7th Global Conference on Business & Economics
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THE EFFECT OF INFORMATION QUALITY ON BUYER-SUPPLIER
RELATIONSHIPS: A CONCEPTUAL FRAMEWORK
Badrul Nizar AHMAD, School of Management, Universiti Sains Malaysia, Malaysia
Tel. No.: 04 6577888
Fax No.: 04 6577448
Assoc Prof Dr. Suhaiza ZAILANI, School of Management, Universiti Sains Malaysia,
Malaysia
Tel. No.: 04 6577888 ext 3952
Fax No.: 04 6577448
Email: shmz@usm.my
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7th Global Conference on Business & Economics
ISBN: 978-0-9742114-9-7
The Effect of Information Quality on Buyer-Supplier Relationships: A Conceptual
Framework
ABSTRACT
Information Quality (IQ) in supply chain management (SCM) has gained its importance
recently due to its ability to reduce costs and increasing responsiveness in the supply chain.
Organizations in the chain increasingly find that they must rely on effective information to
successfully compete in the global market and networked economy. This paper, therefore,
introduces how information quality plays an important role in supply chain management,
particularly in the buyer-supplier relationships particularly in the Malaysian context. As
mentioned earlier that the information sharing among the members of the chain, particularly
between buyer and supplier, will result on the big impact to the partnership in term of the
business performance. Being a conceptual paper, this paper provides a framework that
identifies the dimensions for information quality. Also, this paper investigates if the identified
dimensions results to better buyer-supplier relationships. The framework is expected to be
tested empirically using data from electronic manufacturing firms in Malaysia.
Introduction
Information Quality (IQ) in supply chain management (SCM) has gained its importance
recently due to its ability to reduce costs and increasing responsiveness in the supply chain
(Mc Laren et al, 2004; Chopra & Meindl, 2001; Dagenais & Gaustchi, 2002). A more evident
fact is based on financial excerpts of GXS, a leading provider of business-to-business (B2B)
e-commerce, in which, the company gained USD325 million savings annually through the
information quality of its supply chain activities (Gaithersburg, 2006). During the past
decades, information quality has enabled many organizations such as Dell and Hewlett
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Packard, to successfully operate solid collaborative supply networks (Scott, 1993). As a
consequence to these healthy experiences, UDEX has built a unique, on-demand product
information quality solution that enables customers to eliminate costly errors in the supply
chain, thus increasing sales and improving operational efficiencies (Gaithersburg, 2006).
Thus, organizations increasingly find that they must rely on effective information to
successfully compete in the global market and networked economy.
With regards to SCM, many researchers have given a lot of definitions on SCM. Among the
popular one would be by Lambert et al (1998) in Global Supply Chain Forum mentioned that
SCM is the integration of key business processes from end user through original suppliers to
add value and services to customer and stakeholders. The other definition that could be also
stated here would be by Hanfield and Nicholas (1999) that SCM is the integration of
activities, through improved supply chain relationship to achieve sustainable advantage. It is
widely accepted in the literature that SCM is important for material and information flows
relating to the transformation of the materials into value added products, and the delivery of
the finished products through appropriate channels to customers and markets so as to
maximize customer value and satisfaction. For example, the members of the chain can
accurately identify optimal inventory levels, warehouse space, and inventory turnover if the
shared information is good (Kaeli 1990).
This paper, therefore, introduces how information quality plays an important role in supply
chain management, particularly in the buyer-supplier relationships. As mentioned earlier that
the information sharing among the members of the chain, particularly between buyer and
supplier, will result on the big impact to the partnership in term of the business performance.
This paper will focus on analyzing the dimensions of the information quality from the
supplier’s perspective towards building a great partnership.
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BACKGROUND
Increasingly competition is forcing organizations to be creative in their strategic efforts as
businesses are learning to improve the way customers are served. Many organizations,
therefore, seek competitive capabilities that would enable firms to exceed customers’
perceptions, so that they can enhance market and financial performance (Hayes & Pisaro,
1994). Effective SCM systems allow rich information exchange, quick and reliable data
availability, and easy access to business partners (Mukhopadhyay et al, 1995). This section,
therefore, will help to understand the current situations and why this study is relevant with the
current business scenario. Getting the quality information in the buyer-supplier relationships
is very crucial to have a better result. Information such as material forecast, future build plan,
delivery information etc will really help to improve the supply lines and interrupted business
performance. In this technological age, managing the good and quality information will
become more dominant.
