Int. J. Logistics Systems and Management, Vol. 6, No.

1, 2010 1
Copyright 2010 Inderscience Enterprises Ltd.











An empirical study on Supply Chain Management:
the perspective of Logistics Service Providers
T.N. Srikantha Dath
Department of Mechanical Engineering,
Sri Venkateswara College of Engineering,
Pennallur, Sriperumbudur, Tamil Nadu, India
E-mail: dath@svce.ac.in
E-mail: svce_dath@yahoo.com
Chandrasekharan Rajendran*
Department of Management Studies,
IIT Madras, Tamil Nadu, India
E-mail: craj@iitm.ac.in
*Corresponding author
K. Narashiman
A.C. College of Technology,
Anna University,
Tamil Nadu, India
E-mail: knman@annauniv.edu
Abstract: A growing awareness that competitive advantage comes from the
delivery process as much as from the products has been instrumental in
regarding logistics as a key strategic function. The present work develops a
valid and reliable instrument, covering various aspects of Supply chain
Management (SCM) in India, from the Logistics Service Providers (LSPs)
perspective and investigates the relationship between the factors of SCM and
the measures of performance in a moderated environment. The findings
indicate that the moderator (Supply Chain Orientation) appears to have a
significant and positive effect on the relationship between the factors of SCM
and the business performance measures of LSPs, but appears to have no
significant effect on their financial measure of performance.
Keywords: SCM; supply chain management; supply chain orientation; LSP;
logistics service provider; constructs; moderators.
Reference to this paper should be made as follows: Srikantha Dath, T.N.,
Rajendran, C. and Narashiman, K. (2010) An empirical study on Supply Chain
Management: the perspective of Logistics Service Providers, Int. J. Logistics
Systems and Management, Vol. 6, No. 1, pp.122.
Biographical notes: T.N. Srikantha Dath obtained his PhD in 2008 and is a
Professor in the Department of Mechanical Engineering in Sri Venkateswara
College of Engineering.










2 T.N. Srikantha Dath et al.












Chandrasekharan Rajendran is a Professor in IIT Madras. His areas of interests
include scheduling, simulation, metaheuristics, total quality management
and SCM.
K. Narashiman is an Assistant Professor in A.C. College of Technology,
Anna University. His areas of interests include training and offering
consultancy in total quality management.

1 Introduction
Supply Chain Management (SCM) is emerging as a customer-driven value chain
management, which, in addition to pursuing improvements in efficiency, recognises the
importance of consumer needs and attempts to capture the subtleties of consumer
value as a source of differentiation in the supply chain (Zokaei and Hines, 2007).
As competition becomes more and more intense in many sectors, many enterprises are
considering the option of logistics outsourcing in order to streamline the value chain
(Franceschini et al., 2003). During the last decade, Third Party Logistics (TPL) has
played an important part in the manifestation of inter-organisational issues within
logistics and SCM (Halldorsson and Skjtt-Larsen, 2006). The use of Logistics Service
Providers (LSPs) has become popular and logistics is said to be the last frontier for
reducing costs. A growing awareness that competitive advantage comes from the delivery
process as much as from the product has been instrumental in upgrading logistics from its
traditional backroom function to a strategic boardroom function (see Razzaque and
Sheng, 1998; Mentzer et al., 2001). In todays SCM practices, a successful strategy
depends increasingly on the performance of (TPL) service providers, as they play a key
integrative role linking the different supply chain elements more effectively (Evangelista
and Sweeney, 2006). TPL is commonly known as an arrangement in which a service
provider provides logistics services, such as transportation and warehousing, to the
manufacturers of goods (Chung et al., 2005).
With a GDP of over US$ 474.3 billion, the Indian industry spends 14% of its GDP on
logistics. Close to 22% of the aggregate sales, amounting to over US$ 25 billion is tied up
in inventories in the supply chain network, countrywide (see Korgaonker, 1999a, 1999b
in Sahay and Mohan, 2003). It was estimated, in 2004, that Indian auto parts suppliers
exported about $170 million worth of auto components to the USA. This export is
expected to reach $10 billion (6000% growth) in less than ten years. All three major
US automakers are engaged in auto component production in India for supplying some of
their assembly operations in India, USA, and in other parts of the world (Avittathur and
Swamidass, 2006). Chandra and Sastry (2002) reported that the Indian manufacturing
sector continues to lag in adoption of efficiency enhancing technologies in the
warehousing and transportation sectors, and most Indian products and dispatches are still
not bar coded, because distributors have not suitably adopted efficiency enhancing
technologies.
Since the deregulation of the freight transportation industries, buying logistics
services has become similar to the purchase of other types of industrial services
(Menon et al., 1998). Suppliers have a significant direct impact on cost, quality,
technology, speed, and responsiveness of buyer firms, and strategic outsourcing is









