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IJPDLM 39,2

Collaborative forecasting and planning in supply chains

The impact on performance in Japanese manufacturers
Mikihisa Nakano
Faculty of Management, Kyoto Sangyo University, Kyoto, Japan
Abstract
Purpose The purpose of this paper is to empirically examine the impact of internal and external collaborative forecasting and planning on logistics and production performance. Design/methodology/approach To measure the degree of collaborative forecasting and planning, the concept of collaboration is categorized into three dimensions: sharing resources, collaborative process operation, and collaborative process improvement. Based on these dimensions, a survey of Japanese manufacturers was conducted and the analytical model is proposed to examine using structural equation modeling. Findings There are positive relationships between internal and external collaborative forecasting and planning. Upstream and downstream collaborative forecasting and planning are also positively related. Internal collaborative forecasting and planning has a positive effect on relative logistics and production performance. External collaborative forecasting and planning does not have a signicant effect on relative logistics and production performance. Research limitations/implications This study does not clarify how rms can achieve the improvement of forecasting and planning process. Future research should investigate the mechanism of process improvement in supply chain. Practical implications Not only sharing resources and collaborative process operation but also collaborative process improvement play a crucial role in gaining sustainable competitive advantage in logistics and production. Originality/value This study focuses on the forecasting and planning process in supply chain and proposes new dimensions measuring the degree of collaborative forecasting and planning. By focusing on the process and using the dimensions, the relationship between supply chain collaboration and performance are discussed concretely. Keywords Supply chain management, Forecasting, Production planning, Operations and production management, Japan Paper type Research paper

84
Received 23 June 2008 Revised 26 November 2008 Accepted 12 December 2008

1. Introduction To achieve high logistics and production performance (lower logistics and manufacturing costs, optimal inventory levels, and better customer service), many rms have introduced supply chain management (SCM). To apply the concept of SCM
International Journal of Physical Distribution & Logistics Management Vol. 39 No. 2, 2009 pp. 84-105 q Emerald Group Publishing Limited 0960-0035 DOI 10.1108/09600030910942377

This study was supported by the research grant from Japan Logistics Society. The author would like to express his appreciation to all the respondents who gave of their time to participate in the survey. The author is grateful for the constructive feedback and suggestions provided by two editors and two anonymous reviewers. The author also thank Professor Ichiro Tokutsu of Kobe University for his valuable comments.

in practice, rms should integrate business processes in the supply chain (Bowersox et al., 1999; Lambert, 2006). Through many empirical studies, it has been found that supply chain integration has a positive effect on performance (Akikawa, 2004; Ellinger et al., 2000; Frohlich and Westbrook, 2001; Gimenez and Ventura, 2003, 2005; Kim, 2006; Rodrigues et al., 2004; Rosenzweig et al., 2003; Sanders and Premus, 2005; Simatupang and Sridharan, 2005; Spekman et al., 1998; Stank et al., 1999a, b, 2001). In general, the supply chain process includes several kinds of sub-processes, such as order fulllment, demand management, manufacturing ow management (Lambert, 2006). These previous studies, however, tend to look at the whole supply chain process. Therefore, the relationship between supply chain integration and performance has been discussed ambiguously. Specically, it has not been sufciently conrmed whether or not the integration of each sub-process has a signicant effect on performance. This study focuses on the forecasting and planning process, which plays an important role in managing the supply chain effectively. The relationship between internal and external integrative forecasting and planning and performance was tried to analyze. In the analysis, a survey of Japanese manufacturers was conducted and the data were statistically examined using structural equation modeling (SEM). The purpose is to discuss about whether or not the integration of the forecasting and planning process has a positive effect on logistics and production performance. A major contribution of this study is to develop a measure of collaborative forecasting and planning. The concept of collaboration is a dimension of integration (Kahn and Mentzer, 1996) and is treated as an aggregation of various elements (e.g., sharing operational information, joint planning, joint establishment of objectives, and redesigning work routines and processes) in previous empirical studies using SEM. These elements are categorized into three dimensions. Based on the dimensions, the observed variables measuring the latent construct for collaborative forecasting and planning are set. This paper is organized as follows: Section 2 reviews relevant literatures; Section 3 proposes the dimensions of collaborative forecasting and planning; Section 4 presents the research hypotheses and the analytical model; Section 5 describes the research methodology; Section 6 reports the research results; Section 7 discusses some ndings from the results; and nally, Section 8 draws implications and describes directions for future research. 2. Literature review The main source of competitive advantage from SCM is integration of business processes within a rm and across rms (Bowersox et al., 1999; Lambert, 2006). For integrating business processes, inter-organizational integrative activities are very important. So, many studies have empirically examined the impact of integrative activities on performance. The integrative activities in supply chain are dened as interaction and collaboration by Kahn and Mentzer (1996). This denition is based on Lawrence and Lorsch (1967), which is an early study on inter-departmental integration, and the conceptual framework of inter-departmental integration in product development (Grifn and Hauser, 1996; Gupta et al., 1986; Kahn, 1996). According to Kahn and Mentzer (1996, pp. 9-10), interaction represents the communication aspects associated with verbal and documented information exchange. Such activities are tangible and can be easily monitored. On the other hand, collaboration is dened as the willingness of

