The effects of supply chain visibility, supply chain flexibility, supplier development and inventory

control toward supply chain effectiveness

Siti Masithah Mohd Tarli

Faculty of Business Management, UiTM Puncak Alam

Abstract
Purpose – The purpose of this study is to examine the significance of supply chain strategies – visibility
and flexibility supply chain – as well as the supplier development and inventory control towards the
supply chain effectiveness.
Design/methodology/approach – Applying the strategic – choice theory and the resource – based view
of firms to the supply chain, in this study a research model are developed to demonstrate the premise that
implementing proper supply chain practices to support and execute supply chain strategy that will
enhance the effectiveness of the supply chain. The study utilizes survey data from 100 senior executive
and managers in the purchasing and supply chain functions from manufacturing firms in Malaysia. The
results are based on regression analysis and equation modelling by using SPSS software.
Findings – The study finds that all supply chain strategies, namely, supply chain visibility, supply chain
flexibility, supplier development and inventory control have a positive relationship towards the supply
chain effectiveness.
Practical Implications – For supply chain practitioners, the results indicate that firms benefit greatly if
they consider the strategies of their supply chain and that such a matching yield to improve the supply
chain effectiveness.
Originality/value – The paper theoretically develops logic and empirically shows that all of the supply
chain strategies are appropriate practices for mediating the impact on supply chain effectiveness.
Considered at a higher level of abstraction, there relationships indicate a contribution to theory that
explains how supply chain strategy can result in supply chain effectiveness, through the concurrent
deployment of appropriately matched supply chain practices.
Paper type – Research Paper

Introduction
Supply chain management faces an array of risk that have emerged only in recent years, spurred by twin
factor of globalization and rapid development of technology (C.S., 2004);(Scannell, 2013). In response,
researchers are now revisiting the concept of supply chain vulnerability (Enyinda, 2008);(Juttner U. a.,
2011);(Ozlen, 2013);(Zhou, 2013). Supply chain is a network between a company and its suppliers to
produce and distribute a specific product and the supply chain represents the steps it takes to get the
product or service to the customer. According to (Coy & e, 2013), supply chain is as series integrated
enterprises that must share information and coordinate physical execution to ensure a smooth, integrated
flow of goods, service, information and cash through the pipeline. From (Rajagopal P. S., 2015) article,
one of the important elements of supply chain which plays an important role in cost efficiency
management is logistic component. But in this research more focus on supply chain towards the
effectiveness in the mitigation strategies.
Supply chain development in facing increasingly tough competition and a more vulnerable
environment. Companies are often incapable of handling indirect supply chain risks because the origins of
these risks are simply out of their visibility horizon. This phenomenon, which is responsible for the
increasing supply chains risk, is known as supply chain vulnerability (Kersten, 2006). That is several
factors that supply chain vulnerability such as global sourcing, lean management and high dependence on
suppliers and customers. Supply chain management practices are viewed from a variety of different
perspectives and multi-dimensional concept. SCMP have been defined as the set of activities undertaken
in an organization to promote effective management of its supply chain and it’s is include the supplier
partnership that relate to development supplier in other manufacturing (Sundram V. P., 2011).

Electronic copy available at: https://ssrn.com/abstract=2984513

 The supply chain vulnerabilities can have a significant impact on the effectiveness of the supply
chain and such vulnerabilities occur due to elements which have impact on both upstream and
downstream operations (Chopra S. a., 2007). To reduce vulnerability severe effects, vulnerability
mitigation strategies must be embedded within supply chain development. Therefore, further studies on
the impacts of supply chain mitigation strategies on supply chain effectiveness are needed. Mitigation
strategies should include supply chain visibility, supply chain flexibility, supplier development and
inventory control. According to (Juttner U. P., 2003) and (Chopra S. a., 2004), visibility, flexibility,
supplier assessment and inventory control are essential in risk mitigation.
In addition, to the best of our knowledge, the effectiveness of such suggested mitigation strategies
in enhancing the supply chain effectiveness has not yet been empirically investigated. According to
(Wagner S. a., 2009), suggest that not every mitigation strategy is effective in reducing supply chain
vulnerability. Concerning how surety culture may affect the relationship between vulnerability mitigation
strategies and supply chain effectiveness. An investigation of the role of security culture may refine our
conceptual understanding of the linkages between supply chain security practices and effectiveness,
especially in the context of developing countries.
Drawing from the study by (Oke, 2008), mitigation strategies require specific approaches in
handling low-likelihood high-impact risks based on analysis of supply chain vulnerability. According to
(Norman, 2004), suggest that mitigation strategies for daily operational accidents should be distinguished
from those for uncertainties of a catastrophic nature based on probability and severity of the risk
consequences. A mitigation strategy is an iterative process that evaluates the cost-benefit trade-off
analysis of supply chain operation (Happek, 2005).
Risk management aims to understand the effect of operational dynamics and complexities to
provide a thorough understanding to supply chain members and analyze the effect of risks on network
structure (Hallikas, 2004). Risk management involves understanding, analyzing and addressing risk to
make sure organisations achieve their objectives. So it must be proportionate to the complexity and type
of organization involved. Risk management culture is essential in enhancing the implementation of
mitigation strategy and diffusion among business organization. Risk management needs to be integrated
into an organization’s culture to provide legal path for risk management activities in an organization
(Christopher M. a., 2004).

