SUPPLY CHAIN MANAGEMENT INTEGRATION AND ITS EFFECTS ON
PERFORMANCE IN HOSPITALITY INDUSTRY
Deniz KUCUKUSTA
Dokuz Eylul University, Research Assisstant, Center for Quality and Excellence,
Izmir,Turkey
Ozkan TUTUNCU
Dokuz Eylul University, Assoc. Prof. Dr.,Faculty of Business, Tourism and Hotel
Management Department, İzmir, Turkey
Summary
The main purpose of the study is to determine the role and the relationship between
Supply Chain Management Integration and Hotel Performance according to the perceptions
of the hospitality employees. On this account, it was essential to determine the factors
affecting the integration of supply chain management initially. The results of this study
supports that dimensions of Supply Chain Management have strong effects on hotel
performance. Hotel integration with internal and external customers is realized as important
factors in implementing but internal customer integration is the leading factor for
empowering the overall integration process in supply chain management integration.
Keywords: Supply Chain Management, Performance, Hospitality, Supply Chain Integration
Inroduction
To have a smooth running supply chain management (SCM) system can help
organizations with a sustainable competitive advantage by improving product quality and
service while reducing cost. Although the literature has emphasized that supply chain
integration is essential for productivity, there is a lack of empirical evidence that tests the
impacts on performance. Therefore, the objective of this research was to empirically examine
SCM integration (SCI) and its effects on performance for hospitality industry. First of all, the
dimensions should be determined. According to factor analysis there are two dimensions of
SCI which goes parallel to the theory. Results ensure the positive relationship within SCI
dimensions, internal customer integration and external customer integration. The dimensions
of SCI have also strong positive effect on SCI as well as hotel performance. The nature of the
tourism product as being perishable and inseparable results in to provide service
simultaneously with demand which makes internal integration important than external
customer integration for hospitality industry.
Literature Review
Supply chain management concept is closely related with the concept of best
practices. Adopting supply chain management (SCM) initiatives first and the most
importantly requires that companies should have a long-term view as well as an extensive
focus, on all the channels that are employed in the transformation process of the raw
materials to end-user products. Top management commitment is also essential at this point.
Organizations should redesign how business is done at every level in and outside the
organization. First step in SCM is investigating each function a department handles and
breaking it down if necessary. By evaluating and constructing a specific supply chain, a
company is able to find and reduce system redundancies while improving reliability and
flexibility of a system (Tummala et al.,2006).The creation of a supply chain leads to a better
understanding of the system and the introduction of common standards. Despite the
challenges that are created, developing an effective and efficient supply chain can become a
core competency or even a distinctive competency. A core competency is any function,
which a firm does well at performing. Core competencies are the processes which are
primary business activities that enable companies to obtain a better average degree of
business success over long term. In management discipline “core competencies” refers to
focusing and exploring particular strengths within the company and formulate strategies
which will help in increasing market share and profits. On the other hand, a distinctive
competency is a function that is performed well and is unique. Literature has shown that the
basis of competition in many industries in the future will revolve around supply chain
development (Das & Narasimhan, 2000). Supply chain analysis promotes reducing non-core
processes (waste) and synchronizing the supplier and logistics network. Successful supply
chain practices were first seen in aerospace and automotive industries where good
constructed supply systems led to the concept of Lean production to grow. The information
and communication technologies provide a backbone support to distribute and share
information real-time for effective decision making by supply chain partners. Making
changes to supply chain helps to lower costs and enables a firm to more easily compete on
the basis of price. This is especially important when producing functional goods that are price
sensitive (Fisher, 1997). Also, streamlining supply chain systems can reduce demand and
lead time uncertainties while creating consistency of quality products and reliable supply. It
can also improve customer service levels; therefore, increasing firm’s competitiveness.
Rather than business to business but supply chain to supply chain competition is today’s trend
(Veckery et al, 1999; Monczka Morgan, 1996). The system wide focus on costs is essential in
order to gain a complete picture of the forces that affect company performance. Cost savings
created through working with suppliers and distributors as supply chain partners can be
reinvested into additional research and development (Cooper and Ellram, 1993). Working
together to achieve cost savings allows firms to target their resources into a specialized area
of transformation. It can be argued that market dynamics will alone drive market optimization
across ownership boundaries. However, each company could further optimize performance
by sharing information and removing any redundant processes.
From a financial standpoint, improved SCM can lower costs through greater operating
efficiency, reduced waste generation, and reduced consumption of energy and water. SCM
practices can also lead to increased revenue and shareholder value by generating more repeat
business and attracting new business from customers who value good environmental and
social performance. A strong positive reputation as a company that cares about SCM issues,
coupled with improvements to the quality of the consumer experience provided to clients, can
result in increased customer satisfaction and loyalty, strengthened brand value, enhanced
publicity and marketing opportunities, and better acceptance by local communities in
destinations.
