CHAPTER - 5

DATA ANALYSIS AND HYPOTHESIS TESTING

5.0 INTRODUCTION

Analysis of Data obtained from Questionnaire is presented in this Chapter.

Various conclusions are drawn from the Data analysis and interpretation is also
presented. The proposed Hypothesis are tested and presented in this Chapter. Finally,
concluding remarks that support development of Framework for IT enablement of
SCM is also presented.

5.1 ANALYSIS OF DATA

The study is focused on the IT enabled supply chain management practices in

Indian industrial sector, so the population for this study is entire organizations
operating in India. Questionnaire was hosted by a web portal exclusively obtained for
this research. The portal is active during November 2009 to March 2010. Out of an
initial population of over 900 small, medium and large Indian companies, a randomly
selected 588 companies were invited to participate in the survey questionnaire
through a mail containing the information on the questionnaire web hyperlink and
Excel Spread-sheet. The portal contained aim of the research, brief guidelines for the
participants and an Excel Spread-sheet for providing responses. 247 companies were
responded with complete data through questionnaire leading to a response rate of
42%.
The following criteria have been given priority in selecting the sample units:
The company in sample is
• Practicing Supply Chain Management Practices and have a dedicated
person/Department to carryout SCM
• Demonstrated potential with regard to business needs and resources to
adopt SCM practices or company should be planning the SCM initiative
on a systems basis
• Having a manufacturing / processing / assembly unit or head-office
preferably in metropolitan cities of India and its sub-urban areas or in
popular industrial establishments.

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 Companies whose annual turnover is above Rs. 100 Cr are considered as
Large firms in terms of turnover and who’s annual turnover below Rs. 100 Cr are
considered as Small firms.

The questionnaire was pre-tested by 10 supply chain managers for content of

validity. Necessary care has been taken to help the respondents in answering the
questions, assess their problems in understanding some questions and suggest
modifications. A few pre-test questionnaires were also administered through e-mail
wherein comments were also invited from pre-test respondents. Pre-test questionnaire
was also sent to two SCM experts to suggest changes in questionnaire with regard to
type of questions and scales of measurement used therein. As requested by the
majority of the participants, the names of the participants and companies were kept
confidential.

5.2 DATA RESPONSES

This section deals with the Responses from the respondents through the
Questionnaire.

5.2.1 Primary Sector of the respondents

Primary Sector Frequency Percentage

Manufacturer 167 68
Service 45 18
Both 35 14
Total 247 100

Table 5.1: Primary Sector of the Respondents

Among the respondent companies 167 are manufacturing companies
constituting considerable 68% respondents. Companies whose activities fall under
both manufacturing and service contributes 18% of the responses and remaining
respondents said Service as their primary sector. Manufacturing companies operations
are typically involve almost all sorts of business entities starting from suppliers to the
customers.

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5.2.2 Number of Employees

Cumulative
No. of Employees Frequency Percent
Percent
Below 200 26 11 11
201 – 500 49 20 31
501 – 1000 51 21 52
Above 1000 121 49 100
Total 247 100

Table 5.2: Number of Employees

Number of employees in respondent companies is presented in the table. 5.2

percent of the companies’ employs less than 1000 employees and 44 percent
respondent companies employ more than 1000 employees.

5.2.3 SCM practices in the company

No. of Years of SCM Practices in the

Frequency Percent
company
Less than 3 Years 0 0
Between 3 – 8 Years 73 30
Above 8 Years 174 70
Total 247 100

Table 5.3: SCM Practices in the Company

The years of SCM practices indicates that the firms in India are practicing
SCM quite considerable time. 174 companies, which contribute 70% respondent
companies out of 247 companies, are practicing Supply Chain Management for more
than 5 years. This is indicated by the other observations such as usage of SCM
specific IT tools and the present performance of Supply Chain, majority of the
companies opined that they are managing supply chain with the available common IT
tools and a few are using SCM specific IT tools.

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5.2.4 Present Supply Chain performance

Likert scale Choice Frequency Percent

Strongly disagree 95 38
Disagree 77 31
Neither agree nor disagree 42 17
Agree 19 8
Strongly agree 14 6
Total 247 100

Table 5.4: Present Supply Chain Performance

Around 69% of the respondent company’s present supply chain not fulfilling
the expected performance. SCM literature indicates that this may be due to poor
supply chain planning and design, organizational resistances in re-engineering the
business processes, lack of proper information flow strategies and overall
management of supply chain by better utilizing available technologies. A few
companies expressed that their present supply chain is satisfying the need. Obviously,
these companies are large companies enjoying huge annual turnover and recognized
the need of usage of emerging technologies and implementing through BPR.