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departments to work together. Collaborative activities are typically intangible, less easily regulated, difcult to sustain without joint efforts, and represent a higher level of interrelationship. Using their denition, Stank et al. (1999b) and Ellinger et al. (2000) examined the relationship between marketing/logistics integration and performance. These studies presented that there is a strong relationship between collaboration and performance. This result implied that collaboration is more important than interaction to integrate business processes in a supply chain. Extending these studies, Stank et al. (2001) proposed a new model to analyze the impact of internal and external collaboration on performance and veried the model. Similar models were adopted in other studies (Gimenez and Ventura, 2003, 2005; Rodrigues et al., 2004; Sanders and Premus, 2005). Furthermore, some studies on the relationship between external collaboration and performance (Akikawa, 2004; Frohlich and Westbrook, 2001; Simatupang and Sridharan, 2005) were conducted in European and Asian/Pacic countries. From these studies, we can understand three trends: (1) Collaborative activities have been the focus of recent studies. (2) The target of collaboration has been widened from within a rm to across rms or both within a rm and across rms. (3) Examination of the impact on performance has been performed in various countries. Through these studies, we have obtained a consensus about the importance of internal and/or external collaboration in supply chain regardless of the country. These studies except for Simatupang and Sridharan (2005), however, treat the concept of collaboration as an aggregation of many elements and do not dene the dimensions of collaboration. Moreover, Simatupang and Sridharans (2005) three dimensions of external collaboration, that is: (1) information sharing; (2) decision synchronization; and (3) incentive alignment. Are not dened from the viewpoint of integrating business processes, which is the main source of competitive advantage in supply chain. Therefore, we cannot yet understand how rms should collaborate internally and/or externally to integrate supply chain processes. To answer this question, we need to categorize the concept of collaboration into some dimensions regarding process integration in supply chain. 3. Three dimensions of collaborative forecasting and planning This study focuses on collaborative activities in the forecasting and planning process, which is one of the business processes in supply chain and is called demand management process by Lambert (2006). The reason is as follows. Forecasting and planning plays an important role in every major functional area of business management (Ballou, 2004, p. 287; Makridakis and Wheelwright, 1977, p. 24; Mentzer and Moon, 2005, p. 11). This process is also one of the main competencies/capabilities essential to internal and external integration in supply chain (Bowersox et al., 1999, pp. 22-6;

Sanders and Ritzman, 2004, p. 514). In addition, this process is one area in which collaboration is taking place in supply chain (McCarthy and Golicic, 2002, p. 433). Recently, some case studies on collaborative forecasting and planning (Barratt, 2004; McCarthy and Golicic, 2002; Smaros, 2003) and some surveys about the implementation (Barratt and Oliveira, 2001; Skjoett-Larsen et al., 2003; Stank et al., 1999a) were conducted in various countries (Denmark, UK, and the USA). However, there are few studies that empirically examined the relationship between both internal and external collaborative forecasting and planning and performance. The forecasting and planning process in supply chain is often called sales and operations planning (S&OP). Figure 1 shows the S&OP process of a manufacturer. This gure is modied from Figure 1.4 in Mentzer and Moon (2005, p. 11). As this gure represents, there are two kinds of collaborative activities: (1) sharing resources; and (2) collaborative process operation. In the S&OP process. Sharing resources is to share standardized information (e.g., forecast, shipment, inventory, production, and purchasing data) and customized information (e.g., factors of demand uctuation, and operational resources and constraints). Collaborative process operation is to connect forecast and plan based on a schedule established in advance and to reexamine activities to adjust deviations from forecast and plan when contingencies arise. Referring to March and Simon (1958, p. 160), we can call the former coordination by plan and the latter coordination by feedback. The purpose of these activities is to execute forecasting and planning in the S&OP process periodically. Through these activities, rms can integrate the S&OP operational process monthly, weekly, and daily. In addition, rms, especially in a rapidly changing environment, should rene the S&OP process. Firms need to add new processes (e.g., getting new data for forecasting, such as actual demand, and sharing tacit domain knowledge), eliminate unnecessary processes (e.g., ordering automatically and non-duplicate forecasting), and redesign organizational roles and responsibilities (e.g., dening responsibility for inventory and rules on returned goods). These activities are called process innovation (Davenport, 1993). Process innovation, also known as business process reengineering (Hammer and Champy, 1993), business process redesign (Davenport and Short, 1990; Martinsons, 1995; Stoddard and Jarvenpaa, 1995) or business process change (Guha et al., 1997; Kettinger and Grover, 1995), is essential to gain sustainable competitive advantage. In particular, the implementation of process innovation is successful through continuous improvement (Harrison and Pratt, 1993, p. 11), evolutionary change (Jarvenpaa and Stoddard, 1998, pp. 25-26), or a series of incremental steps (Dennis et al., 2003, p. 39). In-depth interviews were conducted with 22 Japanese manufacturers in food, beverage, cosmetic/household, and electrical/electronic equipment industries from April 2003 to May 2007. Through the interviews, it was found that three manufacturers: (1) Calbee Foods Corporation, which is a food manufacturer. (2) Kao Corporation, which is a cosmetic and household manufacturer. (3) Pokka Corporation, which is a beverage manufacturer, have collaborative processes to rene the S&OP process.