Good performance and a high-quality, sustainable product can also help a company to
reduce the risk of conflict or problems with suppliers, governments, staff and local
communities, and improve its status as a respected partner in destinations. This may mean
enhanced access to key business resources such as capital, the ability to develop products to
meet growing market demand, improved relationships with governments, and a motivated
and loyal staff.
Supply chain practices cannot improve their own efficiencies by themselves, because
the efficiency can be achieved through the interaction of various supply chain practices.
Dawe (1994) argued that, for a successful SCM application, significant efforts for
improvement in all of supply chain functions within a firm should be made, and, first of all,
the focus of supply chain practices should shift from functional and independent to general
and integrative. This implies that the performance of each supply chain practice should be
evaluated depending on how the practice has a significant effect on the efficient integration of
entire supply chain processes, and thus, the successful achievement of SC integration can be
possible by the systematic utilization of various supply chain practices. Dawe’s (1994)
assertions have been supported by the observation by Ballou (1992) that the main activities of
supply chains are generated in all of supply chain processes, and such main activities play
very important roles in effective adjustment and linkage among supply chain functions.
Bowersox (1989) also have the same perspective with the above argument. He asserts that the
process of SC integration should progress from the integration of internal logistics processes
to external integration with suppliers and customers. This internal integration can be
accomplished by the automation and standardization of each internal logistics function, the
introduction of new technology, and continuous performance control under formalized and
centralized organizational structure. External integration can be achieved by information
sharing and strategic linkage with suppliers and customers, and the standardization of
logistics process between firms (Bowersox, 1989).
This study is significant in terms of its uniqueness in Turkey. There is a lack of
literature examining the relationships between SCM integration (SCI) and performance of
hotels in hospitality industry.
The study’s research questions and related hypotheses are presented as follows;
1. Are independent variables of supply chain management (SCI) valid for Hotels of
Turkey?
H1: There is a difference among the independent variables of SCI.
H2: There are differences among the items of independent variables.
2. Is there a relationship between the independent variables of SCI in this study’s
construct?
H3: There is a correlation between the internal customer integration and external
customer integration.
3. Is there a relationship between performance and SCI?
H4: There is a correlation between performance and SCI.
4. Does the construct explain explicitly the SCI for Hotels?
H5: Both internal customer integration and external customer integration explain the SCI.
H6: Internal customer integration is more important than external customer integration for
SCI.
5. Does the construct of SCI explain the performance and has the similar effects on
performance?
H7: Both internal customer integration and external customer integration explain the
performance.
H8: Internal customer integration is more important than external customer integration for
performance.
Research Methodology
Data was obtained by administrating a structured-questionnaire survey consisting two
parts. The first part of the survey inquired 9 statements about level of supply chain
management integration under three dimensions. The second part of the survey consist
dependent variables and the last part inquired demographic and nominal questions about the
employees. The total 11 items which have been resulted in 2 independent factors and 2
dependent variables are rated on a five-point scale (1= strongly agree; 2=agree; 3=neither
agree nor disagree; 4=disagree; 5=strongly disagree). The employees were asked to rate these
statements.
Snowball sampling is used for the survey and it was conducted among staff working
in 12 five star hotels in Aegean Region. In total, 400 questionnaires distributed by the
researchers and usable 187 questionnaires were returned, with a usable response rate of 46%,
which is statistically acceptable for data analysis. Data obtained was analyzed by using SPSS
13.0 program. Data analysis consisted of frequency distribution, descriptive statistics, factor
analysis, and regression analysis at the base of derivative and inferential statistics.
Research Findings
Demographic dispersion and profile of employees under the base of descriptive
statistics are stated in Table 1. 187 hotel staff has gone under the research.
Insert Table 1 about here.
The reliability tests have been implemented on data at the base of derivative statistics.
To increase the reliability coefficient of the test, two data have been taken out of study. As a
result of the test, the general Cronbach’s alpha of data is found to be as 0,850. This result is
within the acceptable limits.
In accordance with Cronbach’s alpha result obtained, the factor analysis has been
implemented on data. The Barlett Test result is realized as the value of 554,498 and p<,001
level and Kaiser-Meyer-Olkin illustration value as 0,813 and this value is within the
acceptable limits. In the principal component analysis implemented on data, the varimax
alternative is used up and in accordance with scree plot dispersion obtained; data of which
Eigenvalue (main value) is above one is taken under consideration.
The variables of which loading rates are less than 0.30 have been taken out of
evaluation so as to have the topic be presented much more clearly. Together with it, there is
no expression of which factor load is below 0.30. In this connection, it is found that 9
variables are formed under two factors and with total difference (variance) in the rate of 0,60.
