The Influence of a Firm's Cross-Functional Orientation on Supply Chain Performance

The Influence of a Firm’s Cross-Functional

Orientation on Supply Chain Performance

AUTHOR

Teck-Yong Eng

is a senior lecturer in the Management Department at King’s College

London, University of London, United Kingdom.

In today’s growing complexity of global networks of

supply chains and hypercompetitive business envir-

onments, firms are confronted with the need to

manage supply chain activities across functions and

between firms. While prior research has noted the

benefits of collaboration between functional areas

for enhanced supply chain performance, there is not

yet empirical evidence on whether an orientation

toward working collectively among different func-

tions for a firm’s supply chain could influence cus-

tomer satisfaction and supply

chain responsiveness. A struc-

tured questionnaire was adminis-

tered to U.K.-based food service suppliers, and 112

usable mail responses were obtained. Measures sup-

porting cross-functional orientation (CFO) were

developed using exploratory and confirmatory factor

analyses, and hypotheses were tested via path ana-

lysis. The findings show that a CFO positively affects

customer satisfaction and supply chain responsive-

ness. The length of Internet adoption was also found

to play a critical role in enhancing CFO, through

positive moderating relationships with customer

satisfaction and supply chain responsiveness.

INTRODUCTIONSupply chain management (SCM) is concerned with

managing the inputs of goods or services for final users

from procurement of raw materials through to the end of

the products’ useful life. The inputs of goods or services

include a range of activities not only within a single

department in an organization but also from different

departments and outside the organization. Such cross-

functional activities in the supply chain are exacerbated

with the growing trend of globalization and increasingly

complex networks of supply chains in today’s business

environments. Furthermore, improvements in informa-

tion technology and the Internet have facilitated com-

munications, exchange of information and sharing of

knowledge among different functions, particularly across

departmental and firm boundaries. For example, it is

possible for companies to source inputs (e.g., material,

labor, expertise) and to organize logistics from different

countries to compete cost-effectively and meet customer

demands. In this instance, companies work across func-

tions and form interfirm relationships to achieve com-

mon SCM goals. This innate phenomenon in the supply

chain can be described as cross-functional orientation

(CFO) — that is, behaviors guided toward the interest of

working collectively among different functions in the

firm and between firms.

While previous works in SCM, logistics and new pro-

duct development (NPD) have examined cross-functional

collaboration between departments for enhanced service

performance, empirical investigation on the influence of

CFO on SCM performance in terms of organizational

characteristics that support cross-functional activities

remains unexplored. Yet, SCM is essentially about har-

nessing various functional resources and inputs in order

to deliver final goods to users at the right time and place.

Also, collaboration between functions in the supply chain

can be a major source of competitive advantage (e.g.,

Sheth and Sharma 1997) and enhanced distribution per-

formance (e.g., Ballou, Gilbert and Mukherjee 2000). But

the extent to which CFO affects customer satisfaction and

supply chain responsiveness in the context of business-

to-business relationships in supply chains has not yet

been examined. Business-to-business relationships

SUMMARY

The Journal of Supply Chain

Management: A Global

Review of Purchasing

and Supply Copyright

& November 2005, by

the Institute for Supply

Management, Inc.TM

Module 2

4 The Journal of Supply Chain Management | Fall 2005

include internal and external customers (functions or

departments), which have direct effects on the satisfac-

tion of collective members in the supply chain to achieve

common SCM goals.

The present study aims to examine the influence of CFO

on customer satisfaction and supply chain responsiveness

in SCM. The objectives of this study are to: (1) identify the

antecedents of CFO through an extensive review of extant

literature; (2) test the statistical significance of character-

istics supporting CFO and (3) test the influence of CFO on

customer satisfaction and supply chain responsiveness.

The article begins with a review of the literature. This is

followed by specification of research hypotheses. Methods

of the study are then described, which include informa-

tion about the sample, study measures, data analysis and

test results. The article concludes with discussion of

implications for theory, practice and research.