Pugsley et al (2000), in their study, showing that an economy-based knowledge emerging
with information is essential for any ongoing organization. The globalization of products,
services, markets and competition has increased the need for flexibility, quality, cost
effectiveness and timeliness (Hunter et. al., 2002). A key resource for attaining these
requirements is information quality and it has revolutionized business practices and now
plays a more central part of business strategies (Pollard & Hayne, 1998). In addition, Sauvage
(2003) claimed that to fully satisfy the diversifying requirement of customers, many
companies had improved their service efficiency by improving the quality of information.
Chapman et al (2003) suggested that companies should pay more attention to information
quality and the quality of information can only be implemented through technology,
knowledge and relationship networks. Fuld (1998) warned companies of the dangers of old
data and irrelevant information and noted that poor information quality on the chain can
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create impacts to firms’ business performance. Poor information quality can have a severe
impact on the overall effectiveness of an organization. A leading computer industry
information service firm indicated that it “expects most business process reengineering
initiatives to fail through lack of attention to data quality.” An industry Executive report
noted that more than 60% of surveyed firms (500 Medium-size corporations with annual
sales of more than $20 million) had problems with information quality (Wand & Wang,
1996).
Consequently, the quality of a product depends on the process by which the product is
designed and produced. Likewise, the quality of information depends on the design and
production processes involved in generating the information. One of the local study on
information quality investigated by Zailani and Rajagopal (2006), found that the extent of
information quality is positively increased the supply chain performance. This paper,
however, believed that there is a gap in the literature about dimensions for information
quality in the context of buyer-supplier relationships in supply chain management. Based on
this gap in the literature, a detailed investigation on the dimensions of information quality is
therefore called for. Furthermore, it is interesting to see the importance of information quality
on the supply chain relationships among supplier companies. This paper, therefore,
investigates the effect of information quality on the supply chain relationships in the context
of supplier perspectives in Malaysia. The research questions are:
a) What are the dimensions of information quality significant in the supply chain
environment?
b) How the dimensions of information quality effect the buyers-suppliers
relationship?
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LITERATURE REVIEW
DEFINITION OF QUALITY
During the 1980s and '90s, when Total Quality Management (TQM) was all the rage, many
and various definitions of quality were put forward. One of the most succinct is simply that
quality is fitness for purpose, or in other words; it is simplified as the output matches the
specification or requirements of the putative user (Juran, 1985). It thus becomes possible to
speak of a "quality" of kilometrico pen as well as a "quality" Parker pen. The issue is not
where the pen fits on some hypothetical scale of reliability or comfort, but whether it meets
the reasonable expectations of the user and is built in accordance with a set of criteria known
to both producer and consumer. In information terms, this means that information items
geared towards one set of consumers may be perceived as poor quality when located by a
different set. Problems start when it becomes difficult to discern the intended user of a piece
of information, or when users expecting one quality level encounter information built to a
different quality level (Ballou et al., 1987).
INFORMATION QUALITY
Based on discussions in the previous section, good product quality means the product fulfills
its requirements. In the beginning of quality management discipline, the concept of quality
was only applicable to products. There are huge studies on the quality but more focused on
the product development studies which have explored on the importance, strategies, tools and
benefits such as quality control, quality awards, and statistical methods like Six Sigma and
ISO 9000 standards (Huarng & Chen, 2002). However, present discussions include quality of
information. Since modern companies are information factories (Chandy et al, 2003), their
key competence is information management. Chandy et al (2003) illustrated an example of
automobile factory for this statement. The factory takes raw materials such as steel and glass
as inputs and creates value by transforming them into cars; an enterprise computing system
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can take raw events generated by myriad sources as inputs and create value by transforming
them into more structured information.