An empirical study on Supply Chain Management 3












considered to be a source of great advantage (Paulraj and Chen, 2005). Nilsson (2006)
concluded from his study that LSPs are facing huge complexities as companies are
becoming more multifaceted themselves in their relationships with suppliers and
customers, and in view of the increased turbulence facing almost all industries. However,
a sustaining supplier-manufacturer (in this case LSP and the customer) relationship
cannot be possible without tangible benefits accruing to both partners (e.g., Iyer and
Bergen, 1997; Kim, 2000). An important implication is that unless there is increase in
revenue outside of the supply chain itself, any gains in efficiency within the supply chain
cannot be sustainable since they are traded off between the chain participants
(Kim, 2000). In the present study, by viewing the supply chain from the LSPs
perspective, an attempt is made to offer some insights to both practicing managers and
researchers into the relationships between the constructs of SCM and the measures of
performance of the LSP, under a moderated environment.
The terms factors, critical dimensions, and constructs have all been
synonymously used in this paper.
2 Literature review
The term LSPs is used as a synonym throughout this paper for carriers, warehouse
operators, third-party LSPs, and any other type of logistics service intermediates such as
forwarders or information processing service providers. As a part of the supply chain,
LSPs help their clients products to reach the market before the demand for them lapses.
LSPs function as intermediaries in bringing about the organised and logical flow of goods
in the supply chains of their client firms (Lai and Cheng, 2004). The new and expanded
role for logistics will place high priority on both inter-firm and intra-firm integration
of logistics activities (Stock et al., 2000; Gunasekaran and Ngai, 2004). Sobrero and
Roberts (2002 in Stjernstrom and Bengtsson, 2004) distinguished between short-term
expectations of the supplier, pertaining to time, costs and quality level, and expectations
with a longer time perspective, which concern learning in the relationship. Nilsson (2006)
found from his research that further development of the logistics discipline, and thus
of importance for logistics management, is the identification of understanding and
sense-making of concepts, techniques, and models in logistics.
Min and Mentzer (2004) identified that the concept of SCM includes agreed vision
and goals, information sharing, risk and reward sharing, cooperation, process integration,
long-term relationship, and the agreed supply chain leadership. Having a common
vision is an important ingredient to building relationship commitment (Hult et al., 2000).
SCM makes firms to cooperate with the common goal to increase the overall channel
sales and profitability, rather than competing for a bigger share of a fixed profit
(Cigolini et al., 2004). Halldorsson and Skjtt-Larsen (2006) noted that the arrangement
between the buyer (shipper/consignee) and service provider is formalised into a
contractual relationship aiming to reduce the risk of failure involved in the relationships.
To enable client firms to manage multiple relationships across their supply chains,
it is highly desirable for LSPs to posses the service capability to meet the needs of
customers for a variety of logistics services (Lai and Cheng, 2004). Customer needs and
expectations are becoming more and more unstable, dynamic and demanding, difficult to
identify, and at the same time, customers have many choices, frequently similar in terms
of quality and price (Fassoula, 2006). Earlier, logistics used to have a supportive role









4 T.N. Srikantha Dath et al.












to primary functions such as marketing and manufacturing, but it has now expanded
to cover warehousing and transportation activities, purchasing, distribution, inventory
management, packaging, manufacturing, and even customer service (Bowersox and
Closs, 1996 in Chapman et al., 2003), and other functions, such as order management,
customer services, management of returns (Gunasekaran et al., 2004), information related
services and value added services (Lai and Cheng, 2004). Late configuration, performed
in the distribution channel, is termed value added logistics. Ballou (1992 in De Koster
and Warffemius, 2005) distinguished four types of late configuration in warehouses,
namely, labelling, packing, assembly, and manufacturing. Nilsson (2006) grouped
the various logistics processes and activities into four uncertainty dimensions, namely,
customer demands and expectations; internal processes; human factors; and general
trends.
Warehouse operation is an important part of logistics where products (raw material,
parts, goods-in-process, finished goods) are stored at, and between, point of origin and
point of consumption. Two other major operations in warehousing are movement
and information transfer (Lambert et al., 1998). According to Faber et al. (2002),
the complexity of a warehouse operation has a large impact on the performance of the
warehouse. The author argued that warehouse complexity refers to:
the number and variety of items to be handled
the amount of daily work to be done.
As per De Koster and Warffemius (2005), the number, nature and variety of processes
necessary to fulfil the needs and demands of customers and suppliers constitute the
warehouse complexity.
Transport is one of the major activities within logistics, where the creation of time
and place utility is performed (Coyle et al., 1996 in Stefansson, 2006). The supply chain
of a transport logistics firm involves shippers at the input side and consignees at the
output side. The goal is to satisfy the needs of different parties both upstream and
downstream in the chain for greater effectiveness and efficiency than its competitors
(Lai and Cheng, 2003; Lai et al., 2004). Quality within the transportation industry
encompasses a number of dimensions, depending upon the perspective. Shippers tend to
view quality primarily in terms of the level of service provided and transportation cost,
while transportation companies view quality from a much broader perspective including
the areas of customer service, administration, maintenance, storage, and information;
finally, government tends to view transportation quality from a safety, economic, and
consumer welfare perspective (Wisner and Lewis, 1997).
Chiu (1995) (see in Gunasekaran and Ngai, 2004) identified the critical success
factors in effective logistics management that included good planning in a logistics
system, a well-designed distribution system, the prudent selection of allied companies,
close relationships with trading partners, good logistics investment analysis, the
elimination of communication barriers to logistics management, the commitment of top
management, and continuous improvement in logistics. Lummus and Vokurka (1999)
argued that successful supply chains would develop customised logistics networks
tailored to each customer segment. With IT, companies can develop an understanding
of their clients activities, such as manufacturing, or marketing, that previously would
have been infeasible due to the workload involved in manually collecting and analysing
large quantities of data (Lewis and Talalayevsky, 2000). Power and Simon (2004) noted