Problem statement
Supply chain is the difficult and also at the same time important part in any business organizations. There
are fewer failures in the supply chain networks will affect the whole chain in the supply network. The
causes of supply chain activities to failed are due to the lack of management culture among the countries
and also environment of the nature in supply chain industry.
Developments technology is one of the problems encountered in adapting the organization to face
tremendous challenges in developing appropriate mitigation strategies. Many countries outside of
technology affect the development of the supply chain to improve the quality but different from Malaysia
which is still at the level of technology in moderate to customize the fields there are problems in adapting
in the organization.
Aside from traditional risks that arise from business activities, companies face new risks that
emerge from sources that are correlated to cooperation with their partners (Giunipero, 2004); (Hearnshaw,
2013). Cooperation with partners is one of the good relationships if communication between the two
parties approved and that there is a problem is the different obstacles such as culture and an environment
of supply chain. Besides, organizational culture in Malaysia totally different from the other countries
based on their management.
The combination of risk sources and vulnerability drivers leads to an increase in vulnerability to
the supply chain (Kersten, 2006). Vulnerability the supply chain will be increase if the organization can’t
handle about the important of the supply chain within the organization. The risks will increase if no action
to reduce vulnerability on the supply chain.

Electronic copy available at: https://ssrn.com/abstract=2984513

Research questions
 How supply chain visibility could influence the supply chain effectiveness?
 How supply chain flexibility could influence the supply chain effectiveness?
 How supplier development could influence the supply chain effectiveness?
 How inventory control could influence the supply chain effectiveness?

Significance of the study

This research identifies the factors which could influence the supply chain effectiveness in Malaysia.
Thus, this study will benefit those who related to this subject of research such as individuals, supplier,
management and other researchers.
Firstly, this study is significant to individual which are related to the issues in supply chain
networks which is the effectiveness with risk management culture as moderator. At the very least, these
individual can enhance their knowledge on the factors that influence the supply chain effectiveness.
In supply chain the most important parties will be the supplier. Supplier is important to
organizational because supplier is one of the branch management that supports to develop the
organization. To improve the suppliers’ performance and capabilities for the benefit of buying
organization, one of the process on a one to one basis is supplier development.
Other than that, this study is important to the management since they will understand more about
the factor that will influence supply chain responsiveness. From managerial perspectives this study the
management will faces the risk that have in recent year by develop the technology and also the challenges
relationship between Asia and other countries about the different culture management.
Furthermore, from this research the researcher can identify the suitable and best method that can
be use when doing a research analysis. Thus, this research will be essential to other researchers who need
to find sources or reference for their future studies and research in this similar subject of study.
Additionally, it may help them as they can study this research and gather other variables which can be as
add on in their variables.

Literature review
Supply chain visibility
Supply chain visibility refers to the ability to access or share information which is useful to supply chain
operations and provides mutual benefits (Christopher M. a., 2004). Supply chain visibility also the ability
of parts, components or products in transit to be tracked from the manufacturer to their final destination. It
also to improve and strengthen the supply chain by making data readily available to all stakeholders
including the customer. Based on the article from (Christian Busse, 2017), the visibility will be upstream
or downstream in supply chain is invariably going to be limited.
Buying firms often have low supply chain visibility as they possess little knowledge about
indirect suppliers or cannot independently verify information about their components or practices (Lyles,
2008). Especially fast-moving industries such as the retail and fashion sectors often lack supply chain
visibility beyond second-tier suppliers (Opara, 2003). Supply chain visibility closes the gap between
planning and implementation to improve cost and resilience. Supply chain visibility offers a complete
view of the production process from outbound suppliers to the ultimate customers. Supply chain visibility
improves confidence and helps a firm maintain a lower level of inventory. Achieving supply chain
visibility should be considered first to increase supply chain effectiveness as part of mitigation efforts.
In addition, the goal of supply chain visibility is to reduce business and supply chain risk,
improve lead times and performance and identify shortage and quality problems along the supply chain. It
also ability to capture information at an item level and improve the overall business processes supporting
the supply chain because of it. The ability to track, trace and manage inventory, support returns and
confirm the authenticity and quality of the product is enhanced when supply chain visibility is referenced
at an item level detail.
 Supply chain visibility is important because supply chain are bigger and more complex so many
of these companies operate on a global scale, using various shipping modes to serve customers
worldwide. Communication and the ability to make quick, informed decisions can be a challenge. The
best solution to gaining visibility may be invest in cloud technology capable of managing big data.
Besides that, customers want better and faster service is the more important in supply chain visibility. An
expanding, increasingly competitive marketplace means customers have more options today than in the
past. Many of them face their own competitive pressures.
Lastly why supply chain visibility important is to cut cost and reduce risk. It also may allow to
eliminate middlemen and spot inefficiencies in network. By making informed decisions about eliminating
bottlenecks and inefficiencies, they are also reducing the risk that something will go wrong. Information
sharing in the supply chain is valuable (Chen, 2010); (Lee, 2003).