Therefore, developing information management skills and information quality is essential to
their business. This is due to the fact that the information quality is a measure of the value
which the information provides to the user of that information, in this case is the
organizations’ businesses (Wang & Strong, 2006). Information or sometimes called as data
quality, however, typically conceptualized as a multi-dimensional concept. Figure 1 depicts
Wang and Strong’s (1996) model of information quality as a multi-dimensional construct.
According to them, although the exact number of dimensions considered and the arrangement
of the dimensions varies somewhat from researcher to researcher, the essence of this model
now has broad support among the information quality research community (refer to Figure 1).
Figure 1: Information quality as a multi-dimensional construct
Note. Adapted from Wang, R. Y., and Strong, D. M. (1996).Beyond accuracy: What quality means to data
consumers. Journal of Management Information Systems, 12(4), 5-34.
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Awareness of information quality as an issue emerged slowly during the early years of
computers, when researchers gradually developed an awareness of the need to measure data
quality, and began the work of convincing others of that need. Information quality is a term to
describe the quality of the content of information systems. As mentioned earlier, most
information system practitioners use the term synonymously with data quality. However,
according to Wang and Strong (1996), as many academics make a distinction between data
and information, some will insist on a distinction between data quality and information
quality. Information quality assurance is confidence that particular information meets some
context specific quality requirements. In conjunction with Wong and Strong’s model, Davis
and Olson (1985) have identified three aspects of data quality: accuracy, precision, and
completeness. Looking at other perspectives, information quality also can be defined in terms
of accuracy, completeness, consistency, and currency (Huh et al, 1990). Fox et al (1993) also
identified the same four dimensions of information quality as Huh et al, (1990) which are
accuracy, completeness, consistency, and currency.
In contrast to this conceptual framework, Madnick and Wang (1992) presented definitions of
information quality derived from empirical observation. Zmud (1978) used factor analysis to
examine the dimensionality of the construct of information. Four dimensions were derived:
quality of information, relevancy of information, quality of format, and quality of meaning, in
which, they used observations of defective information in organizational databases to derive
four components of information quality: completeness, accuracy, appropriateness, and
consistency.
Wand and Wang (1996), on the other hand, argued for a definition of
information quality, should be focused on task-independent, in which, he has identified four
dimensions of intrinsic information quality which are: completeness, lack of ambiguity,
meaningfulness, and correctness. These dimensions are said to be applicable across different
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applications applied to different tasks. In summary, Table 2.1 lists a comprehensive set of
information quality criteria that are taken from Naumann and Rolker (2000).
Table 2.1: Information Quality Criteria
1.
Availability - Percentage of time an information source is ‘‘up’’. Also: accessibility, reliability,
irretrievability, performance
2.
Accuracy - Quotient of the number of correct values in the source and the overall number of values in the
source. Also: error rate, correctness, integrity, precision
3.
Amount of data - Size of result. Also: essentialness
4.
Believability - Degree to which the information is accepted as correct. Also: error rate, credibility,
trustworthiness
5.
Completeness - Quotient of the number of response items and the number of real world items. Also:
coverage, scope, granularity, comprehensiveness, density, extent
6.
Concise representation - Degree to which the structure of the information matches the information itself.
Also: attribute granularity, occurrence identifiably, structural consistency, appropriateness, format
precision
7.
Consistent representation - Degree to which the structure of the information conforms to that of other
sources. Also: integrity, homogeneity, semantic consistency, value consistency, portability, compatibility
8.
Customer support - Amount and usefulness of online support through text, email, phone etc.
9.
Documentation - Amount and usefulness of documents with meta information. Also: traceability
10.
Interpretability - Degree to which the information conforms to technical ability of the consumer. Also:
clarity of definition, simplicity
11.
Latency - Amount of time. Also: response time
12.
Objectivity - Degree to which information is unbiased and impartial.
13.
Price - Monetary charge per query. Also: cost-effectively
14.
Relevancy - Degree to which information satisfies the users need. Also: domain precision, minimum
redundancy, applicability, helpfulness
15.