An empirical study on Supply Chain Management 5












that through a combined use of product numbering, bar-coding and EDI, organisations
have the means available to enable specific SCM practices such as quick response,
cross-docking, use of advance shipment notification, and vendor management of
inventories.
Mentzer et al. (2001), based on their study on understanding shipper-carrier and
shipper warehouse partnerships, presented an empirical support for the following nine
logistics service quality constructs: personal contact quality; order release quantities;
information quality; ordering procedures; order accuracy; order condition; order quality;
order discrepancy handling; and timeliness. Gunasekaran et al. (2004) listed the critical
success factors in logistics operations that include:
strategic alliances with large clients and local TPL providers across the world
web-based information systems, networking and relationship management
key performance indicators for logistics management control
customer relationship management
joint ventures
innovation
benchmarking.
Sahay and Mohan (2006) conducted a survey to determine the extent of usage of TPL
practices in India and to establish the impact of usage of TPL services on business results.
Some of the issues they focused on are:
importance of various logistics activities to organisations
extent of usage of services offered by TPL service providers for carrying out specific
logistics activities
the benefits of using TPL services on specific business objectives
the overall satisfaction with third party LSPs
the future plans of current users of TPL services.
3 Research objectives and methodology
The research objectives of this work framed from the perspective of the LSPs are to
identify the critical dimensions of SCM
develop an instrument that covers all the aspects of SCM
propose a conceptual model to study the influence of the critical dimensions on the
measures of performance
empirically validate the instrument by subjecting the data collected to various tests











6 T.N. Srikantha Dath et al.












validate the conceptual model by investigating relationships between the various
critical dimensions and the measures of performance, taken one at a time, in a
moderated environment
draw conclusions based on the above findings.
The terms factors, critical dimensions, and constructs have all been synonymously
used in this paper.
Based on the arguments made by various authors and the empirical findings shown in
Section 2, the constructs that most influence the concept of SCM from the perspective
of the LSP are identified and listed in Table 1. For a detailed literature review and
description of the critical dimensions, refer to the work by Srikantha Dath et al. (2009).
The availability of hard evidence based on a rigorous research methodology is mandatory
for the development of reliable, valid and pragmatic diagnostic instruments by
researchers, in order to enhance the process of theory building (Sureshchandar et al.,
2001). Also, practitioners can effectively use such instruments and their findings.
This can only be achieved by measuring the perceptions and experiences of a range of
SCM practitioners from industries. Questionnaire survey has been widely acknowledged
as an efficient tool for assessing the perceptions of individuals/organisations on the
chosen subject. In order to capture the aspects of SCM from the perspective of LSP and
empirically validate the SCM constructs, a survey instrument has been developed.
The instrument has been developed, based on an exhaustive review of the literature
(prescriptive, conceptual, empirical and practitioner). A 5-point Likert scale (with one
indicating very low and five indicating very high) has been adopted. The SCM elements
(or items) have been initially presented to a panel of experts from both academia and
practitioners in India. Based on the suggestions of the experts, modifications (in terms
of removal of redundant items, and in the wordings of the items) have been appropriately
done. The complete instrument is given in the Appendix.
Table 1 Constructs of SCM from the perspective of LSP
Construct Abbreviation
Top management commitment TMC
Customer orientation and involvement of employees CEI
Integration of supply chain logistics
Freight forwarding FF
Distribution/warehousing DW
Transportation TR
Information technology IT
Returns management RM
Benchmarking of supply chain activities BM
Logistics design DES
Supply chain orientation SCO
Performance
Financial performance FP
Business performance BP