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Figure 1. S&OP process

Interdepartmental Collaboration Up stream Collaboration Sales Forecast Demand Plan Sales Forecast Demand Plan Capacity Plan Operational Plan Capacity Plan Operational Plan Capacity Plan Operational Plan Down stream collaborative process operation Inter- departmental collaborative process operation Sales and Marketing department Production, Logistics, etc. department Upstream collaborative process operation Suppliers Adjusted Sales Forecast Demand Plan Adjusted Sales Forecast Demand Plan Adjusted Capacity Plan Operational Plan Adjusted Capacity Plan Operational Plan Adjusted Capacity Plan Operational Plan organization collaborative process operation resources flow

Down stream Collaboration

Sales Forecast Demand Plan

Channel Partners

Adjusted Sales Forecast Demand Plan

These rms have frequently discussed operational problems and solutions, for example, what the causes of forecasting errors were, why the demand side could not coordinate the errors with the supply side, why they could not share some data for forecasting and planning, and how they should manage inventory levels, through cross-functional meetings within the rms, internal meetings involving suppliers, and external meetings with channel partners. These rms have continued such collaborative meetings since the end of the 1990s or the beginning of the 2000s and gained high logistics and production performance. Therefore, rms in an unstable environment should continuously modify the S&OP process to adapt to market uncertainty. We call the activities collaborative process improvement, which means collaborative activities for improving the S&OP process. Namely, collaborative process improvement is to redesign and implement the forecasting and planning process collaboratively and continuously. Through the above discussion, we can categorize the concept of collaboration into three dimensions: (1) sharing resources; (2) collaborative process operation; and (3) collaborative process improvement. Using these dimensions, the observed variables adopted in previous empirical studies were classied, as Table I shows. The observed variables on sharing resources are adopted by seven authors. The observed variables on collaborative process operation are also used by six authors. These dimensions are recognized as collaborative activities by many authors. The observed variables on collaborative process improvement, however, are utilized by only four authors. Moreover, only two authors (Gimenez and Ventura, and Rodrigues et al.) adopt the observed variables on the dimension in both internal and external supply chain. Consequently, we can understand that the importance of collaborative process improvement is not sufciently noticed. Based on this recognition, using these dimensions, this study empirically examines the impact of collaborative forecasting and planning in both internal and external supply chain on performance. 4. Hypotheses 4.1. Relationship between internal collaboration and external collaboration Stank et al. (2001) and Gimenez and Ventura (2003, 2005) presented a positive relationship between internal collaboration and external collaboration. Regarding the correlation in the S&OP process, we can explain as follows. If a manufacturer shares resources among departments and operates the forecasting and planning process collaboratively, the manufacturer can provide accurate forecasts and plans to suppliers and channel partners, and jointly operate the forecasting and planning processes with them. Similarly, through a high degree of external resources sharing and operational coordination, the manufacturer can operate the forecasting and planning process using accurate forecasts and plans. Moreover, to adapt to high market uncertainty, rms should change business processes not only within rms but also across rms, as proposed by Champys (2002) X-engineering concept. In other words, manufacturers need to improve internal and

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Authors External Integration Sharing resources

Frohlich and Westbrook (2001)

Stank et al. (2001)

Gimenez and Ventura (2003, 2005)