Supply chain flexibility

Supply chain flexibility is the ability to adapt to changes in the global competitive environment in a fast
and cost-effective manner. Supply chain flexibility is a strategic initiative that enables the firm to respond
rapidly to changes in the market, including unanticipated actual disruptions in the supply chain (Swafforf,
2006). Supply chain flexibility is widely seen as a strategic response to increasingly uncertainty and
competition (Merschamnn, 2010).
There are two types of supply chain flexibility which is micro flexibility and macro flexibility.
Micro flexibility is means how fast a supply chain could detect and respond to issues and opportunities in
the short term. For example, the truck is late, demand suddenly surges, a customer needs some sort of
special packaging or handling; it show how fast and effectively can these changes. Macro flexibility is the
speed at which a company’s supply chain adapt strategies or market place changes.
In addition, the challenges of supply chain flexibility first is changing market conditions which is
customer expectation for speed and low cost have reached new highs in our always-on, digital and global
world. Economic and supplier volatility are a constant threat to supply chain continuity. Next is the
systems sprawl now confronts them with poor visibility and limited capability for internal and external
collaboration while requiring manual workarounds just to maintain baseline performance. Supply chain
flexibility has been touted as a key strategy for managing and mitigating the risks associated with
uncertainties in supply chain. However, the ability to manage these risks for seamless day-to-day
operations in retail stores depends entirely on how flexibility strategies are deployed (Raymond Obayi,
2017).
The ways to improve the supply chain flexibility is institutionalizing partnerships with suppliers
and subcontractors in order to straighten the chain while dealing with fluctuations and changes in demand.
Next is transferring operations to external source. Building tools and capabilities to quickly identify
changes in demand and it means of dealing with variable demand and supply chain efficiency. The last is
formulations of organizational structure and work support processes. Few barriers for greater flexibility in
supply chain such as integration capability between the various information systems throughout the
supply chain which would allow visibility and faster response time to changes in demand. Beside
management requests to lower costs at the expense of flexibility.

Supplier development
Outsourcing activities are strategic response to conditions of uncertainty and dependence from the
scarcity of resources within the organization (Hatonen, 2009). Supplier development is the process of
working with certain suppliers on a one-to-one basis to improve their performance and capabilities for the
benefit of the buying organization. From the article (Noraizah, 2016), stated that advanced technologies
such as e-procurement can help facilitate effective solutions for procuring organizations to procure from
suppliers based on five rights so e-procurement also can make supplier development more secure from the
wrong choose or alert about the suppliers concern.
Supplier development is any effort to improve the supplier’s performance and capabilities to meet
the organization’s current and future needs (Prahinski, 2004). (Krause, 1997) define supplier development
as any effort of the buying firm to improve the performance and/or the capabilities of their suppliers with
the purpose to attain the short and long-term objectives of the buying firm.
The programs is typically initiated by a buying firm to improve its supplier’s performance or
capabilities in a way that enables the supplier to meet the long and short term needs of the buyer. During
supplier development, the buyer quite often sends out a cross-functional development team to train the
supplier and provide it with knowledge about ways in which it can improve (Anthony K. Asare, 2013).
Through focusing on supplier development, organization are able to generate many mutually beneficial
opportunities including expanding the competitive landscape (pricing, service level) between the
organization’s existing and potential vendors. It also promoting innovation and out-of-the-box thought
leadership trough the entrance of new products, service and solutions in the business. Growing the
sources and channels from which to procedure and service and also increasing visibility and awareness of
executive management to key diverse suppliers.
There are benefits of supplier development, first is an improved knowledge and collaboration
sharing throughout the extended enterprise. Next is increased responsiveness to customer needs and
market dynamics. Besides that, establishing and manufacturing of new designs, improved quality and
reliability of products will be achieved. Last is the inventory costs can reduces between 25-50 percent,
time of sourcing of information reduced by 25-30 percent and time to market a company’s products is
reduces by up to 20 percent.
The challenge is to create conductive conditions to facilitate a collaborative working process.
Greater willingness to work in partnership is required in the current business environment. Quick changes
in the business environment have put manufacturing firms under pressure to improve quality, delivery and
responsiveness while simultaneously reducing costs (Kannan, 2006). Supplier development enables firms
to better utilize their resources, increase the value added and allows manufacturing firms to be more
effective in responding changing needs. (Modi, 2007) and (Wagner S. a., 2009) conclude that the
development of a supplier’s capabilities requires more than low involvement activities such as audits or
incentives.