An empirical study on Supply Chain Management 7












One aspect of SCM from the supply chain partners perspective is Supply Chain
Orientation. By Supply Chain Orientation, it is meant in this study, that the supply chain
partner (LSP) takes efforts to orient his or her activities, related to the supply chain,
towards the Shipper/Consignee. As per Walter et al. (2003), the level of commitment,
trust and cooperation of its members determines the ultimate success or failure of a
supply chain alliance. Christopher and Towill (2001) noted that SCM integrates
suppliers, manufacturers and distribution centres to get the right products to the right
place, at the right time, and in the right condition. Traits such as coordination,
collaboration, commitment, communication, trust, flexibility, and dependence, are widely
considered to be central to meaningful relationships (Kannan and Tan, 2006). Through
commitment, trading partners throughout the supply chain become integrated into their
major customers processes and more tied to their overarching goals (Spekman et al.,
1998). The suppliers ability to deliver customised products with short delivery times and
high due-date observance is becoming increasingly dependent on their ability to use
the information that is shared by their customers in order to anticipate their own raw
material requirements. Therefore, suppliers managers are convinced that a key way to
maintain and improve their customer service is to increase collaboration with their
customers (Rota et al., 2002).
4 A conceptual model and proposed hypotheses
Based on the literature evidence and logical reasoning, the various functions related to the
critical dimensions of SCM from the LSPs perspective that are listed in Table 1, are
portrayed by means of a descriptive model as shown in Figure 1. The box on the left side
in Figure 1 indicates the constructs (Independent Variables (IVs)) of SCM from
the LSPs perspective, and the box on the right side, the measures of performance
(Dependent Variables (DVs)) of the LSP. The third box houses the moderator, Supply
Chain Orientation. The observations made by the various researchers referred to
in Section 3 clearly indicate that for a successful SCM, as well as for the improvement
in the performance of the supply chain partner, the supply chain partner has to
orient his or her activities (related to the supply chain) towards the customers
(Shipper/Consignee) strategy. The orientation of the supply chain activities, therefore,
means the integration and collaboration of supply chain partners business strategies
towards the customers supply chain strategy. In line with the above arguments, it is
proposed that the presence of the moderator (Supply Chain Orientation) has an
interaction (moderating) effect on the relationship between the IVs, and the DVs in the
model with respect to SCM, i.e., the orientation of the suppliers SCM functions towards
the customers (Shipper/consignee) SCM functions, in a positive manner, enhances the
performance of the LSP and, thereby, the supply chains performance. This leads us to
the following two hypotheses:
H1a: SCO has a significant and moderating effect on the relationship between the IVs
(given in the proposed conceptual model in Figure 1) and FP.
H1b: SCO has a significant and moderating effect on the relationship between the IVs
(given in the proposed conceptual model in Figure 1) and BP.










8 T.N. Srikantha Dath et al.












Figure 1 Theoretical model for SCM-perspective of LSP

5 Empirical validation of the proposed SCM constructs
The population for the study is the LSPs, and TPLs in India, who are involved in
providing various logistics services to manufacturers of components, parts and final
products in various sectors, namely, the automotive (e.g., manufacturers of two and
four wheeled vehicles), heavy engineering (e.g., manufacturers of trucks, tractors,
heavy machinery), light engineering (e.g., manufacturing of storage equipments), home
appliances (e.g., manufacturers of television, washing machines, refrigerators), computer
hardware, pharmaceuticals, and petroleum sectors. The respondents for the questionnaire
were vice presidents, senior personnel, managers and executives working in the logistics
companies. The list of probable respondents were first obtained from the members of
Indian Institute of Materials Management, and The Confederation of Indian Industries,
Chennai, provided details of some of the respondents. In all, about 80 people were
contacted from firms across various industries and sectors mentioned above, and about
60 persons agreed to respond. Finally, 43 responses were received. The copies of the
questionnaire have been mailed to the respondents by post, and electronically also,
in early June 2006 and the data have been collected over a period of eight months starting
from July 2006.
After data collection, the next step is the modification, refinement and finalisation of
the measurement instrument. The data are factor analysed in order to unearth the latent
factors based on the item-factor loadings. Then the instrument is subjected to tests of
reliability and validity, thereby ensuring standardisation and making it operational
(Sureshchandar et al., 2001). The technique used here is Confirmatory Factor Analysis
(CFA) as opposed to the conventional Exploratory Factor Analysis (EFA). In the CFA
technique the researcher is aware of the number of factors that are required to explain the
inter-correlations among the measured variables. Furthermore, the researcher knows
which observed variables are presumably reliable indicators of each of the factors,
and which variables are not related to a factor. As research on SCM is quite well founded,
and in view of the increasing acceptance of the CFA approach, the present work chooses
to adopt the factor analysis in a confirmatory fashion (also see Sureshchandar et al., 2001;
Kaynak, 2003).









An empirical study on Supply Chain Management 9












Once a scale is developed, its construct validity must be ensured so that one can have
confidence that explanations based on the proposed model reflect reality. Construct
validity is broadly defined as the extent to which the items measure the concept that they
are presumed to measure. It is generally used to refer to the vertical correspondence
between a construct, which is at an indiscernible, latent and abstract level, and
a purported measure of it that is at an observable, operational level (Peter, 1981).
Different validity terms are used to reflect numerous aspects of construct validity.
A comprehensive list of validity types that are typically mentioned in texts and research
works include face, content, convergent, discriminant and criterion-related validity.
The basic prerequisite for construct validity checking is the unidimensionality of the
measure.
Unidimensionality refers to the existence of a single construct underlying the
measures. Items within a measure are useful only to the extent that they share a common
nucleus (Nunnally, 1988). The problems associated with unidimensionality can be further
fine-tuned by removing those items from the scales that reduce the extent of
unidimensionality. For checking unidimensionality, a measurement model is specified for
each construct and CFA is run for all the constructs. Individual items in the model are
investigated to see how closely they represent the same construct (Ahire, 1996).
A Comparative Fit Index (CFI) of 0.90 or above for the model implies that there is no
proof of lack of unidimensionality (see Byrne, 1994 in Sureshchandar et al., 2001).
Table 2 indicates the CFI values for all the constructs, which are well within limits. Root
Mean Square Error of Approximation (RMSEA) is the additional fit index used to
evaluate the model fit in the present study. RMSEA is a measure of model discrepancy
per degree of freedom, which incorporates a measure of parsimony into the measure of
(lack of) fit. Values of RMSEA, <0.1, are deemed acceptable (Hair et al., 2005).
The RMSEA values for each of the constructs, given in Table 2, are within acceptable
limits except for BP. However, the corresponding Bentler-Bonnet Fit Index (BBI) and
CFI values are well within the limits.
Table 2 Item-factor loadings and fit indices
Factor Item no. Item loadings BBI CFI Alpha () RMSEA
1 0.62
2 0.58
3 0.79
4 0.75
5 0.72
7 0.57
Top Management
Commitment (TMC)
9 0.79
0.91 0.98 0.865 0.079
1 0.57
3 0.86
4 0.82
Logistics Design
(DES)
5 0.62
0.99 1.00 0.806 0.000
1 0.51
3 0.66
4 0.94
5 0.83
Customer Orientation
and Involvement of
Employees (CEI)
8 0.73
0.98 1.000 0.843 0.000