Reliability - Degree to which the user can trust the information. Note: technical reliability is synonymous
to availability.
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16.
Reputation - Degree to which the information or its source is in high standing. Also: credibility
17.
Response time - Amount of time until complete response reaches the user. Also: performance, turnaround
time
18.
Security - Degree to which information is passed privately from user to information source and back.
Also: privacy, access security
19.
Timeliness - Age of information. Also: up-to-date, freshness, correctness
20.
Understandability - Degree to which the information can be comprehended by the user Also: ease of
understanding
21.
Value - Added Amount of benefit the use of the information provides.
22.
Verifiability - Degree and ease with which the information can be checked for correctness. Also:
naturalness, traceability, provability
Although there are no uniformed lists for the information quality dimensions, this study
adopts the dimensions that commonly identified as information quality dimensions in the
literature review and also commonly believed to be the most significant for the supply chain
management environment. They are accessibility, appropriate amount, believability,
completeness, concise representation, consistent representation, ease of operations, free of
error,
interpretability,
objectivity,
relevancy,
reputation,
security,
timeliness,
understandability and value added (refer to Table 2.1 for definitions).
INFORMATION QUALITY AND SUPPLY CHAIN MANAGEMENT
Christopher (1997) has explained the close links between information quality and the
management of supply chain. Activities such as stocks that need replenishing, deliveries that
need routing and orders that need to be coordination require intensive quality of information
flow. Accuracy, timeliness, completeness and consistency in the information that flows along
the channel in a supply chain can position a firm well especially when faced with world-class
competitors. Information monitoring, control and reporting systems are therefore essential for
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any management system, as firms drive the decisions based on the data collected through this
system. These include the designing and planning of information systems at the initial stage,
control and coordination, and cross-organizational coordination to ensure that the dimension
of information quality (accuracy, timeliness, completeness and consistency) are given due
attention at the design stage on the information system. It is believed that the information
technology such as the intranet, extranet, Internet, WWW and EDI facilitate the real-time or
timeliness of information in a chain (Zailani & Rajagopal, 2006).
The Web platform has several advantages, which will allow a firm to overcome some
traditional supply chain problems. These include: real-time information on inventories, single
data entry to minimize human errors as inputting of the data is handled by customers
themselves and there is no need to re-enter the information, a real-time online ordering
function for the build-to-order and build to backlog business model, and multi-level password
control so that different functions can have different access levels which are again controlled
by the respective authorized people. Migrating to a Web-based information system with a
common platform for all of the channel partners will help in the standardization that can be
accomplished only with the relationship and cooperation of all the channel partners in a
chain. The legacy systems that serve different needs, such as for shop floor manufacturing
system, order recording, order delivery, and so on are important for accurate and
completeness of information flow in a supply chain. Migrating to a more advanced and
integrated IT system will allow firms to expand their operations and enable their client who
has a separate database that is operated independently to interface with the host database.
Also firms need to reengineer the architecture of the IT system for their company regarding
the type of information that should be made available, when and to whom. The IT system
must be attempted to bring in the concept of two way and real-time information flow in a
supply chain.
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Information quality deals with the managing of information systems on the above said
dimension with the objective of providing accurate information on the performance of
different channel of the supply chain too. The information quality systems that flow are used
for measuring the performance of, and controlling the operations in, a chain. Activities such
as the collecting, processing, retrieving, reporting and storing of data are part of information
quality management. Techniques such as groupware, IT/IS, shareware, data mining and data
warehousing can be used for the purpose of managing quality information. The technologies
of information should include EDI, e-commerce, ERP, Internet, WWW, and artificial
intelligence (AI) and expert systems. This quality information will help to integrate various
process/links along the supply chain.
THE DIMENSIONS FOR BUYER-SUPPLIER RELATIONSHIPS
The view of buyer-supplier relationships as influencing factors for effective supply chain
management is not new. For example, Krajewski and Ritzman (2003), states that “the
relationships between buyer and supplier in supply chain system is a model of the real
world”. This view might seem somewhat restricted because it does not relate to any theory.