Table I. Literature on the relationship between collaborative activities in supply chain and performance Internal/external Latent variables Dimension Observed variables Others Internal Collaboration Sharing resources Access to planning systems; Sharing production plans; Joint EDI access/networks; Knowledge of inventory mix/levels; Common logistical equipment/containers; Common use of third-party logistics Packaging customization; Delivery frequencies Integrated database; Sharing operational information; Sharing both standardized and customized information; Objective feedback to employees regarding integrated logistics performance Compensation, incentive, and reward systems External Collaboration Collaborative process operation Sharing resources Collaborative process operation Internal Integration Collaborative process improvement Sharing resources Collaborative process operation Collaborative process improvement Others Sharing operational information Integrating operations; Arrangements that operate under principles of shared rewards and risks; Operational exibility Developing performance measures; Benchmarking best practices/processes Shared ideas, information, and other resources Joint planning to anticipate and resolve operative problems Joint establishment of objectives; Joint development of the responsibilities understanding; Joint decisions about ways to improve cost efciencies Informal teamwork; Established teamwork (continued)

Authors External Integration Sharing resources Collaborative process operation Collaborative process improvement

Internal/external Latent variables

Dimension

Observed variables

Akikawa (2004) Internal

External

Coordination

Shared information Joint planning to anticipate and resolve operative problems Joint development of logistics processes; Established work team for the implementation and development of CRP or other ECR practice; Joint establishment of objectives; Joint development of the responsibilities understanding: joint decisions about wavs to imnrove cost efciencies Informal teamwork Information sharing Planning integration

Rodrigues et al. (2004)

Others Sharing resources Collaborative process operation Integrated operations Sharing resources Collaborative process operation Collaborative process improvement

External

Integrated operations Sharing resources Collaborative process operation Collaborative process improvement

Sharing operational information Cross-functional work team for managing day-to-day operations Redesigning work routines and processes; Shifting from managing functions to managing processes Sharing operational information Operational exibility; Integrating operations Initiatives to standardize supply chain practices and operations (continued)

Collaborative forecasting and planning 91

Table I.

92

Authors Internal Collaboration Sharing resources

Sanders and Premus (2005) External Collaboration Collaborative process improvement Sharing resources

Simatupang and Sridharan (2005)

Table I. Internal/external Latent variables Dimension Observed variables Integrated database; Sharing operations information Cross-functional collaboration in strategic planning Sharing operations information; Sharing cross-functional processes; Sharing cost information Engaging in collaborative planning External Information sharing Collaborative process operation Sharing resources Decision synchronization Collaborative process operation Incentive alignment Collaborative process operation Promotional events; Demand forecast; POS data; Price changes; Inventory-holding costs; On-hand inventory levels; Inventory policy; Supply disruptions; Order status or order tracking; Delivery Schedules Joint plan on product assortment, promotional events; Joint development of demand forecasts; Joint resolution on forecast exceptions, order exceptions; Consultation on pricing policy; Joint decision on availability level, inventory requirements, optimal order quantity Joint frequent shopper programmes; Shared saving on reduced inventory costs; Delivery guarantee for a peak demand; Allowance for product defects; Subsidies for retail price markdowns; Agreements on order changes

IJPDLM 39,2

external forecasting and planning process simultaneously. Thus, we can expect that there will be a positive relationship between internal collaboration and external collaboration in the forecasting and planning process. Gimenez and Ventura (2005), however, found that the signicance of the relationship between internal collaboration and external collaboration depended on the strength of the relationship with external rms. So, this study focuses on the relationship with main suppliers and channel partners, and the following hypotheses are proposed: H1a. The higher the degree of internal collaborative forecasting and planning, the higher the degree of collaborative forecasting and planning with main suppliers. H1b. The higher the degree of internal collaborative forecasting and planning, the higher the degree of collaborative forecasting and planning with main wholesalers/retailers. 4.2. Relationship between collaboration with suppliers and collaboration with channel partners Previous studies have not sufciently examined the relationship between collaboration with suppliers and collaboration with channel partners. This is because upstream integration and downstream integration tend to be separated in research (Frohlich and Westbrook, 2001, p. 186; Vickery et al., 2003, p. 524). To propose a hypothesis on this relationship, we refer to Forza (1996). Forza presented a hypothesis that the companies which seek the benets of upstream interaction/ integration will also seek the benets of greater downstream interaction/integration (or vice versa) (p. 42). This hypothesis was statistically supported. The author has found a similar phenomenon through a case study of Calbee Foods Corporation, which is introduced above (see Section 3) and is a best practice rm of SCM. At Calbee, the sales department started external collaborative planning called planning meeting with main retailers. Through the reports by the sales department at internal cross-functional meeting called bukai, the production and logistics departments recognized the effect. Next, the production and logistics departments started planning meetings with their main material suppliers and physical distribution service suppliers. For this reason, we expect that there will be positive relationship between upstream collaborative forecasting and planning and downstream collaborative forecasting and planning, and a second hypothesis is proposed: H2. The higher the degree of collaborative forecasting and planning with main suppliers, the higher the degree of collaborative forecasting and planning with main wholesalers/retailers. 4.3. Relationship between internal collaboration and performance In general, the higher the degree of internal collaboration, the more superior the absolute performance, as measured against a pre-determined target. However, the relative performance, as measured against performance of competitors, is not always improved. This is because internal collaboration does not lead to competitive advantage if most rms perform a high degree of internal collaboration. In fact,