10 T.N. Srikantha Dath et al.












Table 2 Item-factor loadings and fit indices (continued)
Factor Item no. Item loadings BBI CFI Alpha () RMSEA
1 0.80
2 0.92
3 0.87
Freight Forwarding
(FF)
5 0.87
0.99 1.000 0.921 0.000
1 0.53
2 0.87
3 0.79
Distribution/
Warehousing (DW)
6 0.65
1.000 1.000 0.797 0.000
3 0.61
4 0.92
5 0.67
Transportation (TR)
8 0.61
0.98 1.000 0.792 0.000
1 0.67
2 0.83
3 0.83
Information
Technology (IT)
4 0.85
0.99 1.000 0.866 0.000
1 0.82
2 0.58
3 0.90
4 0.91
Returns Management
(RM)
5 0.42
0.97 1.000 0.829 0.000
1 0.80
2 0.76
3 0.67
5 0.81
Benchmarking of
Supply Chain
Activities (BM)
6 0.78
0.95 0.99 0.874 0.069
1 0.82
2 0.74
3 0.60
Supply Chain
Orientation (SCO)
4 0.67
0.98 1.00 0.790 0.000
1 0.66
2 0.80
3 0.73
Financial Performance
(FP)
4 0.73
0.98 1.000 0.807 0.000
1 0.87
2 0.98
6 0.34
Business Performance
(BP)
7 0.69
0.96 0.98 0.777 0.111









An empirical study on Supply Chain Management 11












Unidimenisonality alone, though a necessary condition, is not sufficient by itself to
establish the usefulness of the scale. Once unidimensionality of a scale is substantiated,
its statistical reliability should be assessed before it is subjected to further validation
analysis. Reliability is a measure that determines its ability to yield consistent results
(Nunnally, 1988). The reliability of the construct is evaluated by the internal consistency
method (in this study) and is estimated by using a reliability coefficient called
Cronbachs alpha (Cronbach, 1951) (see Table 2); note that the minimum advisable
level is 0.7 (Nunnally, 1988), and may be reduced to 0.6 in exploratory research
(Hair et al., 2005).
5.1 Face validity
Face validity is the mere appearance that a measure is valid. Often, a measure is
considered to have face validity if the items are reasonably related to the perceived
purpose of the measure (see Kaplan and Sacuzzo, 1993 in Sureshchandar et al., 2001).
As the items representing the SCM constructs have been identified from the literature,
their selection is justified, thereby ensuring the face validity of the instrument. Experts in
the field have also established the face validity through a thorough review of the
instrument.
5.2 Content validity
Content validity of an instrument refers to the degree to which it provides an adequate
depiction of the conceptual domain that it is designed to cover. If the items representing
the various constructs of an instrument are substantiated by a comprehensive review of
the relevant literature, content validity can be ensured (Bohrnstedt, 1983; Sureshchandar
et al., 2001). As explained earlier, the present instrument has been developed based on a
detailed analysis of the literature. Moreover, experts in the field have also reviewed the
questionnaire and validated it.
5.3 Convergent validity
Convergent validity is the degree to which the various approaches to construct
measurement are similar to (converges on) other approaches that, theoretically, they
should be similar to. When a measure correlates well with other measures that are
believed to measure the same construct, convergent validity is obtained (see Kaplan and
Sacuzzo, 1993 in Sureshchandar et al., 2001). It can also be such that each item in a scale
is treated as a different approach to measure the constructs (Ahire, 1996). The BBI is the
indicator of convergent validity. A scale with values of 0.90 or above is an indication of
strong convergent validity (see Bentler and Bonnet, 1980 in Sureshchandar et al., 2001).
Table 2 indicates the BBI value for each of the constructs, which are well within limits.
5.4 Discriminant validity
Discriminant validity is related to the degree to which measures of different factors are
discrete. An instrument has discriminant validity if the correlations between measures of
different factors using the same method of measurement are lower than the reliability
coefficients (see Crocker and Algina, 1986 in Kaynak, 2003). Multicollinearity is the