Inventory control
Inventory control is a key to inventory reduction, adapting to market variations more efficiently and
enabling enterprise to respond to consumer demand more quickly while maintaining supply chain
operation cost. The control of material flow from suppliers of raw material to final customer is crucial to
maintain efficiency and sustainability. Inventory control can be broadly defined as the activity if checking
a shop’s stock, more specifically inventory control may refer to in operation management and supply
chain management that necessary programmed software for managing inventory.
Inventory control is part of mitigation strategies to ensure that the right amount of inventory is
maintained to retain the service level to customers. According to (Bragg, 2011), defined inventory control
as a set of policies and operating procedures that are designed to minimize a company’s use of inventory
from minimum inventory investment to generate maximum profits.
In addition, inventory management is the function that pertains to the decisions about stocks in an
organization and this function is known as inventory control (Waters, 2003). The management of
inventories influences a firm’s financial strength and competitive position because the approach taken to
inventory management directly affects working capital, production and customer service (Ng, 1993);
(Vergin, 1998). Inventory management is that active control program which allows a firm to manage its
manufacturing, sales, purchases, distributions and payments (Lavely, 1996).
According to (Kotler P., 2002), inventory management refers to all activities involved in
developing and managing the inventory levels of raw materials, semi-finished materials (work-in-
progress) and finished good so that adequate supplies are available and the costs of over or under stocks
are low. Managing inventory is considered to be one of the most important areas of supply chain
management (Ganeshan, 1999); (Fisher, 1997); (Presutti, 2003).
Research model and hypotheses
According to (Hua., 2012), hypothesis is conjectural statements of the relationship between two or more
variables, which carry clear implications for testing the stated relations. The hypothesis is logically
developed relationship between two or more variables. Research hypotheses were tested using a multiple
regression analysis. It is a useful technique that can be used to analyze the relationship between a single
dependent (criterion) variable and several independent variables (predictor or explanatory) at one time
(Ibrahim, 2010); (Zolait, 2010).
The hypothesis is logically developed relationship between two or more variables. The study
should also decide whether to accept or reject the null or alternate hypothesis. The elements of hypothesis
are null hypothesis and alternate hypothesis. The null hypothesis is expressed as no significant
relationship between two variables or no significant relationship between two groups. The hypothesis that
being tested for this study are:
H1. There is relationship between supply chain visibility towards supply chain effectiveness.

H2. There is relationship between supply chain flexibility towards supply chain effectiveness.

H3. There is relationship between supplier development towards supply chain effectiveness.

H4. There is relationship between inventory control towards supply chain effectiveness.

Methodology
Questionnaires are the most frequently used data collection method in educational and evaluation
research. Questionnaires help gather information on knowledge, attitudes, opinions, behaviors, facts, and
other information. The survey instrument (questionnaire) used in this research came from a combination
of adopted questions of various literature and new questions that were developed based on the literature
and suggestions from academicians and practitioners (Akmal A. O., 2015). In a survey, the researcher
uses a questionnaire to gather information from the respondents to answer the research questions. The feat
of a research work depends on the quality of the questionnaire developed, therefore it is crucial to follow
the format given in order to develop an effective questionnaire (Bhatti M. A., 2015).

Supply chain visibility

Supply chain flexibility Supply chain
Supplier development effectiveness
Inventory control

Figure 1: The research model

A Likert scale is a psychological measurement device that is used to gauge attitudes, values and
opinions. It functions by having a person complete a questionnaire that requires them to indicate the
extent to which they agree or disagree with a series of statements.
A five-point Likert scale ranging from “Very Low Extent” (1) to “Very High Extent” (5) was
used to measure each item of these variables. The scales for supply chain effectiveness were adapted from
(Fugate, 2009), (Craighead, 2009) and (Lorentz, 2010). The items of supply chain effectiveness were
measured using a five-point Likert scale ranging from “Much Worse” (1) to “Much Better” (5) to rate the
performance improvement.
Probability sampling comprises of either unrestricted (simple random sampling) or restricted
(complex probability sampling) in nature (Sundram V. P., 2010). Sample size is refers to number of
element included in the study. The sample size use in this study us about 100 which are randomly
selected. This sample of 100 respondents is expected statistically projectable to the number of firm
industries in Malaysia. A stratified random sample is obtained by separating the population into non-
overlapping groups (strata) and them selecting a simple random sample from each stratum (Sundram V.
P., 2013). This means that the members represented in the sample from each stratum will be proportionate
of the number of elements in the representative strata (Sundram V. P., 2012).

Data analysis
Response rate
The process of analyzes a data and finding begins after all the data and information had been gathered
through the data collection method (Bhatti M. A., 2012). Therefore, the survey data were applied to
principal component analysis to reduce the number of variables and to concentrate on a particular
research dimension (Akmal A. O., 2016). A total of 209 Malaysia manufacturing companies were
selected randomly to be the sample of this study and were also contacted in order to respond to the
questionnaire. Out of 209 companies, 100 questionnaires were extracted as usable questionnaires and
were used for data analysis in this research.

Demographic profile of respondents

The discussion about the demographic factors will be presented. The demographic factors including of
job title, job function, industry category and years in business. From the analysis show in table 1 below, it
discovered that the senior manager contributed more in participating in this survey as compared to
director and VPs and CEO/president. From the total 100 respondents who participated in this survey, it is
shown that most of the respondents involved are from the manufacturing/production function. Detail of
the demographic distributions are explained further in the Table 1 below.

