
is no longer between organizations, but among supply chains. Supply chain management
(SCM) is the term used to describe the management of the flow of materials, information, and
funds across the entire supply chain; from suppliers to component producers to final
assemblers to distribution (warehouses and retailers), and ultimately to the consumer. In fact,
it often includes after-sales service and returns or recycling (Silver, Pyke, & Peterson, 2001;
Supply chain management has generated much interest in recent years for a number of
reasons. Many managers now realize that actions taken by one member of the chain can
influence the profitability of all others. This study presents the supply chain management
Negeri Sembilan.
The primary objective described in this paper is to explore SCM practices and the
Negeri Sembilan. The research questions are How widely are these SCM concepts
implemented in practice? and How well SCM do practices correlate with firm
performance? For the purpose of this study, twenty-five commonly cited SCM practices
from the literature were identified (Table 1) to describe the construct of SCM practices. These
information technology and sharing, and customer service. In terms of the firm performance
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chain practices. Moreover, the uniqueness of this study to our understanding and knowledge
is implicit as there are no published studies on supply chain management practices in any of
company. The products include power and signal management, logic, discrete, and custom
runs a network of electronics manufacturing facilities, sales offices and design centres in
North America, Europe, and the Asia Pacific regions. ON Semiconductor was founded in
1999. The company was originally a spinoff of Motorola's Semiconductor Products Sector. It
continues to manufacture Motorola's discrete, standard analogue and standard logic devices
(Wikipedia, 2016).
Negeri Sembilan was chosen to determine the SCM practices and the relationship with firm
performance. Actually, this company are located in Lot 55 & 122, Senawang Industrial
Estate, 70450 Seremban, Negeri Sembilan. It is a high volume probe, assembly and test
factory with 175,000 square feet of clean room space, located on a 9 acre campus. And, the
production also involved power & small outline surface mount packages such as QFN/DFN,
DPAK, SM, TSOP, TO, and Leadless. Recently, the enrolments of the workers in ON
Semiconductor Electronics Company in Seremban, Negeri Sembilan are 1204 which consists
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(Documentary File of ON Semiconductor, 2016). There are three shifts of working in this
1.3 Definition
1.3.1 Supply Chain Management (SCM)
Supply chain management encompasses the planning and management of all activities
involved in sourcing, procurement, conversion, and logistics management. It also includes the
crucial components of coordination and collaboration with channel partners, which can be
chain management integrates supply and demand management within and across companies.
More recently, the loosely coupled, self-organizing network of businesses that cooperate to
provide product and service offerings has been called the Extended Enterprise.
of goods and services. It includes the movement and storage of raw materials, work-in-
process inventory, and finished goods from point of origin to point of consumption.
Interconnected or interlinked networks, channels and node businesses are involved in the
(Encyclopedia, 2016).
chain (Siti Zaleha and Abu Bakar, 2014). The authors further emphasised that SCM practice
comprehensive concept. Thus, the concept includes the downstream and upstream sides of the
supply chains. In addition, according to Zhou and Benton Jr (2010), a group of supply chain
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practice is regarded as effective supply chain practice if the selected best practices have been
implemented.
2013). Other than that, it is also defined as the accomplishment of a given task measured
against preset known standards of accuracy, completeness, cost, and speed. In a contract,
performer from all liabilities under the contract. (Business Dictionary, 2016).
The electronics industry, especially meaning consumer electronics, emerged in the 20th
century and has now become a global industry worth billions of dollars. Contemporary
society uses all manner of electronic devices built in automated or semi-automated factories
operated by the industry (Wikipedia, 2016). It is also operates the use of many small
electrical parts such as microchips and transistors (Merrian Webster Dictionary, 2016).
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Supply Chain Management (Question 1)
The objective of this section is to perform a literature review of the issues relating to
the practices and performance of SCM. Studies on supply chain management (SCM)
applied practices, and a consequent improvement to SCM theories. In this context it is best to
start with a few samples in this area from previous research that are regarded as very
valuable. To date, (Lurquin, 1996), apparel (Darpin, 1992; Christopher & Peck, 1997),
grocery (Fernie, 1995; Zairi, 1998), computer (Magretta, 1998), automobile (Helper, 1991;
Choi & Hong, 2002) were conducted this study on various industrial sectors including
Most of the available literature on SCM is concerned with advocating SCM practices.