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Stank et al. (2001) presented a signicant relationship between internal collaboration and relative performance. In contrast, Gimenez and Ventura (2003) did not nd the signicance. As Gimenez and Ventura (2003, p. 85) indicated, this difference depends on the sample demographic (e.g., industry and country). In Japan, some manufacturers started to introduce SCP (Supply Chain Planning) software in the latter half of the 1990s. Simultaneously, these rms reformed the organizational structure and process (e.g., establishing SCM committee, setting up forecasting department, reassigning responsibility for inventory, and rebuilding forecasting and planning process). A survey of Japanese manufacturers was conducted with 275 members rms of Japan Institute of Logistics Society (JILS) in November 2003 (68 effective responses) (Nakano, 2005). As a result, it was found that only 14 rms (20.6 percent) used information systems for both forecasting and planning, and the functional departments (e.g., production and logistics) planed based on a one-number forecast calculated by the forecasting department or decided through consensus meeting called jukyu-chousei-kaigi or seihan-kaigi. The result implies that there are a few manufacturers advanced in internal collaborative forecasting and planning, but the degree of internal collaborative forecasting and planning is low at most Japanese manufacturers. Therefore, it is expected that internal collaborative forecasting and planning will lead to highly competitive performance, and a third hypothesis is offered: H3. Internal collaborative forecasting and planning has a positive effect on relative performance. 4.4. Relationship between external collaboration and performance The strength of the relationship between external collaboration and relative performance also depends on the sample demographic. On external collaboration, it is well known that Japanese automotive manufacturers (e.g., Toyota, Nissan, and Honda) have very strong partnerships with their suppliers. As Gimenez and Ventura (2003, p. 85) mentioned, in this industry, external collaboration does not lead to a competitive advantage because it is a prerequisite to survive, and almost all companies have implemented it. However, rms in other industries are not similar to automotive manufactures. Akikawa (2004) conducted a survey of Japanese manufacturers aimed at 700 rms in March 2002 (70 effective responses). His study showed that the ratio of rms that share information and integrate planning with suppliers and customers was 20-30 percent. The result implies that most Japanese manufacturers have not sufciently collaborated with main suppliers and customers on the forecasting and planning process. Recently, there are some initiatives on external collaborative forecasting and planning: Collaborative Planning, Forecasting, and Replenishment by AEON (major general merchandise store, GMS) and grocery manufacturers; continuous replenishment program (CRP) by Heiwado (local GMS) and grocery manufacturers; vendor managed inventory (VMI) by Asahi Breweries (beer manufacturer) and wholesalers; SCM under the leadership of retailer called demand chain management by Yamada Denki (electronics retailer) and electronics manufacturers; electronic procurement system called Spirits by Sony; partnership with suppliers called WP2 (World production partners) by World (apparel rm). These initiatives imply that some

advanced manufacturers have a high degree of external collaborative forecasting and planning. So, it is expected that collaborative forecasting and planning with main suppliers and customers will lead to very competitive performance, and fourth hypotheses are proposed: H4a. Collaborative forecasting and planning with main suppliers has a positive effect on relative performance. H4b. Collaborative forecasting and planning with main wholesalers/retailers has a positive effect on relative performance. Hypothesized relationships are represented in Figure 2. In the following section, we call relative performance simply performance for convenience. 5. Method 5.1. Data Data were collected through a mail survey sent to Japanese manufacturers. The survey instrument was initially pre-tested at meetings with four managers of SCM or logistics department and one consultant. The individuals were asked to review readability and ambiguity of expressions in the questionnaire. Their suggestions for rewording were reected in the nal survey instrument. The questionnaire was mailed to 256 manufacturers among members of JILS in January 2005. The respondents were managers of SCM or logistics department. After removing incomplete responses, the total number of effective responses was 65, which represented a response rate of 25.4 percent. While the sample size is relatively small, there are precedents for using SEM with similar sample sizes (Boyd and Fulk, 1996; Gimenez and Ventura, 2003, 2005; Larsson and Finkelstein, 1999; McGrath et al., 1996; Miller et al., 1997; Singh, 1986; Walker and Poppo, 1991; Walker and Weber, 1987). The sample demographic is shown in Table II.