5.2.5 Most significant obstacle for IT enablement of SCM

Obstacle for IT enablement of SCM Frequency Percent

Low level internal integration among user
Departments within the firm 22 9
Internal Resistance due to lack of knowledge
on existing IT tools for SCM and emerging
Technologies 26 11
Lack of Top Management’s Commitment to
invest in IT 52 21
Supplier Reluctance to facilitate integration of
business operations 24 10
Lack of IT enabled Supply Chain Management
Skills in existing Human Resources 28 11
No proven ROI in IT enablement 95 38
Total 247 100

Table 5.5: Most significant obstacle for IT enablement of SCM

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Around 38% of the respondents opined that no proven ROI on IT enablement is the
biggest obstacle to convince top management to consider on IT investment. And 21%
of the respondents opined that lack of top management commitment to adopt
new/emerging technologies. It can be ruled out that lack of top management
commitment to invest in IT is due to no proven ROI in IT investment alone. Top
management may think investment in IT enablement in many views. In case of
willingness to re-engineer business processes, companies need to convince supply
chain partners, mainly suppliers.

5.2.6 Major Concern for IT enablement of SCM

Major Concern Frequency Percent

Buy-side transaction (Up-Stream) 86 35
Sell-Side Transactions (Down-Stream) 56 23
Both (Entire Supply Chain) 105 43
Total 247 100

Table 5.6: Major Concern for IT enablement of SCM

Around 43% companies opined that the major concern for IT enablement is
across the total supply chain. IT enablement across the entire supply chain needs total
revamp of the business processes. If the organization is willing to re-engineer their
businesses this option will be strategic. If the organization is willing to concentrate on
either up-stream or down-stream, then the option would be simple. In order to
implement IT along the up-stream side, dedicated software, hardware may be required
calling a need to adopt customized or proprietary SCM specific IT tools to get
strategic benefits. Whereas implementation along the down-stream side, common IT
tools such as Internet, XML, collaborative portals are sufficient and this offers an
advantage of minimum investment on IT when compared to SCM specific IT tools.

5.3 RESEARCH QUESTIONS AND HYPOTHESES TESTING

Based on the research questions, hypothesis to support and answer questions

related to the research problem is developed and addressed.

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5.3.1 Research question 1

How extensively is common IT tools and SCM specific IT tools being

implemented SCM practices in Indian Companies?
[H1 a] Null Hypothesis: Usage of Common IT tools in Indian Companies for
Managing their Supply Chains are above average
H0 : μC ≥ 3
Where, μC = Overall common IT tools implementation
Alternate Hypothesis: Usage of Common IT tools in Indian Companies for
Managing their Supply Chains are below average
H1 : μC < 3
Where, μC = Overall common IT tools implementation
[H1 b] Null Hypothesis: Usage of SCM specific IT tools in Indian Companies for
Managing their Supply Chains are below average
H0 : μS ≤ 3
Where, μS = Overall common IT tools implementation
Alternate Hypothesis: Usage of SCM specific IT tools in Indian Companies for
Managing their Supply Chains are above average
H1 : μS > 3
Where, μS = Overall common IT tools implementation

Since the mean of the sample is to be compared with a number, Student’s t-

test is conducted. Student t-test results are presented in Annexure - II. ANOVA is not
used here, because significant relation between the common IT tools and SCM
specific IT tools used is not required. The Level of IT implementation is to be seen.
The reference to compare mean is decided as 3 because in the scale of 1-5, 3 is
considered as the median.

The results were expected, because the common IT tools such as Internet,
XML, EDI, and RFID are very popular in Indian companies because of increase in
bandwidth of Internet and availability & service of other common tools are within the
reach and affordability of even small firms in India. Where as SCM specific IT tools
such as customized IT tools for Inventory Management, collaborative portals, etc.,. In
fact, large companies having high annual turnover are normally well adapted to the
technology as compared to the small companies.
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5.3.2 Research question 2

How do companies in India perceive most common benefits in IT enabled SCM?

H2: Expected benefits from IT enablement in Indian firms are strategic in

terms of investment on IT enablement, firm performance and cost
effectiveness in operations.