Fox (1991) and Michael (1996) suggest that manufacturers should synchronize the entire
supply chain as a single business entity and integrate the flows across the supply chain in
order to reduce costs, improve customer service, and ward off impending competitive
pressures in manufacturing (Veera Pandian & Govindaraju, 2011). Balsmeier and Voisin
Integrating the supply chain gives the business more options in competitive strategy.
Ragatz et al. (2010) found that supplier memberships in new product development teams
contributed significantly to the success of these teams. The mechanism through which SCM
Literature suggests (Slywotzky et al., 2009) that a firms aggregate performance relative to its
and improvements in productivity relative to its competition (Fisher, 1997; Simchi-Levi et al.,
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Supply Chain Management (Question 1)
2007). Customer relationships focus on the bond and loyalty between a focal firm and its
customers, and the focal firms intimate knowledge about customer-related preferences
(Groves & Valsamakis, 1998; Malhotra et al., 2008). Growth in revenues includes sales from
existing products and from new products and markets (Kalwani & Naravandas 1995; Zahra &
George 2005).
in Asia, company need to recognise other factors such as local norms, ground physical
infrastructure, and ground IT infrastructure (Siti Zaleha and Abu Bakar, 2014). Previous
studies have shown that different industry may also have a different effect on SCM practices
There are evidences to suggest that different countries may have the different
practices in implementing supply chain management. In a study by Chow et al. (2008), the
authors used different constructs for different country. This is due to the fact that different
managerial perceptions of how supply chain components are related to each other and to
organization, different world views from different country and cultural differences. A further
argument supporting this study is from Halldorsson et al. (2008), that investigated the
such as the type of industry, firm size, a firms position in the supply chain, supply chain
length, and the type of a supply chain. Jharkharia and Shankar (2006) investigated the supply
chain practices in four sectors from Indian manufacturing industry, namely; Auto,
Engineering, Process and FMCG (Fast Moving Consumer Goods) sector. The findings
revealed that different sectors were adopting SCM practices based on their own constraints
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Supply Chain Management (Question 1)
characteristics increase the need for integration. Therefore, the constructs of SCM practices in
electronics industry will emphasised on integration. Furthermore, Siti Zaleha and Abu Bakar
(2014) also were proposed constructs for SCM practices in manufacturing industry are
integration, logistics, and strategic location. Moreover, Berry et al., (1994) stated that Total
management of the supply chain enhances the competitive edge of all players therein
(Karata, 2009).
In addition, a study by Mollenkopf and Dapiran (2009) in Australia and New Zealand
demonstrated that the motor/transport and the chemicals/petroleum sectors perform the best
while food processing and distribution sectors as well as the clothing and textile sectors
perform weak in their logistics and supply chain competencies. Thus, the evidences seem to
indicate that different industries may have different adoption on certain variable in supply
chain practices. It is clear therefore that a set of supply chain practices may not be suitable for
In conclusion, the evidences from previous studies suggest that different country and
different industry may have a different set of SCM practices. Therefore, this study is
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design, sampling method and type, measurement of concepts and their operational definitions
A quantitative method was chosen to find out the descriptive and correlation study to
understand the SCM practices and performance of the electronic manufacturing sector of the
selected company in Seremban, Negeri Sembilan. As such, by using this research design and
questionnaires which consists of 25 items, the study explored the supply chain management
Sembilan and determines the correlation between SCM practices and firm performance.
3.2 Sampling
There population of employers in the selected company were 1204. Therefore, a non-
probability sampling method was used that specifically employed the convenience sampling
technique where the samples used for this study were only 75 out of 1204 employers. The
questionnaires will be given to the selected managers, engineers, executives, supervisors, and
clerks from the company and had a role and knowledge in the area of operations management
and supply chain management. There are 40 female and 35 male were selected as respondents
of this study.
The practices of SCM are operationally defined as the level of commitment given by
the organization in implementing the SCM activities. Therefore, the dimensions and elements
used to measure the SCM practices were measured through the managerial and strategic
commitment of the organization in total. A 5-point Likert Scale was used in the
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questionnaires to elicit responses from the respective respondents ranging from a continuum
3.4 Questionnaires
A survey instrument in the form of a questionnaire was used based on the constructs
described in Appendix I. This survey questionnaire adapted from Tan (1999) and Tan and
Wisner (1999). This instrument has, thus, been tested and proven in terms of ambiguity,
reliability, and validity. Respondents were asked to indicate, using a five point Likert scale,
the importance of the twenty-five practices in the firms SCM efforts (Table 1). Several other
total of 75 questionnaires were distributed and collected which require one to two weeks.