Respondent’s Profile
Frequency Percentage (%)
Job Title
Senior manager 86 86.0
Directors and VPs 8 8.0
CEO/President 6 6.0
Job Function
Corporate executive 9 9.0
Purchasing/Procurement 25 25.0
Manufacturing/Production 31 31.0
Distribution 13 13.0
Transportation 14 14.0
Sales 8 8.0
Industry Category
Manufacturing 45 45.0
Process Industry 31 31.0
Service 16 16.0
Others 8 8.0
Years in Business
Less than 2 years 7 7.0
2 – 5 years 37 37.0
6 – 10 years 48 48.0
More than 10 years 8 8.0
Table 1: Frequency analysis for demographic
 The demographic factors including of job title, job function, industry category and years in
business. . This shown by the questionnaire answered by all the 100 respondents which is 86 (86.0
percent) senior manager, 8 (8.0 percent) director and VPs and 6 (6.0 percent) by the CEO/president. From
the total 100 respondents who participated in this survey, it is shown that most of the respondents
involved are from the manufacturing/production function which represents the distribution at a frequency
31 (31.0 percent) and the least respondents are from the sales function which is 8 (8.0 percent). It is
shown that the manufacturing industry are the industry with the most returned questionnaire which is 45
(45.0 percent). Thus, the majority respondents that took part in this survey are those who have been in the
business 6 to 10 years.

Factor analysis on supply chain

Table 2 presents the factors loadings of supply chain items after deleting the items that show either low
factor loading (0.40) or high cross-loading (40.35), the results indicate that the loadings of the remaining
items were from 0.40 to 0.85.
The Kaiser-Meyer-Olkin (KMO) measure, measure of sampling adequacy (MSA) for all items
was 0.62 which is ranged within the acceptable level, i.e. between 0.51 and 0.90, in other words. In fact, if
the KMO measure is 40.6 and the Bartlett’s test of sphericity is large and significant. The cronbach’s
alpha of the items is reliable, i.e. 0.805, 0.761, 0.803, 0.723 and 0.731, respectively. These results provide
support to discriminate and convergent validity of supply chain effectiveness. Moreover, the results also
show homogeneity within the dimensions and heterogeneity between the dimensions. The results of factor
analysis are demonstrated in Table 2.

Items Factor loadings

1 2 3 4
Supply chain visibility
We and our partners inform in advance of changing needs. 0.78
We and our partners share knowledge of core business process. 0.76
We and our partners keep each other informed about customer’s 0.76
future needs.
We and our partners communicate future strategic needs. 0.77
We continue to improve integration of activities across supply chain. 0.74
We and our partners share problems, market and inventory 0.74
information.
We and our partners collaborate to monitor product movement. 0.72
Supply chain flexibility
It is possible to switch the purchase of items from one supplier to 0.85
another.
It is possible to change the quantity of supplier’s order. 0.74
Different modes of transportation are available in delivering 0.75
products
to the customers.
Production capacity is sufficient to accommodate an increase in 0.76
demand.
Overtime or temporary worker is possible to cope with short term 0.74
demand fluctuation.
Most suppliers are capable of producing a small quantity due to 0.84
relatively low setup costs.
Supplier development
Used multiple suppliers for the purchased item to create competitive 0.75
pressure.
Site visits to the suppliers to help them improve performance. 0.76
Conducted training and education programs supplier personnel. 0.76
 Consideration to enhance business relationships in the future. 0.79
Assessed the supplier’s performance through a formal supplier 0.74
evaluation system.
Development of targeted quality and other improvement benchmarks 0.79
within the suppliers.
We involve key suppliers in the product design and development 0.84
stage.
Inventory control
Our firm provides permanent and visible storage for material supply. 0.84
Our firm sets up threshold for each type of materials referring to 0.86
production fluctuation.
Our firm maps material flows from the suppliers up to the 0.73
customers.
The position of inventory is always being monitored. 0.76
Reliability 0.76 0.68 0.71 0.71
Eigen value 5.36 2.17 1.93 1.77
Percentage of variance 14.02 11.52 11.22 9.76
KMO 0.62
Table 2: Summary of factor and reliability analysis

Items Factors loadings

Supply chain effectiveness
Transportation cost. 0.76
Warehousing cost. 0.75
Inventory cost. 0.70
Logistic administration cost. 0.78
Product cost. 0.75
Order delivered in the right quantity, specification and without damage. 0.77
Reliability 0.78
Eigen value 3.67
Percentage of variance 30.57
KMO 0.63
Note: One component extracted, the solution cannot be rotated
Table 3: Summary of factor and reliability analysis supply chain effectiveness