According to Robicheaux and Coleman (1994), the buyer seller relationships is grounded in
some well established theories such as transaction cost theory, political economic theory,
social exchange theory and resource dependence theory.
As a consequence to these
important theories for the buyer seller relationships, Moller (1991), indicated that number of
constructs of relationships can be developed and shared in the different context. Empirical
studies have proposed several complement relationship dimensions such as trust, satisfaction,
adaptation, dependence, communication, commitment and co-operation. However, according
to Wilson and Kristan Moller (1991), they have identified trust as the most frequently used
dimension. The details of each dimension are explained as below.
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The conclusion by Wilson and Kristan Moller (1991) is supported by Cox et al (2003) who
argued that trust was the most important ingredient in developing successful and mutually
beneficial buyer and seller relationships. Without trust, these relationships could not be
established, and the strategic alliances that resulted from these relationships could not be
fostered. Establishing these strategic alliances was essential to gaining a significant advantage
in the marketplace. Morgan and Hunt (1994) refer to trust as the willingness to rely on
exchange partners in whom one has confidence. Another type of trust is goodwill trust, in
which refer to the integrity and benevolence of parties. Some studies purpose that the true
meaning of trust implies a “leap of faith”: parties believed that both interested in the other’s
welfare and that neither will act without considering the impact of his action on the other
(Kumar, 1996). In other words, goodwill trust reflects the beliefs that each partner is
interested in the other’s welfare and that a partner will not intentionally undertake actions that
harm the other (Anderson & Narus, 1990; Geysken et al., 1996).
Moorman et al. (1992) defines commitment as an enduring desire to maintain a valued
relationship. This corresponds with the belief that relationship commitment only exists when
the relationship is considered important (Morgan & Hunt, 1994). Although different
conceptualizations exist, commitment is typically defined as the intention of an exchange
partner to continue a relationship (Anderson & Weitz, 1989; Dwyer et al., 1987). Geyskens et
al. (1996) emphasize that different motivations can underlie such intention, and therefore
various types of commitment exist. They distinguish affective commitment and calculative
commitment as the most relevant types of commitment; since these types occur most often in
practice (see also Mathieu & Zajac, 1990; Kumar et al., 1994; Geyskens et al., 1996; De
Ruyter et al., 2001). Affective commitment expresses the extent to which a party likes to
maintain a relationship with the other party. This kind of commitment is based on a general
positive feeling towards the exchange partner. An affective committed partner desires to
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continue his relationship because he likes the partner and enjoys partnership (Geyskens et al.,
1996).
Adaptation occurs when supplier adapts to the needs of specific important customers and that
customers adapt that capabilities of specific suppliers (Helen et al., 1991). Such adaptation
frequently occurs by way of investing in transaction specific assets such as product/process
technology and human resources (Hakansson, 1982). Satisfaction is the positive feeling that
results from an evaluation of all aspects of an exchange relationship (Wilson & Kristan
Moller, 1991). The domain of satisfaction that a firm considers to be, on the one hand
rewarding, profitable and of value, and on the other hand costly, unfair or frustrating (Rukert
& Churchill, 1984; Ping, 1993). Communication has been defined as “the formal as well as
informal sharing of meaningful and timely information between firms” (Anderson & Narus,
1990). Frequently and timely communication is important because it assists in resolving
disputes and aligning perceptions and expectations (Morgan & Hunt, 1994). Effective
communication is therefore essential for successful collaborations. Power/dependence is also
an important dimension of relationships. Power is a function of extent to which two members
in a channel are dependent on each other for satisfaction of their goals and the relative
sources/bases of each channel member’s power (El-Ansary & Stern, 1972).
Dependence refers to a firm’s need to maintain an exchange relationship to achieve desired
goals (Frazier & Rody, 1991). In exchange relationships, both parties maybe, to some degree,
depend on each other (Gundlach & Cadotte, 1994). The structure (magnitude and relative
symmetry) of this “reciprocal” dependence characterizes the level of interdependence in the
relationship and has important implications for interaction (Mohr & Spekman, 1994).