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All the data was selected and pro-cessed by using the computer program Statistical
Package for Social Sciences (SPSS) version 15.0. The statistical tools used in this study are
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descriptive. To measure the primary objective of this study, that is, to identify the
organizational adoption level of SCM practices, inferential statistical tools such as the one-
sample t-test were employed. Pearsons correlation was used to reveal the underlining
4.0 FINDINGS
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There are 40 female and 35 male were selected as respondents of this study (Graph 1).
When comparing the ages of the respondents, there are 22 respondents with the age of 26 to
30; 26 respondents with the age of 31 to 35; 9 respondents with the age of 36 to 40; 13
respondents with the age of 41 to 45 and the rest were 46 to 50 ( Graph 2). There are 20
Indians, 35 Chinese and the rest are Malays (Graph 3) Furthermore, there are 20 of them are
diploma holders, 34 of them were degree holders and 9 of them are master and the rest are
PhD holders (Graph 4). Respondents are also categorized into five departments in the
Gender
42
40
38 Gender
36
34
32
male female
age
30
25
20
age
15
10
5
0
26 to 30 31 to 35 36 to 40 41 to 45
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ethnic
40
35
30
25 etnic
20
15
10
5
0
Indian Chinese Malay others
education background
40
35
30
25 education background
20
15
10
5
0
diploma degree masters PhD
Name of Department
40
30
20
10 Name of Department
0
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Supply Chain Management (Question 1)
are under more intense competitive pressure to gain efficiency and efficacy in their supply
and logistics systems. Thus, they could be expected to be on the leading edge of the
implementation of SCM. To answer this question the respondents were presented with 25
SCM activities and asked to indicate the level of adoption in their business. The survey result
was tested by a one sample T-Test to identify the organizational adoption in the practice of
SCM activities.
After the survey had been completed the reliability of the scale was further examined
using coefficient alpha (Cronbachs alpha). All scales were found to exceed the minimum
threshold of 0.7 suggested by Nunnally (2005) and cited by Panayides (2004). Convergent
validity is indicated by a high Cronbachs alpha being attained when the individual variable
scores are combined into a single scale. The actual result of the scale reliability analyses are
reported in Table 1. The descriptive analysis (Table 2) below, mainly the measurement of
central tendency (mean value and standard deviation), strongly indicate that on-time
performance (including JIT), determining customers needs and supply chain integration are
Alpha
Itemtotal Coeff.
No Scale Items Mean SD if item
correlation Alpha
deleted
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17 Aiding the supplier in increase their JIT 3.10 0.30 0.15 0.81
capabilities.
extending the supply chain effort are gener-ally less preferred by the selected respondents
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The following presents the results of hypothesis testing through a one sample t-test,
which indicates the extent or degree of practice of supply chain management among firms in
the electronics sector in Malaysia. The hypothesis testing reveals that the mean value for
overall SCM practices is significantly more than 3 ( = 5%). This confirms that selected
respondents from the electronic manufacturing firms have adopted SCM practices.
Aiding the suppliers to increase their JIT capabilities. 0.393* 0.072 0.145
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Reducing response time across the supply chain. 0.111 0.038 0.195
Significant at = 10%
As such the above findings coincide with several other researchers opinion (Berry,
Towill, & Wadsley, 1994; Kim, 2006) on the importance of supply chain adoption, mainly by
the manufacturer. The impetus for such supply chain adoption is due to several performance
based factor, which range from firm level to performance of overall supply chain (Field &
Meile, 2008; Forslund & Jonsson, 2007; Gunasekaran, Patel & Mc-Gaughey, 2004).
Furthermore, correlation test was performed to determine the relationship between SCM
practices and firm performance and the result are shown in Table 3.
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However, not all correlations were significant statistically. Although causality cannot
excellence should focus on: increasing the firms Just-In-Time (JIT) capabilities, contacting
the end users of the products to get feedback on performance and customer service, aiding
sup-pliers to increase their JIT capability, and locating closer to the customers.