Result and discussion

First section is demographic information. This section will ask about the respondent’s background of
work and the duration they are involved in the industry. Background section is more about the
respondents because the results will evaluate which departments are really take note about the
effectiveness of logistics. A relatively high internal consistency of reliability analysis must have a
reading of cronbach alpha that is more than 0.7. Thus, it is shown that all the variable have a result of
more than 0.7. According to (Rajagopal P. N., 2016), stated that the value for cronbach’s alpha of 0.7 or
higher is considered acceptable.
We have selected the target respondent by using convenience sampling as the sampling
procedure. The instrument used was 100 questionnaire, using Likert scale measurement, have two section
which is rating from one to five, ranging from “very low extent” to “very high extent” (1= very low
extent, 2= low extent, 3= neutral, 4= high extent, 5= very high extent) and “much worse” to “much
better” (1= much worse, 2= worse, 3= neutral, 4= better, 5= much better).
The consistency check to measure the reliability is cronbach coefficient alpha or in other words
called Cronbach’s Alpha. Factor analysis and Cronbach’s Alpha analysis were performed to verify the
dimensionality and reliability of each construct (Sundram V. P., 2016). A relatively high internal
consistency of reliability analysis must have a reading of cronbach alpha that is more than 0.7.
Variables Cronbach Alpha No. of items
Supply Chain Visibility .805 7
Supply Chain Flexibility .761 6
Supplier Development .803 7
Inventory Control .723 4
Supply Chain effectiveness .731 6
Table 4: Reliability analysis

It is to obtain the variance for interval – scaled between independent variables and dependent
variable. It shows below in table 5, the overall mean and standard deviation for independent variables and
dependent variable. Mean is used to measure the center tendency of the arithmetic average of the scores
and standard deviation is used to measure variability of the square root of variance providing an index of
variability in the distribution of scores (Sundram V. P., 2016)
The mean for supply chain visibility is 3.8029 and the standard deviation is 0.48933. Next, the
supply chain flexibility factors have a mean of 3.8433 and standard deviation of 0.47545. The supplier
development factors have a mean of 3.8829 and standard deviation of 0.47070. For the fourth factor
namely the inventory control have a mean of 3.7125 and standard deviation of 0.52148. Finally, supply
chain effectiveness has mean of 3.9683 and a standard deviation of 0.43853.

Descriptive Statistics
Variables Mean Std. Deviation
Supply Chain Visibility 3.8029 .48933
Supply Chain Flexibility 3.8433 .47545
Supplier Development 3.8829 .47070
Inventory Control 3.7125 .52148
Supply Chain Effectiveness 3.9683 .43853
Table 5: Descriptive statistic analysis

Correlation analysis is to examine how the variables in this study are related to each other. It is
also referred to as zero-order correlation, refers to the correlation between variables and has a range of
possible values from -1 to +1. The correlation analysis testing the relationship and the strength of
association between variables can be seen. To elaborated more on inter – relation between those variables,
according to (Guildford, 1973) rule was used to determine the correlation strength which is depicted as in
below.

R Strength of relationship
< 0.20 Almost negligible relationship
0.20 – 0.40 Low correlation; definite but small relationship
0.40 – 0.70 Moderate correlation; substantial relationship
0.70 – 0.90 High correlation; marked relationship
> 0.90 Very high correlation; very dependable relationship
Table 6: Correlation strength based on Guilford’s Law

Based on table 7 below, there is a low correlation (p = 0.375) or definite but small relationship
between the supply chain visibility and supply chain flexibility. This relationship is significant at the 0.05
level. Next, low correlation (p = 0.346) or definite but small relationship between supply chain visibility
and supplier development. The significant at the 0.05 level. High correlation (p = 0.979) or marked
relationship between supply chain flexibility and supplier development at the significant 0.05 level. High
correlation (p = 0.908) or marked relationship between supply chain visibility and inventory control
significant at 0.05 level. Low correlation (p = 0.266) and (p = 0.226) or definite but small relationship
between supply chain flexibility and supplier development with inventory control. High correlation (p =
0.856) or marked relationship between the supply chain visibility and supply chain effectiveness that
significant at 0.05 level.
Low correlation (p = 0.291) and (p = 0.300) or definite but small relationship between supply
chain flexibility and supplier development with supply chain effectiveness. Moderate correlation (p =
0.646) or substantial relationship between the inventory control and supply chain effectiveness with the
significant 0.05 level.

Variables SCV SCF SDM ICL SCE

SCV 1.000
SCF .375** 1.000
SDM .346** .979** 1.000
ICL .908** .266** .226* 1.000
SCE .856** .291** .300** .646** 1.000
*** significant at 0.01
** significant at 0.05
* significant at 0.1
Table 7: Correlation analysis

Multi-regression analysis
Multi-regression is an extension of bivariate correlation. It represents the best predicted to the dependent
variable from several independent variables. Regression analysis is used when independent variables with
one another with the dependent variable.
Based on the table 8, it shows a standard multi regression analysis was conducted to evaluate how
well supply chain visibility, supply chain flexibility, supplier development, inventory control and supply
chain effectiveness. The R value represent the simple correlation and is 0.922, which indicates very high
correlations. The four independent variables explain 85 percent of the variance in supply chain
effectiveness. Adjustment of R square penalizes the additional of 0.844 unit of independent variable to the
model.
Based the table 8, it shows that the multiple regression analysis was carried out with supply chain
effectiveness as the dependent variable and the 4 factors as the independent variables to support the
dependent variable whether its bring effect to the supply chain effectiveness or not. By looking at the beta
column under standardized coefficients, it shows the highest number in beta is 1.579 for supply chain
visibility, followed by supplier development with beta value 0.517, supply chain visibility with beta value
-0.608 and inventory control with beta value -0.742.
For the supply chain visibility variable it shows that the coefficient is 1.415, so for every unit
increase in supply chain visibility a 1.42 unit increase of supply chain effectiveness. Supply chain
flexibility shows that coefficient is -0.561, so for every unit increase in supply chain flexibility will -0.56.
Next supplier development shows that coefficient is 0.481, so for every unit increase 0.48. Lastly, for the
inventory control variable the coefficient is -0.624, so for every unit increase in inventory control a -0.62
increase of supply chain effectiveness.
The ‘t’ value and sig., it shows that the t-statistic and the associated 2-tailed p-value used to test
the efficiently whether it significantly different from zero. Using an alpha of 0.05; the coefficient for
supply chain visibility (15.588) is significantly from 0 because its p-value is 0.000, which is smaller than
0.05. The coefficient for supply chain flexibility (-3.039) is significantly from 0 because its p-value is
0.003, which is smaller than 0.05. The coefficient for supplier development (2.591) is significantly from 0
because its p-value is 0.011, which is smaller than 0.05. The coefficient for inventory control (-7.538) is
significantly from 0 because its p-value is 0.000, which is smaller than 0.05.