The summary results of factor analysis are presented in the following table (Table 2). H1 is
supported here.
Insert Table 2 about here.
The participants have given the lowest average as 3,99 to the first factor which
represents hotel integration with internal customers (5 as the highest and 1 as the lowest).
Together with it, they have given the highest average with 4,34 to the factor of hotel
integration with external customers (patients), which represents the level of contact and the
service process. Indeed, two factor averages are representing that staff has positive approach
and perception about all the dimensions of integration. H2 is rejected here as items are
unchanged.
Insert Table 3 about here.
In order to analyze the relationship among independent variables, correlation coefficient
values were calculated. As Table 3 shows, there is a positive and strong relationship (r =
,543, and p=,0001) between two factor attributes. H3 is supported here. There is also one
more correlation statistics made in order to test the relationship between two dependent
variables, overall supply chain integration and overall quality management system. Table 4
represents the correlation results. There is also positive and very strong relationship between
the dependent variables (r = ,639, and p=,0001). H4 is supported here.
Insert Table 4 about here.
Regression analysis is applied to determine the importance of independent variables
on dependant variables (Table 5). There are two dependent variables. In other words, the
expression of ‘Overall, our hotel’s supply chain integration is successful’ given with the
circular expression is involved. However this expression is considered as dependent variable,
due to the findings obtained in factor analysis. Especially 2 factors of supply chain
management as hotel integration with internal customers and hotel integration with external
customers (patients) have strong effect on this dependent variable. H5 and H6 are supported
here.
Insert Table 5 about here.
When we examine the Table 6 it is seen that the F value is realized as meaningful in
the level of 68,793, p=,0001. In connection with it, Multiple R=,663 and R Square=,440 is
realized. It is examined that R square value is in the sufficient level for the researches made
in social sciences. It is needed to assess the Beta values to determine the importance levels of
independent variables in connection with the dependent variable parallel with the knowledge
gained from regression analysis. When we examine the importance of Beta values obtained
from regression analysis, it is seen that the variable of Hotel Integration with Internal
Customers has become meaningful at the level of ,659. Another variable which is meaningful
is Hotel Integration with External Customers (Patients), with the Beta value of ,265. It is
understood that, these two factors affect the first dependent variable 44% together.
Insert Table 6 about here.
There is another dependent variable expressed as ‘Overall, the performance of our
hotel is good’. A second regression analysis is made to determine the effects of independent
dependent variables of supply chain management on the dependent variable. In Table 6, it is
seen that the F value is realized as meaningful in the level of 60,823, p=,0001. In connection
with it, Multiple R=,635 and R Square=,403 which is also in sufficient level, are realized.
When Beta values are examined to determine which factor has stronger effects on dependent
variables, it is seen that Hostel Integration with Internal Customers has the highest Beta value
of ,523. The other factor is Hotel Integration with External Customers (Patients) with the
Beta value of ,391. H7 and H8 are supported here
Conclusion
The main purpose of the study is to determine the role and the relationship between
Supply Chain Management Integration and Hotel Performance according to the perceptions
of the hospitality employees. With this purpose, it is essential to determine the factors
affecting the integration of supply chain management. The results of this study supports that
dimensions of Supply Chain Management have strong affects also on hotel performance.
According to the factor analysis, integration within the hotel and with the suppliers is
realized in a single factor and we have renamed this combined factor as integration with
internal customers. Since the suppliers’ role in the service process is essential and vital, it
could be discussed as an internal customer with the philosophy of quality management
system. The other factor is named as integration with external customers, who are the hotel
guests. According to Hofstede (2005) Turkish society has a holistic approach, thus SCI’s
three independent variables in original scale (organization’s internal integration, integration
with suppliers and customer integration) were perceived as two independent variables in our
research. Participants perceived organization’s internal integration and integration with
suppliers as one variable (internal customer integration). The variable names for this study
were renamed as “internal customer integration” and “external customer integration” in order
to reflect the nature of TQM philosophy. The nature of the service industry as being
intangible, perishable and inseparable results in to provide service simultaneously with
demand (fast response) which makes internal integration for hotels more important than
customer integration. Participants perceived internal integration as their performance
indicator that is why the results showed that internal customer is more important as it has
been encountered in the case for SCI.
Hotel Integration with Internal Customers is realized as the most important factor in
implementing and empowering the overall integration processes in supply chain management
system in hospitality industry. Also Hotel Integration with External Customers representing
level of communication, relation, and the agility of service process has also strong effect on
overall integration of supply chain management.