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H2

Collaborative forecasting and planning with main Suppliers H1a

H4a

H3 Internal Collaborative forecasting and planning H4b

Logistics and Production Performance

H1b Collaborative forecasting and planning with main Customers

Figure 2. Conceptual model

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Industry sub-sector 1. Food 2. Beverage 3. Apparel 4. Chemical 5. Cosmetic & Household 6. Pharmaceutical 7. Ceramic 8. Nonferrous metal 9. Metal 10. Machinery 11. Electrical/Electronic equipment 12. Automotive 13. Other

Frequency 13 10 1 6 5 3 3 1 5 1 8 5 4 65

Percentage 20.0 15.4 1.5 9.2 7.7 4.6 4.6 1.5 7.7 1.5 12.3 7.7 6.2 100.0

96

Table II. Sample demographic

Based on the procedure described by Armstrong and Overton (1977), an analysis of non-response bias was conducted. Concretely, the responses were numbered sequentially in the order they were received, and compared mean scores of the rst quartile assumed to be most motivated to participate with those of the last quartile assumed to be most similar to non-respondents to all variables. As a result, a signicant difference (at p , 0.05) in means was not found. Hence, there was no evidence of response bias. 5.2. Measures The hypothesized model illustrated in Figure 2 was tested using SEM. The model is composed of four constructs: (1) internal collaborative forecasting and planning; (2) collaborative forecasting and planning with main suppliers; (3) collaborative forecasting and planning with main customers (wholesalers/ retailers); and (4) logistics and production performance. These constructs are latent variables that cannot be observed directly. Accordingly, observed variables listed in Table III were used. Three latent variables on inter-organizational collaborative forecasting and planning are measured using six observed variables: two variables on sharing resources (sharing standardized information and sharing customized information), two variables on collaborative process operation (coordination by plan and coordination by feedback), and two variables on collaborative process improvement (collaborative process redesign and continuous process improvement). In some previous studies, performance was measured using an index of customer service level (Ellinger et al., 2000; Gimenez and Ventura, 2003, 2005; Stank et al., 1999; Stank et al., 2001). However, Narasimhan and Das (2001) and Sanders and Premus (2005) described that successful rms engage in the simultaneous pursuit of multiple performance objectives. These studies treated performance as a composite construct encompassing cost, product quality, delivery speed, and new product introduction time.

Mean Internal collaborative forecasting and planning (IC) IC1 Internal sharing standardized information IC2 Internal sharing customized information IC3 Internal coordination by plan IC4 Internal coordination by feedback IC5 Internal collaborative process redesign IC6 Internal continuous process improvement Collaborative forecasting and planning with main Suppliers (CS) CS1 Sharing standardized information with main suppliers CS2 Sharing customized information with main suppliers CS3 Coordination by plan with main suppliers CS4 Coordination by feedback with main suppliers CS5 Collaborative process redesign with main suppliers CS6 Continuous process improvement with main suppliers Collaborative forecasting and planning with main Customers (CC) CC1 Sharing standardized information with main customers CC2 Sharing customized information with main customers CC3 Coordination by plan with main customers CC4 Coordination by feedback with main customers CC5 Collaborative process redesign with main customers CC6 Continuous process improvement with main customers Logistics and Production Performance (LPP) LPP1 Logistics cost LPP2 Manufacturing cost LPP3 Final product inventory level LPP4 Order ll rate LPP5 Delivery speed LPP6 Delivery times

SD

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3.26 3.40 3.54 3.69 3.32 3.37 3.34 3.45 3.35 3.58 3.20 3.31 3.22 3.23 3.05 3.31 3.08 3.08 3.45 3.35 3.20 3.57 3.51 3.38

1.02 0.93 0.95 0.58 0.79 0.74 0.91 0.81 0.87 0.73 0.79 0.79 0.89 0.84 0.89 0.86 0.89 0.87 0.77 0.72 0.90 0.75 0.59 0.78

Table III. Questionnaire items

In the same way, this study treats performance as a composite construct encompassing logistics cost, manufacturing cost, nal product inventory level, order ll rate, delivery speed, and delivery times. This study calls it logistics and production performance. For inter-organizational collaborative forecasting and planning items, respondents were asked to indicate their agreement based on a ve-point scale between 1 strongly