12 T.N. Srikantha Dath et al.












extent to which a variable can be explained by the other variables in the analysis. It refers
to the correlation among three or more independent variables. Variance Inflation Factor
(VIF) is the common measure for assessing multicollinearity and a VIF value below
ten indicates that there is no multicollinearity (Hair et al., 2005). In the present study,
VIF values exhibited during regression analysis were below the threshold value of 10,
indicating that there is no multicollinearity. The constructs have exhibited discriminant
validity as all the reliability coefficients indicated in Table 2 are higher than the
correlations between the measures of the particular factor and other factors (Table 3).
Thus, the constructs may be interpreted as independent.
Table 3 Correlation between the various constructs
TMC DES FF DW TR CEI IT RM BM SCO FP BP
TMC 1
DES 0.701** 1
FF 0.397** 0.601** 1
DW 0.373* 0.421** 0.224 1
TR 0.304* 0.347* 0.294 0.304* 1
CEI 0.458** 0.609** 0.637** 0.218 0.441** 1
IT 0.515** 0.426** 0.365* 0.178 0.445** 0.423** 1
RM 0.323* 0.507** 0.389* 0.299 0.262 0.541** 0.445** 1
BM 0.615** 0.440** 0.449** 0.164 0.398** 0.435** 0.550** 0.447** 1
SCO 0.703** 0.780** 0.586** 0.457** 0.512** 0.622** 0.521** 0.505** 0.537** 1
FP 0.212 0.235 0.265 0.052 0.292 0.280 0.405** 0.390** 0.358* 0.252 1
BP 0.337* 0.420** 0.417** 0.309* 0.410** 0.586** 0.405** 0.595** 0.393** 0.472** 0.571** 1
*Correlation is significant at the 0.05 level (2-tailed).
**Correlation is significant at the 0.01 level (2-tailed).
5.5 Criterion-related validity
Traditionally, criterion-related validity is evaluated by examining the correlations of the
different constructs with one or more measures of Business Performance (BP) (Saraph
et al., 1989). In the present context, criterion related validity is exhibited by correlating
the scales scores with the outcome constructs, namely, BP, indicated in Table 3.
All constructs show significant and positive correlation with the DV, indicating that there
is good criterion-related validity.
To sum up, all the dimensions have exhibited strong unidimensionality, reliability,
convergent, discriminant and criterion-related validities. Moreover, the item-factor
loadings, indicated in Table 2, are above 0.3. The items eliminated during the validation
process are given in Table 4, and the complete instrument is given in Appendix. Some of
the items (such as distance between accidents has increased, percentage of items
shipped without errors has increased, etc.) under the measures of performance were
eliminated during the validation process and the table indicates only the validated items
for the measures of performance. Cronbachs alpha is obtained by using SPSS, and the
item-factor loadings, RMSEA, the CFI, and BBI values are obtained by using the
LISREL package.











An empirical study on Supply Chain Management 13












Table 4 List of items eliminated during the validation process
Construct code Items eliminated
TMC 6,8
DES 2
SCO 5
CEI 2,6,7,9
IT 5,6
FF 4,6
DW 4,5,7,8,9,10
TR 1,2,6,7
BM 4
6 Results and analysis
The effect of the moderators, namely, Supply Chain Orientation, on the relationship
between the various IVs and the DVs taken one at a time is individually studied through
multiple regression analysis (Hair et al., 2005). Table 5 displays the results obtained from
the regression analysis, and the effect of the moderator on the relationship between the
IVs and the DVs. The R
2
values, the adjusted R
2
values, the F values, and the significance
level of the relationship, are all given. The R
2
values and the adjusted R
2
values are given
before and after the moderation effect, and these are respectively termed as B and A in
the table. The R
2
values indicate that the moderator (namely, SCO) has a significant
contingent impact on the relationship between the constructs of SCM and the BP of the
LSP and, therefore, the hypothesis H1b is accepted. The results also indicate that the
effect on the relationship when the measure of performance is Financial Performance
(FP) does not appear significant. Hence, hypothesis H1a is rejected. This may be due to
the fact that the challenges the TPL companies do have to face, particularly in Indian
conditions (Upendram et al., 2004), affect the economic performance of the LSPs.
But, with regard to the effect of the moderator on BP, as LSPs operate as intermediaries,
they need to ensure that the products reach the destination before the demand for the
product lapses. The LSPs seem to be operating satisfactorily in this context, explaining
the acceptance of the hypothesis, H1b. With the measures taken by the Government
of India to improve the infrastructure and the opening up of railway transport to private
operators, LSPs may start offering cost effective services to their clients, thereby
improving their own financial performance. Furthermore, Koh and Tan (2005) noted that
customer expectations of TPL-providers continue to evolve for ever. Faster delivery
times, greater customisation and increased service levels are in demand, supported by
immediate real time access to information on consignment status. However, customers
are reluctant to pay for these extra benefits, and expect them in tandem with price
reductions. Tan and Kritchanchai (2006) also observed from their study that there was a
certain level of concern voiced by the TPL companies against their clients, which
according to the authors, implied:











14 T.N. Srikantha Dath et al.












improper management of expectations
a gap in understanding and communication between the parties.
The concerns expressed by the TPL providers were:
the customers do not understand the complexity of and difficulty in providing
logistics support in Asia
customers lack the understanding of their logistics process
customers withheld critical information.
Table 5 Effect of the Supply Chain Orientation on the relationship between constructs of SCM
and the measures of performance
Moderator Supply Chain Orientation
MOP FP BP
B 0.261 0.492 R
2