When factors of supply chain management integration are examined, it is seen that
these two factors are directly related to the service process, which is the core element of
customer satisfaction. In hospitality industry, both external and internal customer satisfaction
leads to higher performances. The sub-dimensions of supply chain integration which are
stated in factor analysis have also strong effect on hotel performance. We can state that
factors affecting the integration of supply chain management strongly affect the hotel
performance as well.
References
Ballou, R. A. (1992). Business Logistics Management. NJ: Prentice-Hall, Englewood Cliffs.
Bowersox, D.J. (1989). Logistics in the integrated enterprise. Paper presented at the Annual
Conference of the Council of Logistics Management, MO: St Louis.
Cooper, M.C., Ellram, L.M. (1993). Characteristics of supply chain management and the
implications for purchasing and logistics strategy. The International Journal of Logistics
Management, 4(2), 13-24.
Das, A., Narasimhan, R. (2000). Purchasing competence and its relationship with
manufacturing performance. Journal of Supply Chain Management, 36(2), 17-28.
Dawe, R. L. (1994). An investigation of the pace and determination of information
technology use in the manufacturing materials logistics system. Journal of Business
Logistics, 15(1), 229-58.
Fisher, M.L. (1997). What is the right supply chain for your product? A simple framework –
can you figure out the answer?. Harvard Business Review, 75(2), 105-16.
Hofstede, G. (2005). Cultural dimensions Resources. Retrieved from the web January 5,
2007. http:// www. Geert-hofstede.com/geert_hosftede_resources.shtml.
Monczka, R. M., Morgan, J. P. (1996). Supplier integration: a new level of supply chain
management. Purchasing, 120(1), 110-13.
Tummala R. V. M., Cheryl, L. M., Johnson, P., Johnson, P. (2006).Assessing supply chain
management success factors: A case study. Supply Chain Management: An International
Journal, 11(2), 179-92.
Vickery, S., Calantone, R., Droge, C. (1999). Supply chain flexibility: an empirical study.
Journal of Supply Chain Management, 35(3), 16-27.
Table 1. Numerical and Percentage Dispersion of Sample Profile
Number
%
Sex
Number
%
Primary School
Secondary School
High school
University
11
14
65
83
5,9
7,5
34,8
44,4
Missing
14
7,5
Total
187
100,0
Education
Female
Male
Missing
Total
45
131
11
187
24,1
70,1
5,9
100,0
Age
15-25
26-32
30
80
16,0
42,8
33-42
59
31,6
43-50
51 and above
Missing
Total
7
1
10
187
3,7
,5
5,3
100,0
Less than 1
1-5
6-10
11-20
21 and above
4
54
51
58
10
2,1
28,9
27,3
31,0
5,3
Less than 1
29
15,5
Missing
10
5,3
1-3
4-6
7-9
10 and above
Missing
Total
81
40
8
17
12
187
43,3
21,4
4,3
9,1
6,4
100,0
Total
187
100,0
Total Working Years
Tenure
Table 2. Table for Factor Analysis Results
Factor
Loading
FACTOR 1 – Hotel Integration
with Internal Customers
The establishment of quick
,841
ordering system.
Stable procurement through
,814
network
Data integration through
,745
departments within the hotel
Periodic interdepartmental
,729
meetings among internal function
The level of strategic partnership
,641
with suppliers
Integrative inventory management
FACTOR 2 – Hotel Integration
with External customers
Eigenvalue
Mean
Variance
Explained
F
α
4,041
3,99
44,905
4,135
,835
1,366
4,34
15,176
3,479
,765
,515
The level of contacts with patients
The level of communication with
patients
The agility of service process
,893
,842
,556
Table 3. Correlation Matrix between Factors of Integration
Hotel Integration with
Internal Customers
Hotel Integration with
External Customers
Hotel Integration with
Internal Customers
Hotel Integration with
External customers
1
,543
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
,0001
187
1
Table 4. Correlation Matrix between Overall Integration and Hotel Performance
Overall Integration
Overall Performance
Overall Integration
Overall Performance
1
,639
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
,0001
160
1
Table 5. Regression Analysis of the Factors Affecting the Overall Integration

T
Sig T
,659
8,160
,0001
Hotel Integration with External
Customers (Patients)
,265
2,733
,007
Constant
,241
1,480
,141
VARIABLES
Hotel Integration
Customers
with
Internal
Note : Multiple R=,663; R square =,440; Adjusted R Square =,434 F=68,793; Signif F=,0001
Table 6. Regression Analysis of the Factors Affecting the Overall Hotel Performance

T
Sig T
,523
6,438
,0001
Hotel Integration with External
Customers (Patients)
,391
4,009
,0001
Constant
,015
,091
,928
VARIABLES
Hotel Integration
Customers
with
Internal
Note : Multiple R=,635; R square =,403; Adjusted R Square =,403 F=60,823; Signif F=,0001