An empirical study of the interaction effects of internal integration and customer integration on flexibility capability and market performance

Purpose – The purpose of this paper is to investigate empirically the effects of internal integration and customer integration on process flexibility and market performance. It also aims to identify the basic practices that comprise internal integration and consider the interaction between internal integration and customer integration.
Design/methodology/approach- A questionnaire survey approach was used with the unit of analysis at the firm level. Key informants included managing directors, vice presidents, supply chain directors, general managers and supply
chain/logistics/purchasing managers. The sample was drawn from automotive industry suppliers in Thailand. Structural equation modeling was used for the data analysis.
Findings- Internal integration is defined as a multidimensional concept comprising information system integration, cross-functional team working and cross functional coordination. The findings also illustrate that internal integration and customer integration positively influence each other and, both together and individually, lead to improved process flexibility. Improved process flexibility leads to improved market performance. Process flexibility mediates between internal and customer integration and market performance. However, customer integration has a stronger indirect effect on market performance than that of internal integration.
Research limitations/implications- The study uses cross-sectional data so the findings provide a picture of supply chain integration in Thailand’s automotive supplier in a particular point in time. Additionally, the findings rely on the perceptual measures of single informant respondents in each company and the study focuses on a single industry.
Practical implications – The results provides useful information for executives who wish to implement internal integration and customer integration. The results clearly provide empirical evidence to identify the basic elements of internal integration and suggest that managers should implement both internal integration and customer integration at the same time in order to achieve superior performance in the market.
Originality/value – The paper generates the theory that today studies firms have
developed relationship in two ways with their supply chain partners. Thus, they should be simultaneously interactive and collaborative working together. The industry studied may be unique in term of the step of integrative philosophy may be not follow what Stevens used to suggest- internal integration first and then external integration, but both should work together to generate joint outcomes. This cooperative manner/behavior strengthens the definition/concept of supply chain management.