A 0.458 0.589
B 0.030 0.334 Adj. R
2

A 0.010 0.250
F 1.023 1.735
Sig. Level 0.474 0.104
A: Indicates after moderation.
B: Indicates before moderation.
MOP: Measures of Performance.
FP: Financial Performance.
BP: Business Performance.
7 Summary and conclusions
An attempt has been made in this study to find the constructs of SCM from the
perspective of the LSPs. The constructs have been validated by a series of tests.
The relationship between the constructs of SCM and the measures of performance in the
presence of the moderator is studied. It is noted in this context that the effect of
moderator, Supply Chain Orientation, on the relationship between the constructs of SCM,
from the perspective of the LSPs and the DVs, taken one at a time, is not significant in
case of LSPs Financial Performance, whereas, correspondingly, the relationship seems
to be significant when the DV is Business Performance. This may be due to:
1 lack of adequate responses
2 the fact that the analysis is being done in a developing economy (India) wherein
the TPL companies need to address the challenges to maintain the momentum,
whereas the LSPs are more keen to consolidate their positions rather than achieve
better commercial gains in view of the driving factors (e.g., Golden Quadrilateral
network, North-South-East-West Corridor, and Private Participation in rail freight)
(Manda, 2006).









An empirical study on Supply Chain Management 15












These driving factors would, in future, enable TPL service providers in offering more
cost effective services to clients, thereby increasing the TPL usage by all industries
(Manda, 2006). The results are in line with the findings of Chandra and Sastry (2002)
who reported that the Indian manufacturing industry continues to lag in adopting
technologies to enhancing efficiency in the supply chain, particularly with respect to
warehousing, transportation, and distribution. Though it is inherent from literature review
that there could be a significant correlation between some of the constructs of SCM and
the measures of performance (FP), it is observed that such a correlation is not significant
at the 0.05 or 0.01 level (Table 3). The same is observed with the correlations between
some of the constructs of SCM: this could probably be due to the sample size
encountered in the current study. This aspect possibly calls for further investigation in
future research attempts. As scope for future work, researchers can attempt to establish
similar frameworks of SCM for some specific sectors with larger sample sizes.
Acknowledgements
The authors are thankful to the referees and the Editor for their valuable suggestions to
improve the earlier version of this paper.
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Appendix: Instrument: perspective of logistics service provider
Top management commitment
Extent to which the top management
1 Ensures that the organisations business strategy is aligned with the customers supply
chain strategy to serve the ultimate customer
2 Commits adequate resources for effective supply chain management
3 Supports acquisition and implementation of appropriate information systems across
departments and across supply chain
4 Emphasises on having appropriate performance measures for the various functions and
activities in the organisation









An empirical study on Supply Chain Management 19












Appendix: Instrument: perspective of logistics service provider (continued)
Top management commitment
Extent to which the top management
5 Ensures that employees are adequately trained to improve performance of the organisation
and supply chain
6 Believes in having long-term collaborative relationships with the customers as well as with
our trading partners
7 Lays emphasis in ensuring a good internal communication and dialogue process
8 Ensures recognition and rewarding systems are transparent and are in line with supply
chain strategy
9 Believes that benchmarking and continual improvement of various activities and process
result in competitive advantage
Customer orientation and involvement of employees
Extent to which
1 Our employees are part of our customers cross-functional teams for formulating and
implementing logistic/supply chain objectives and plans
2 Our trained and empowered employees (including drivers) instill confidence in customers
i.e., shippers and consignees during interactions with them
3 Our employees are capable of making alternative arrangements of service in times of
exigencies
4 Our organisation takes cognizance of formal and informal customer complaints
5 Customer feedback is regularly sought and utilised for the purpose of improvement of our
products and processes
6 Our organisation has a methodology for logging customer complaints
7 Our organisation has a long-term relationship with our customers
8 Our customers are provided information regularly regarding our performance, status of
inventory, alternative routing, market conditions, etc.)
9 Our customer transaction procedures and documentation related to services offered are
standardised and simplified
Information technology
Extent to which
1 Our various departments, offices and branches are linked electronically to support business
operations and facilitate customer service
2 Information technology (e.g., RFID, EDI, CFAR, Vehicle tracing, etc.) is used to enable
real time connectivity
3 Our organisations information system is interfaced with our customers computer systems
(e.g., having access to customers secure extranet sites)
4 Information systems are periodically updated with accurate and timely information
5 Our organisation has access to data at point of sale (EPOS) to enable QR/ECR
6 Comprehensive database maintained in our organisation helps us to retrieve customer
specific purchase patterns and inventory positions