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disagree and 5 strongly agree. For logistics and production performance items, respondents were asked to indicate their perceptions based on a ve-point scale between 1 much worse than competitors and 5 much better than competitors. 6. Results 6.1. Reliability and validity The test for reliability of each construct was conducted using Cronbachs coefcient a. Table IV reports that the values are greater than 0.70, which is a criterion that is generally accepted as indicating reliability (Garver and Mentzer, 1999). Next, convergent validity of each latent variable was evaluated using conrmatory factor analysis via AMOS 6.0 software. Table V shows multiple t indices, standardized coefcients, and t-values. Because no single statistic is considered superior regarding assessment, a review of multiple t indices is desirable. x-square values for four latent variables are signicant (at p , 0.05). The ratios of x-square value to the degree of freedom are within the recommended range (x2/df % 3) (Hair et al., 1998). Goodness of t index (GFI), comparative t index (CFI), and incremental t index (IFI) had values exceeding the 0.90 cutoff (Hu and Bentler, 1995). Root mean square residual (RMR) is small. Also, standardized coefcients are statistically signicant at p , 0.05 level. These results provide the evidence of convergent validity. Furthermore, following the recommendation of Garver and Mentzer (1999), discriminant validity was evaluated through a condence interval test. If the condence interval (^ two standard errors) around the correlation estimate between two factors does not include 1.0, the result provides the evidence that two factors are different (Anderson and Gerbing, 1988). In the correlation estimates between latent variables, none of the condence intervals contained 1.0, demonstrating discriminant validity. 6.2. Hypotheses test results The model was tested using SEM via AMOS 6.0 software. Maximum likelihood method was used to estimate parameters. Some correlations were assumed to improve goodness-of-t. These correlations were assumed among similar kinds of inter-organizational collaborative activities. Figure 3 shows the result. Multiple t indices were used to evaluate goodness-of-t of the model. x-square value is signicant (at p , 0.05). But the ratio of x-square value to the degree of freedom is within the recommended range (x2/df % 3) (Hair et al., 1998). RMR is slightly high value. GFI is below the recommended criteria (GFI $ 0.90) (Hu and Bentler, 1995). Instead, CFI, IFI, and Non-Normed Fit Index had values exceeding the 0.90 cutoff (Hu and Bentler, 1995). The result of these alternative indices provides the evidence of the overall validity of the hypothesized model.
Constructs IC CS CC LPP Cronbach a 0.829 0.910 0.904 0.780

98

Table IV. Test for reliability

Constructs IC CS cc LPP Items IC1 IC2 IC3 IC4 IC5 IC6 CS1 CS2 CS3 CS4 CS5 CS6 CC1 CC2 CC3 CC4 CC5 CC6 LPP1 LPP2 LPP3 LPP4 LPP5 LPP6

x2 22.851 18.470 15.854 12.535 Standardized coefcient 0.550 0.739 0.805 0.480 0.682 0.804 0.813 0.756 0.851 0.732 0.730 0.876 0.743 0.675 0.908 0.676 0.844 0.879 0.496 0.594 0.654 0.745 0.629 0.559

df 9 9 9 9

x 2/df 2.539 2.052 1.762 1.393

p-value 0.007 0.030 0.070 0.185 t-value 4.471 * 6.501 * 7.323 * 3.814 * 5.834 * 7.305 * 7.720 * 6.938 * 8.282 * 6.629 * 6.605 * 8.685 * 6.638 * 5.826 * 9.036 * 5.839 * 8.029 * 8.574 * 3.793 * 4.672 * 5.252 * 6.171 * 5.010 * 4.349 *

GFI 0.909 0.913 0.923 0.945

RMR 0.046 0.031 0.029 0.031

CFI 0.908 0.960 0.971 0.958

IFI 0.912 0.961 0.971 0.961

Collaborative forecasting and planning 99

Note: *p , 0.01

Table V. Test for convergent validity

Each hypothesis was assessed by reviewing the signicance, magnitude, and direction of each parameter coefcient. The results show that internal collaborative forecasting and planning and collaborative forecasting and planning with main suppliers or customers are strongly and positively correlated; this result supports H1a and H1b. Similarly, collaborative forecasting and planning with main suppliers and collaborative forecasting and planning with main customers are strongly and positively correlated; this supports H2. A causal relationship between internal collaborative forecasting and planning and logistics and production performance is statistically signicant. So, H3 is supported. The causal relationship between collaborative forecasting and planning with main suppliers or customers, and logistics and production performance are not statistically signicant; this does not support H4a and H4b. Consequently, only internal collaborative forecasting and planning has a signicant effect on logistics and production performance. External collaborative forecasting and planning does not signicantly affect logistics and production performance.

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H2** 0.580 (6.216)

Collaborative forecasting and planning with main Suppliers 0.835 (16.249) H3* Internal Collaborative forecasting and planning H1b** 0.612 (6.698) Collaborative forecasting and planning with main Customers

H4a 0.174 ( 0.616) 0.746 (2.184)

100

H1a**

Logistics and Production Performance

0.009 H4b ( 0.053) 2 = 312.82 df = 239 p = 0.00 2/df = 1.31 GFI = 0.744 RMR = 0.057 CFI = 0.918 IFI = 0.921 NNFI = 0.905

Figure 3. Hypotheses test results

** p-value < 0.01 * p-value < 0.05

Hypothesis Parameter estimate (t-value)