Cooperation refers to situations in which firms work together to achieve mutual goals
(Anderson & Narus, 1990). De Toni et al. (1994) argue that the form of cooperation that
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characterizes the partnership model of buyer supplier relationship does not necessarily mean
harmonious collaboration, with unconditional faith in each party.
THEORETICAL FRAMEWORK
Based upon the research objectives and past researchers on information sharing in buyer
supplier relationships, the 16 information quality dimensions are shown on the left and the
buyer supplier relationships is shown on the right. Taken together, sixteenth strategic
relationships (H1 through H16) result; these relationships describe the main effects.
DIMENSIONS OF
INFORMATION
QUALITY
BUYER –SUPPLIER
RELATIONSHIPS
The Information Quality Assessment (IQA) instrument is studied, which uses 69 survey items
to measure 16 dimensions. Therefore, the paper hypothesizes that improvement in various
aspects of information quality would positively affect the relationships. Accurate, relevant,
and timely information can help the buyer supplier respond to changes in its competitive
environment. Information that is relevant, timely, and accessible across organizational units
can assist in aligning the organization’s information systems with its business objectives.
Customer data that is free of errors can help an organization improve its customer service.
Believable information can improve an organization’s communications efficiency.
Information that is consistently and concisely represented can improve the efficiency with
which the buyer supplier organization develops and deploys new systems. Information that is
presented in the right amount and in a fashion that is easy to use and understand can improve
the business efficiency of the buyer supplier organization. Therefore, the sixteenth
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hypotheses stated below address the relationships between information quality and buyer
supplier relationships.
H: Improvements in the dimensions of information will be positively improved the buyer
supplier relationships.
POPULATION/ SAMPLE
The proposed framework will be tested using data from suppliers who supply the materials in
companies. However, for this study, because of time limitations, the population will be
reduced to only the suppliers (that involved with raw materials or products materials) in ten
of the multinational companies in Northern Region of Malaysia. A random sampling
technique will be used to determine the number of companies to be selected. From a
methodological perspective, buyer supplier relationships can be studied using different units
of analysis such as a single party, both parties (the dyad) or multiple parties (the network).
Measuring the relationship strength is further confounded by the fact that many suppliers
frequently supply their customers with different types of product, and these relationships
differ according to product type. In Sako et al (1994) study, their respondents were asked to
reply to questions with respect to the basis of the most important or focal supplier product
relationship. In other words, their study was focused on the buyers’ point of view, in which,
they considered the focal supplier as the supplier with the largest monetary purchasing
volume. Whereas, in this study, the focus of the study is on the suppliers’ perspective, and
therefore, the questionnaires were distributed to the suppliers of the identified companies.
CONSTRUCTS
The independent variables for this study will be those used to measure information quality.
These variables are operationalized at the dimension level, in which, were measured directly
by using the 69 survey items from the Information Quality Assessment (IQA) instrument
adapted from Lee et al. (2002) and Najjar (2002). This instrument utilizes a scale from 1 to 5,
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where 1 represents not at all and 5 represent completely. The dependent variables for this
study are those used to measure buyer-supplier relationships. This variable is operationalized
at the dimension level by using the 27 relevant survey items from the instrument developed
by Fynes and Voss (2002). This instrument utilizes a scale from 1 to 5, where 1 represents
strongly disagree and 5 represent strongly agree.
CONCLUSION
Information Quality (IQ) in supply chain management (SCM) has gained its importance
recently due to its ability to reduce costs and increasing responsiveness in the supply chain.
Organizations in the chain increasingly find that they must rely on effective information to
successfully compete in the global market and networked economy. This paper, therefore,
introduces how information quality plays an important role in supply chain management,
particularly in the buyer-supplier relationships particularly in the Malaysian context. As
mentioned earlier that the information sharing among the members of the chain, particularly
between buyer and supplier, will result on the big impact to the partnership in term of the
business performance. Being a conceptual paper, this paper provides a framework that
identifies the dimensions for information quality. Also, this paper investigates if the identified
dimensions results to better buyer-supplier relationships. The framework is expected to be
tested empirically using data from electronic manufacturing firms in Malaysia.
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