Most significant benefit anticipated Frequency Percent

Improved Customer Service 11 4
ROI on IT enablement 97 39
Lowering Total Operating Costs 69 28
Reduction of Bull-whip effect 28 11
Supply Chain Visibility 34 14
Better Supplier and Customer Relationships 8 3
Total 247 100

Table 5.7: Most significant benefit anticipated

When asked for most significant benefit expected form the IT enablement of
SCM, more than half of the respondents (67%) said ROI on IT enablement and
lowering Total Operating Costs as the significant benefits. Also, SCM literature
extensively supports that the most significant benefit anticipated through the adoption
of IT for SCM depends on individual firm’s choice, which in turn depends on the
nature of business, relationship aspects with the suppliers, strategic benefits such as
reduction in costs, improved customer satisfaction, better supplier and customer
relationships, reduction of lead-time across the supply chain, inventory optimization
etc.,. These anticipated benefits further can be discussed as a complementary to the
main benefits purely based on the suppliers side and customer side i.e., upstream side
or downstream side respectively.

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5.3.3 Research Question 3

To investigate the impact of SCM specific IT tools usage on the supply chain
performance.
Hypothesis 3: adoption of SCM specific IT tools in present supply chain with
suitable re-engineering of the supply chain will improve its performance
ANOVA between the respondents response “present supply chain
performances is satisfactory in fulfilling the expectations” and “extent of usage of
"SCM specific IT tools for managing your Supply Chain” revealed the significance
relationship between them. This elaborates the reasons for the poor performance of
the present supply chain is due to inadequate usage of IT tools, especially usage of
SCM specific IT tools are predominant. Literature strongly supports the fact that poor
performance of the supply chain is due to the following reasons
• Poorly designed supply chains
• Lack of information sharing facilities and procedures
• Inadequate IT infrastructure
• Poor collaboration among the supply chain partners
• Lack of top Management support to IT adoption
• Absence of supply chain integration
• Poor visibility of the supply chain
• Resistance to change, both within the organization and across supply
chain
• Lack of trust among the supply chain partners
• Absence of SCM specific IT tools to enable upstream and down stream
information flows
• Disparity in trading partners capabilities etc

Top management participation is important in making strategic decisions, in

particular, IT investment decisions to achieve an effective SCM system. It is not just
the implementation of a piece of software, but it requires some major changes in
business processes and the way the company operates. This requires considerable
investment in both capital and people [34]

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Chi-square test:
In order to test the hypothesis, Chi-square test is conducted. Calculated Chi-
Square value from the MS Excel chi-square statistical tool is 0.105905.
The result obtained shows that the chi-square test is significant at α = 0.05
level. The calculated chi-square value 0.105905 obtained to test t is less than 26.3 at
95% confidence level, Null Hypothesis is accepted i.e., hypothesis: there exists a
significant relation between the firms present supply chain performance and usage of
SCM specific IT tools. Further, it is significant even at α at 0.10 and 0.001. ANOVA
and Chi-square test results are presented in annexure – III which supports the
hypothesis

5.3.4 Research Question 4

Does present supply chain of Indian companies need a re-design through

Business process re-engineering (BPR) to facilitate IT enablement to receive
strategic benefits?

H4: Present Supply Chain needs Re-design based on the BPR in the context
of Information flows and Business processes to get strategic benefits
Respondents of the survey questionnaire provided valuable information on re-
design/re-engineering requirement of present supply chains.

Respondent’s data on Re-Engineering:

Respondent choice Frequency Percent
Strongly disagree 9 4
Disagree 12 5
Neither agree nor disagree 28 11
Agree 64 26
Strongly agree 134 54
Total 247 100

Table 5.8: Respondent Choice on Re – Engineering

Around 80 percent of the respondent companies expressed that their business

processes are required to be re-engineered that calls a need of re-design of their

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present supply chain. Business process re-engineering demand complete revamp of
the existing business processes with a strategic view to minimize lead-times and align
the entities along the entire supply chain. The major hurdle in this regard is differing
organizational cultures among the supply chain partners.

5.3.5 Research Question 5

How do Indian Companies perceive investment in IT enablement?