To improve the revenue growth, firms would do well to ensure on-time delivery of
own firms products directly to the customers points of use, increasing the firms Just-In-
Time (JIT) capabilities, contacting the end users of the products to get feedback on
performance and customer service, participating in the sourcing decisions of the suppliers,
locating closer to the customers, use of a third-party supply chain management specialist, and
requiring suppliers to locate closer to the firm. This correlation between supply chain
consistent with previous studies (Elmuti, 2002; Falah, Zairi, & Ahmed, 2003; Jharkharia &
Shankar, 2006).
With respect to customer relationship levels, the activities to foster, i.e., the activities
that statistically correlated with this performance measure were: on-time delivery of own
firms products directly to the customers points of use, determining customers future needs,
contacting the end users of the products to get feedback on performance and customer
service, participating in the marketing efforts of the customers, use of a third-party supply
chain management specialist, and requiring suppliers to locate closer to the firm.
These findings complement previous studies (Elmuti, 2002; Jharkharia & Shankar,
2006; Kim, 2006; Lau, Yam, & Tang, 2007) that found a positive relationship between supply
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chain management practices and customer relationship. The data also indicates that the main
focus of SCM is on revenue growth levels: the number of statistically significant correlations
with revenue growth levels is much more than the corresponding number for either of the two
4.3 The Weaknesses and strength of this organization with regards to supply chain
management
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From the analysis of the current supply chain management and impact on logistic cost
and service level, it was demonstrated how in was at the beginning, when implementation
started, and which are the strengths and weaknesses in this moment. Despite many activities
that have happened since, service level increased, but stock level as one of key components
of logistic cost, has not decreased as it was planned. So this is a point to focus on from now
on. For doing that it is necessary the improvement of the communication between the internal
Another point may be to reduce non value adding activities and implement the ones
that can really contribute to the result, focus more on effective infrastructure, having a better
visibility on market and more efficient sales order management process like E-Commerce
(Maria & Christina, 2014). When companies perform the supply chain SWOT analysis, they
are able to lower costs and improve upon those approaches that help ensure timely
availability of parts and materials in order to satisfy customer demands. Supply chain is based
on partnerships and cooperation. Without these there wouldnt be any integration of efforts. It
requires sharing of sensitive information about customers, upon request, strategic plans of the
achieving positive customer satisfaction. There are some very effective ways to do this
outside of systems, logistical infrastructure and analytics. These tactics require that
communication within the supply chain must be established and maintained with a high
employees and management is also vital to the improvement of processes, products, and
result in maximized savings, improved service levels, and an inspired team of talented
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Supply Chain Management (Question 1)
employees. According to Legacy Supply Chain Services, (2016) there are five guidelines to
concise manner that defines organizational goals and the methods to achieve those
reduces error within the supply chain and saves both time and money. Focus on the
shift scheduling, and facilities management. This is one of the many ways to increase
productivity depends on where employees and management focus their time and
and shareholders. Instead, try to focus to key performance indicators on 5-7 critical
areas that drive your business, for example: Safety, Service/On-Time Delivery,
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Supply Chain Management (Question 1)
d) Engage, Align, and Empower Your Workforce: Focus on the core skills of
employees and management to empower them. This focus will foster confidence and
makes it possible to create new ways to engage and align, to ultimately increase
productivity. Be sure to define the supply chains goals in a clear and concise method
that will allow employees and management to take advantage of existing and future
increase productivity, reduce costs, and improve customer service and satisfaction
levels. Then tie an incentive plan into the supply chains core mission, a critical
management may improve their workplace strategies and execution. This constructive
training will drive a successful organization and improve supply chain productivity.
Increasing productivity within the supply chain is achieved through a top down
approach everything rises and falls on leadership. Leaders must practice effective
the workforce, and enact a powerful training program. Working in unison, management and
employees will create and establish a performance-based culture within a company and its
supply chain.
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6. 0 CONCLUSION
The current research provides the supply chain management adoption level of selected
firm in the electronics manufacturing sector in Seremban, Negeri Sembilan, proving that the
firm have adopted SCM activities at a statistically significant level. Nevertheless, the
adoption level is still at the moderate level. Even though, the adoption of SCM in the ON
Semiconductor industry is not very high, those departments have made some progress in
SCM practices have benefited from SCM regarding their performance, especially relating to
revenue growth.
that is why many times it uses teams of work which go beyond organizational and functional
integration not only in the middle of the company but also with external partners (Butilc,
2012).
This paper is a preliminary study, a pilot study, and was initiated to obtain an insight
into the supply chain practices in the electronics industry and to explore the organizational
effort and commitment towards the implementation of these supply chain management
activities.
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