Coefficients a
Model Unstandardized Standardized T Sig
Coefficients Coefficients
β Std. Error β
(Constant) 1.192 .175 6.833 .000
Supply Chain Visibility 1.415 .091 1.579 15.588 .000
Supply Chain Flexibility -.561 .185 -.608 -3.039 .003
Supplier Development .481 .186 .517 2.591 .011
Inventory Control -.624 .083 -.742 -7.538 .000
F value 134.441
Sig .000
Adjusted R2 .844
R2 .850
Table 8: Coefficient for IV and DV

Conclusion
It can conclude that all independent variables are accepted the alternate. The independent variables were
accepted are supply chain visibility, supply chain flexibility, supplier development and inventory control.
In this research, there are four factors that had been identified that will be lead supply chain
effectiveness which are supply chain visibility, supply chain flexibility, supplier development and
inventory control. This research were being done due to researcher observation from the extracted data
and the issues that researcher heard to fulfill the supply chain industry that faced by the organization.
All independent variables are significant. The significant variable is supply chain visibility,
supply chain flexibility, supplier development and inventory control. The variable significant means there
is a relationship between supply chain effectiveness with supply chain visibility, supply chain flexibility,
supplier development and inventory control. The all variables is accepted alternate hypotheses.
The significant relationship between supply chain visibility and supply chain effectiveness is
positive because supply chain visibility is an important with the knowledge. Information-sharing,
analysis, collaboration and decision-making are vital to getting the most from supply chain visibility. As
build up more information and continue to improve the supply chain, the demand forecasting and
business planning will improves as well with supply chain visibility. To become supply chain more
effectiveness, supply chain visibility is more cut cost and reduce risk by making informed decisions.
The significant relationship between supply chain flexibility and supply chain effectiveness is
positive. According to (Grigore, 2007), supply chain flexibility is ability to reconfigure the supply chain,
altering the supply of product in line with the customer demand. The flexibility of supply include
flexibility in establishing the relationship with partners.
The significant relationship between supplier development and supply chain effectiveness is
positive. Supply chain effectiveness is will be more effective in supplier development because supplier
development will be reducing the product defects, improving on-time delivery and reducing order
fulfillment cycle time. It more effective that combination of approaches may be appropriate under
different circumstances, depending on the nature of the supplier, the type of commodity and the
management team at the supplier.
The significant relationship between inventory control and supply chain effectiveness is positive.
The integrated system allows companies to optimize the linkage between supply chain and inventory and
coordinate the inventory management to reduce costs and enhance differentiation. Effectiveness supply
chain also related with the inventory control that can help the satisfy the customers by providing them
with the products they need in the swiftest manner. Poor inventory leads to lower availability of goods so
to gain those service satisfaction stars, need to manage the inventory well. Also need a proper system to
manage those inventories on the basis of demand and supply.
According to (Koste, 1999), mentioned that flexibility can be either reactive or proactive in
nature. The reactive nature of flexibility addresses the environmental uncertainty, both internal and
external. To increase supply chain flexibility through proactively, the following strategies are, first,
component commonality is the obvious strategies related to product design that can improve flexibility.
Large component commonality also increase supply chain flexibility. The use of component commonality
to increase supply chain flexibility has been discussed by (Pujawan, 2004). Besides, lead time reduction is
an important strategy to enable better flexibility. With shorter lead time, organization will be able to better
respond to demand uncertainty.
Supplier development is a bilateral effort by both the buying and supplying organizations to
jointly improve the supplier’s performance or capabilities in one or more flowing areas such cost, quality
and delivery. Therefore, the buying firm can use supplier evaluation feedback and rewards to improve the
supplier performance toward supply chain effectiveness via asset specificity such as the direct investment
in tooling and equipment, dispatch of technicians to serve specific supplier as well as specialized training
(Li, 2007).
The inventory control is must make sure the total costs are accurate goes that getting the
inventory level right is imperative but what about the right quantities of the highest performing brands
and products. So it need to find out which product perform the best quantity margin and focus on vendors
that yield the highest profits. Beside, inventory shrinkage is the ways to control shrinkage (inventory loss
due to theft, damage or simply falling). Shoplifting can be a big problem but inventory loss due to poor
tracking is often. Track inventory with a POS system that can give the accurate reports that can help to
identify shrinkage. Don’t treat all SKUs the same also the ways to improve inventory control toward
supply chain effectiveness.
This study is important to the researcher who might interest to investigate about the supply chain
effectiveness. The reason is to encourage more academicians to get involved in investigation of various
academic fields especially in supply chain industry. By doing this study, it also will helps personnel who
involved in the supply chain industry to gain more knowledge about the right way in order to associated
well the supply chain strategies towards the supply chain effectiveness.
Future researcher proposed to overcome the limitations faced in this study which are insufficient
time in collecting data and lower feedback from the respondents. Future researcher may use other
mediums of data collection such as interview, observation and others to overcome these limitations.
Furthermore, the researcher may prolong the period of data collection in order to get higher feedback for
better result. In this study, it is to measure one attribute which is supply chain effectiveness. The other are
that researcher might look other elements that can affect supply chain effectiveness.
As conclusion, supply chain visibility, supply chain flexibility, supplier development and
inventory control is influence towards the supply chain effectiveness to increase more effectiveness in
mitigation strategies at manufacturing firms in Malaysia.
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APPENDIX I