H5: Companies in India are facing dilemma in deciding the strategic
objectives of IT enablement in the context of getting a trade-off between
conflicting objectives such as Maximization of Profit and Revenue against
Minimization of Total Operating Costs, Information Sharing Costs and
Transportation & Logistics costs

F-test results on the sample for variances among the most significant benefits
perceived by the companies and the most significant obstacles for IT enablement
show that there exists a strong relation between the perceived benefits and the
strategies of organization in viewing IT investment. Hence the companies in India
have to think strategically to identify the most significant benefits from IT
enablement. Each of the available benefits in turn decides the scale of IT enablement.
If the company wants to identify the benefit that leads to performance improvements
either across the entire supply chain, along the up-stream or down-stream, the
company can assess the level of IT enablement to get strategic benefits. F-test Results
are presented in Annexure-IV

5.3.6 Research Question 6

What are the direct and indirect impacts of IT enablement on the supply
chain performance?
H6: Usage of SCM specific IT tools has direct and indirect impact on the
firm’s supply chain performance

ANOVA between present supply chain performances in fulfilling the

expectations and "extent of usage of "SCM specific IT tools for Managing Supply
Chain" is presented in annexure – V & VI

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 Also, Annual Turnover of the Company: ANOVA results supports that there
exists no significance between Annual turnover of the company and the usage of
SCM specific IT tools for Indian companies. Also literature on SCM supports that
ability and affordability of the organization does not influence the investment in
acquiring various enablers like IT enablement, Collaborative portals, RFID etc., This
indicates a strategic perception of the companies in investing such assets.

5.4 CONCLUSIONS

Out of an initial population of over 900 small, medium and large Indian
companies, a randomly selected 588 companies were invited to participate in the
survey questionnaire. 247 companies were responded with complete data through
questionnaire leading to a response rate of 42%.

Around 69% of the respondent company’s present supply chain not fulfilling
the expected performance. SCM literature indicates that this may be due to poor
supply chain planning and design, organizational resistances in re-engineering the
business processes, lack of proper information flow strategies and overall
management of supply chain by better utilizing available technologies.

IT enablement across the entire supply chain needs total revamp of the
business processes. If the organization is willing to re-engineer their businesses this
option will be strategic. If the organization is willing to concentrate on either up-
stream or down-stream, then the option would be simple. In order to implement IT
along the up-stream side, dedicated software, hardware may be required calling a need
to adopt customized or proprietary SCM specific IT tools to get strategic benefits.
Whereas implementation along the down-stream side, common IT tools such as
Internet, XML, collaborative portals are sufficient and this offers an advantage of
minimum investment on IT when compared to SCM specific IT tools. In case of
willingness to re-engineer business processes, companies need to convince supply
chain partners, mainly suppliers.

When asked for most significant benefit expected form the IT enablement of
SCM, more than half of the respondents (67%) said ROI on IT enablement and
lowering Total Operating Costs as the significant benefits. Also, SCM literature

63
extensively supports that the most significant benefit anticipated through the adoption
of IT for SCM depends on individual firm’s choice, which in turn depends on the
nature of business, relationship aspects with the suppliers, strategic benefits such as
reduction in costs, improved customer satisfaction, better supplier and customer
relationships, reduction of lead-time across the supply chain, inventory optimization
etc.,. These anticipated benefits further can be discussed as a complementary to the
main benefits purely based on the suppliers side and customer side i.e., upstream side
or downstream side respectively.

ANOVA between the respondents response “present supply chain

performances is satisfactory in fulfilling the expectations” and “extent of usage of
"SCM specific IT tools for managing your Supply Chain” revealed the significance
relationship between them. This elaborates the reasons for the poor performance of
the present supply chain is due to inadequate usage of IT tools, especially usage of
SCM specific IT tools are predominant.

Around 80 percent of the respondent companies expressed that their business

processes are required to be re-engineered that calls a need of re-design of their
present supply chain. Business process re-engineering demand complete revamp of
the existing business processes with a strategic view to minimize lead-times and align
the entities along the entire supply chain. The major hurdle in this regard is differing
organizational cultures among the supply chain partners.

In order to develop an effective framework for ‘IT Enablement” of SCM, some

strategies are suggested as follows
1. Supply chain costs should be optimum including the information sharing costs
2. Ambiguity should be eliminated regarding ‘IT Enablement’ of SCM in the
context of benefits or the impacts
3. Most promising ‘IT tool’ selection should ensure adoptability, affordability
and suitability
4. IT enablement should ensure effective RoI on the Investment

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