20 T.N. Srikantha Dath et al.












Appendix: Instrument: perspective of logistics service provider (continued)
Supply chain orientation
Extent to which
1 Our organisation has global network and reach connecting places of our customers
interest
2 Cargo and documents are cleared with local offices and agencies in a timely manner
3 A comprehensive dispute resolution management system is available to address
contingencies
4 Our organisation understands the benefit of collaboration, coordination and information
sharing with our customer
5 Key deliverables are clearly defined at the time of entering into contract with the
customers
Logistics design
Extent to which
1 Design of our logistics activity helps in identifying root causes of material and information
flow problems in the supply chain
2 Various product characteristics such as volume to weight ratio, value to weight ratio,
different brand of goods, perishable, hazardous, fragile, etc., are considered while
planning the logistics activity
3 Inter-modal concept has been adopted in the containers, handling and transporting
equipments, for moving various types of materials such as general cargo, bulk-liquids and
solids, etc. in the supply chain
4 Our organisation has a reliable system for handling customers property (material,
information and documents) under specified conditions with utmost regard to safety and
security
5 Environmental criteria are considered while designing and operating the various functions
of the organisation
Integration of supply chain logistics
Freight forwarding
Extent to which
1 Our organisation has facilities /alliance and support from various carriers (i.e., air, surface
and sea carriers)
2 Cargo Arrival Notices (CAN) are provided to our customers, immediately on arrival of the
cargo
3 Our organisation provides facilities such as Multi Country Consolidation (MCC), Stuffing
and De-stuffing services for sea imports/exports
4 Our organisation offers innovative services such as buyer consolidation, merge in transit,
cross docking, postponement hubs, repacking and re-labelling, pick and pack, and storage
and sort, to serve wider range of customers and to enhance customer satisfaction
5 Shipment documents such as Bill of Lading, Shipping Bills, ARE-1, EP (Export
Performance) copy, etc. are provided to customers in time, with desired correctness and
completeness
6 Our organisation provides greater number of options to shippers and consignees for
transporting of materials (e.g., cost effective, partial container loads, alternative routing
convenient, bulk, oversize and restricted materials)











An empirical study on Supply Chain Management 21












Appendix: Instrument: perspective of logistics service provider (continued)
Distribution/warehousing
Extent to which
1 Location of our warehouse is based on weighing the related tangible and intangible factors
such as customer proximity, access to transportation, labour availability, costs related to
land and labour, taxes, state incentives and laws, JIT requirements, etc.
2 Ambient conditions of storage/Stacking are maintained in the warehouse
3 The warehouses have sufficient storage and handling equipment to cater to the varying
material specifications
4 The warehouses are designed for further expansion and to accommodate new products
5 The warehouse is designed to handle more traffic i.e. having appropriate storage layout
and the dock being designed for handling all modes of transport
6 Inventory is monitored in the warehouse and feedback provided regularly to customer
7 Information technology is utilised in our warehouse to scientifically locate, store and
retrieve materials
8 Maintenance policy for our storage and handling equipments are defined
9 Trained, skilled and knowledgeable employees handle storage and retrieval activities with
accuracy in picking and minimising damages to materials
10 Materials in the warehouse are handled on FIFO basis
Transportation
Extent to which
1 Ambient conditions of storage in transit are continuously monitored and maintained in the
vehicles
2 Wide varieties of services such a transshipment, pick and pack, etc., are offered to
customers
3 Vehicles are placed in time for material collection and delivery
4 Vehicle routing and scheduling are scientifically planned to enhance productivity and
customer satisfaction
5 Transportation solutions such as supply consolidation, milk run concepts are offered to our
customers to enhance operational efficiency and customer satisfaction
6 Our organisation has a wide range of vehicles in terms of capacity and type to suit varied
requirements of customers
7 Our organisation has clearly defined maintenance policy for transport vehicles
8 Skilled, trained and certified drivers handle our transport vehicles
Returns management
Extent to which
1 Our reverse logistics policies and programs are in alignment with our Customers Returns
Strategy
2 Forward and reverse logistics operations are linked to each other (e.g., Milk van supplying
milk in new crates and collects the old ones)
3 Our reverse logistics systems have been provided with adequate information systems to
offer services such as planning and control of product recovery, tracking and tracing
returns, inventory management, etc. to our customers
4 Information from reverse logistics is utilised to improve our forward logistics programs
5 Our organisation has a good network of asset recovery, segregation, disposal of hazardous
and obsolete material, remanufacturing and re-distribution facilities that are strategically
located in order to minimise returns and recycling costs









22 T.N. Srikantha Dath et al.












Appendix: Instrument: perspective of logistics service provider (continued)
Benchmarking of supply chain activities
Extent to which emphasis is laid on benchmarking the following with those of best-in-class
organisations
1 Information management
2 Supply chain orientation (i.e., relationship with customers, etc.)
3 Returns management
4 Performance measures
5 Services offered such as Warehousing, Freight forwarding, etc.
6 Employee training and management
Measures of performance
Financial performance
Extent to which
1 Our market share has increased
2 Profitability of our organisation has improved
3 Total logistic cost has decreased (total response cost + total inventory costs + total supply
costs + total transportation costs + total warehousing costs)
4 Inventory carrying costs have decreased
Business performance
Extent to which
1 Damage free shipment percentage has increased
2 On-time arrival percentage has increased
3 Warehouse order cycle time has reduced (elapsed time from when an order is released to
the warehouse floor until it is picked, packed and ready for shipping)
4 Customer service level has increased