Section 1: Demographic Profile

Please tick (√) at the appropriate box/column or write in your answer where appropriate.
JOB TITLE

Senior Manager

Directors and VPs

CEO/President

JOB FUNCTION

Corporate Executive

Purchasing/Procurement

Manufacturing/Production

Distribution

Transportation

Sales

INDUSTRY CATEGORY

Manufacturing

Process Industry

Service

Others

YEARS IN BUSINESS

Less than 2 years

2 – 5 years

6 – 10 years

More than 10 years

Section 2
Please indicate your level of agreement on the following statements based on your experience working in this
company. The rating is from 1=Very Low Extent to 5= Very High Extent.

Very High
Very Low

Neutral
Extent

Extent

Extent

Extent
High
Low
1

5
Code

SUPPLY CHAIN VISIBILITY

SCV1 We and our partners inform in advance of changing
1 2 3 4 5
needs.
SCV2 We and our partners share knowledge of core
1 2 3 4 5
business process.
SCV3 We and our partners keep each other informed about
1 2 3 4 5
customer’s future needs.
SCV4 We and our partners communicate future strategic
1 2 3 4 5
needs.
SCV5 We continue to improve integration of activities
1 2 3 4 5
across supply chain.
SCV6 We and our partners share problems, market and
1 2 3 4 5
inventory information.
SCV7 We and our partners collaborate to monitor product
1 2 3 4 5
movement.

SUPPLY CHAIN FLEXIBILITY

SCF1 It is possible to switch the purchase of items from
1 2 3 4 5
one supplier to another.
SCF2 It is possible to change the quantity of supplier’s
1 2 3 4 5
order.
SCF3 Different modes of transportation are available in
1 2 3 4 5
delivering products to the customers.
SCF4 Production capacity is sufficient to accommodate
1 2 3 4 5
an increase in demand.
SCF5 Overtime or temporary worker is possible to cope
1 2 3 4 5
with short term demand fluctuation.
SCF6 Most suppliers are capable of producing a small
1 2 3 4 5
quantity due to relatively low setup costs.

SUPPLIER DEVELOPMENT
SDM1 Used multiple suppliers for the purchased item to
1 2 3 4 5
create competitive pressure.
SDM2 Site visits to the supplier to help them improve
1 2 3 4 5
performance.
SDM3 Conducted training and education programs supplier
1 2 3 4 5
personnel.
SDM4 Consideration to enhance business relationships in
1 2 3 4 5
the future.

SDM5 Assessed the supplier’s performance through a formal

1 2 3 4 5
supplier evaluation system.
SDM6 Development of targeted quality and other
1 2 3 4 5
improvement benchmarks within the supplier.

SDM7 We involve key suppliers in the product design and

1 2 3 4 5
development stage.

INVENTORY CONTROL
ICL1 Our firm provides permanent and visible storage for
1 2 3 4 5
material supply.
ICL2 Our firm sets up threshold for each type of materials
1 2 3 4 5
referring to production fluctuation.
ICL3 Our firm maps material flows from the suppliers up
1 2 3 4 5
to the customers.
ICL4 The position of inventory is always being monitored.
1 2 3 4 5

Section 3
Please indicate your level of agreement on the following statements based on your experience working in
this company. The rating is from 1=Much Worse to 5= Much Better.

Neutral
Worse

Worse

Better

Better
Much

Much
1

5
Code

SUPPLY CHAIN EFFECTIVENESS

SCE1
Transportation cost. 1 2 3 4 5

SCE2
Warehousing cost. 1 2 3 4 5

SCE3
Inventory cost. 1 2 3 4 5
SCE4
Logistic administration cost. 1 2 3 4 5
SCE5
Product cost. 1 2 3 4 5
SCE6 Order delivered in the right quantity, specification
1 2 3 4 5
and without damage.