7. Discussion The supports for H1a and H1b suggest that there are positive relationships between internal collaborative forecasting and planning and external (upstream/downstream) collaborative forecasting and planning. This result is the same as the results of Gimenez and Ventura (2003, 2005) and Stank et al. (2001). The correlation coefcient between internal collaborative forecasting and planning and collaborative forecasting and planning with main suppliers is larger than one between internal collaborative forecasting and planning and collaborative forecasting and planning with main customers. As further analysis, a signicance test for the difference between the two coefcients was conducted. As a result, null hypothesis that two coefcients are equal was not supported. This result means that the correlation with upstream rms is stronger than that with downstream rms. This phenomenon may depend on the manufacturers position in an external relationship. A manufacturer trades with suppliers as a buyer and with customers as a seller. In general, a buyer can require resources sharing, coordination, and process improvement of partners more easily than a seller. It is considered that the difference of position in an external relationship inuences the strength of the correlation. The support for H2 suggests that there is positive relationship between upstream collaborative forecasting and planning and downstream collaborative forecasting and planning. As introduced above (see Section 4), at Calbee, external collaborative planning called planning meeting was conducted by the sales department at rst, and after that, the production and logistics departments started the meetings with their suppliers. It is considered that the internal cross-functional meeting called bukai played an important role in mediating the dissemination of the planning meeting. It is speculated that the production and logistics departments learned how to operate the planning meeting through the reports by the sales department in bukai. With regard to

the mechanism through which internal organizational learning leads to external collaboration, we will need more research in the future. The support for H3 is the same as the results of Sanders and Premus (2005) and Stank et al. (2001). This result means that internal collaborative forecasting and planning leads to competitive advantage of logistics and production in Japanese manufacturers. This is similar to the phenomenon found through the in-depth interviews, which is described in Section 3. Three rms (Calbee Foods Corporation, Kao Corporation, and Pokka Corporation) have maintained the performance of some measures (e.g., order ll rate and manufacturing cost) and improved the performance of other measures (e.g., safety inventory level and logistics cost), or improved the performance of these measures simultaneously. In contrast, other rms in the same industries have faced a trade-off in performance or got a worse performance. The difference between the former and the latter is whether or not rms continuously improve their forecasting and planning process to adapt to market uncertainty. Therefore, the author is convinced that not only sharing resources and collaborative process operation but also collaborative process improvement play a crucial role in gaining sustainable competitive advantage in logistics and production. This conclusion, however, applies only to internal collaborative forecasting and planning because H4a and H4b are not supported. The external collaborative forecasting and planning in Japanese advanced manufactures may be in the phase of pilot test and a necessary but not sufcient condition for performance improvement similar to European rms (Barratt, 2004; Smaros, 2003). Future research is needed to examine how external collaborative forecasting and planning inuences logistics and production performance. 8. Implications and future research Many researchers and practitioners agree that collaborative activities have a very important role in integrating the supply chain process. In this study, the concept of collaboration is dened into three dimensions: (1) sharing resources; (2) collaborative process operation; and (3) collaborative process improvement. And statistically analyzed the impact of internal and external collaborative forecasting and planning on the performance of Japanese manufacturers. As a result, it was found that the combination of these three activities on internal collaborative forecasting and planning can lead to superior logistics and production performance. This result implies that we need to pay attention to collaborative process improvement, which has not been sufciently recognized the importance in previous empirical studies, as well as sharing resources and collaborative process operation, which have been treated by many researchers. This study, however, does not clarify how rms can achieve the improvement of forecasting and planning process. Regarding capabilities to conduct such a dynamic process improvement, which are called dynamic capabilities, there are many discussions on dynamic resource-based view in strategic management theory (Eisenhardt and Martin, 2000; Teece and Pisano, 1994; Teece et al., 1997; Zollo and Winer, 2002). In the academic area of SCM, Supply Chain 2000 framework proposed by Bowersox et al. (1999) shows typical

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competencies/capabilities of supply chain integration, but they treat the static aspect of competencies/capabilities. Except for a dynamic resource-based framework of competition by Olavarrieta and Ellinger (1997, p. 577), there are few studies on dynamic capabilities in supply chain. Accordingly, we must clarify the dynamic aspect of how rms improve forecasting and planning process. To investigate the mechanism of process improvement in supply chain, qualitative research is more effective. We can explore the mechanism by studying some cases of best practice rms in detail, comparing the cases, and analyzing the similarities and differences. The research will present more concrete requirements on the improvement of forecasting and planning process for academics and practitioners. Finally, the ndings of this study derived from survey data on Japanese rms are quite restrictive. Thus, it is difcult to generalize to other regions like North American, European, and other Asian countries. By conducting an international cross-sectional study, we can analyze the impact of collaborative forecasting and planning on performance and make comparisons among countries.
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