LITERATURE REVIEW

Background

As defined above, CFO recognizes the interdependency

of different functions that contribute to the entire supply

chain where no single business activity and process in the

supply chain is of value to the organization by itself. This

implies that CFO is supposed to be beneficial as the supply

chain of a firm is oriented toward cross-functional coor-

dination for achieving supply chain responsiveness and

customer satisfaction. For example, customer information

from the sales and marketing function needs to

be communicated to other functions (e.g., production,

finance, human resources) in the supply chain to ensure

consistent service and to satisfy customers’ demands. The

present study focuses on satisfaction of business custo-

mers, which includes satisfying internal and external

functional areas in the supply chain. As such, customer

satisfaction is the degree to which the company’s supply

chain meets the needs of its business functions and

partners’ business requirements. Supply chain respon-

siveness is concerned with the efficiency along the supply

chain in reducing response lag time and in meeting the

demands of different functions. It is the degree to which

the company’s supply chain is able to respond quickly to

demand challenges and environmental changes in the

marketplace (Handfield and Nichols 1999). The ability of

the company’s supply chain to respond quickly to envir-

onmental changes can be used to offer customers added

value.

Some researchers contend that working across functions

could slow down decisions (Cespedes 1995), and cause

disharmony (Souder 1988) and conflict (Weinrauch and

Anderson 1982) between functions. In SCM, interdepart-

mental collaboration has been noted to enhance service

and distribution performance (Andraski 1998; Ellinger

et al. 2000a). Literature on NPD has documented positive

performance implications of interdepartmental colla-

boration and/or cross-functional interaction using cross-

functional teams (e.g., Denison, Hart and Kahn 1996;

Griffin and Hauser 1996). Much of the literature in the

context of marketing and operations management has

dealt with the interface between two departments (e.g.,

Hausman, Montgomery and Roth 2002) or with the

integration of supply chain activities (e.g., Narasimhan

and Kim 2002).

Although literature on cross-functional teams in NPD

and supply chain integration could provide insights for

CFO (Krishnan and Ulrich 2001), cross-functional teams

are purposefully set up to achieve certain objectives in

NPD such as supply chain integration. In contrast, CFO is

an organizationwide orientation, which includes cultural

values that guide behavior and action in the supply chain.

It is also important to note that NPD is only one of many

different functions in SCM. Supply chain integration

refers to combined resources, expanded joint capabilities

and enhanced flow of information along the supply chain

for achieving competitive advantage. But the question of

the influence of guided behavior toward collective action

in CFO with the adoption of the Internet communication

capabilities has not yet been empirically examined.

Theoretical Background

Two theoretical perspectives that support supply chain

activities gravitating toward CFO are the resource depen-

dence theory and the relational marketing perspective.

The resource dependence theory suggests that the relative

influence of one subunit is a function of the resources the

subunit contributes (Pfeffer and Salancik 1978). This

means that different functional areas in an organization

contribute to overall SCM goals. The resource dependence

theory can explain CFO in terms of coordinated action

among different functions in the supply chain in order to

reduce uncertainty, and manage both dependence and

interdependence in intra- and interfirm relationships

(e.g., see Anderson 1982; Larson and Rogers 1998). For

example, different functions or departments in an orga-

nization cooperate with each other to manage interde-

pendence of cross-functional activities. In relational

marketing literature, exchange norms for individual

members and collective groups have been noted to pre-

scribe or guide behaviors and expectations (Macneil 1980;

Stinchcombe 1985; Shapiro 1987). Norms can be

described as learned behavior from expectations and

shared values, and they are to a large extent observable

action. Relational norms are implicated in CFO in terms

of embedded values and expectations guiding and facil-

itating behavior and action in the supply chain.

Despite the influence of resource interdependencies and

norms on members of the supply chain, relatively few

studies have combined these theories and examined CFO

in the supply chain. Previous studies have examined the

The Influence of a Firm’s Cross-Functional Orientation on Supply Chain Performance

The Journal of Supply Chain Management | Fall 2005 5

efficiency of interdepartmental collaboration and inte-

gration such as between marketing and manufacturing

(e.g., Hausman et al. 2002), and marketing and research

and development (e.g., Atuahene-Gima and Evangelista

2000). Research on relational norms has focused on

governance of individual exchange relationships and

relationship continuity (Dwyer, Schurr and Oh 1987;

Morgan and Hunt 1994). To date, no research has yet

examined the influence of CFO on customer satisfaction

and supply chain responsiveness.

In addition, no research has yet examined the moder-

ating effect of the length of Internet adoption on CFO

outcomes. The length of Internet adoption is the degree

to which the Internet has been adopted for supply chain

applications in an organization. Consistent with the the-

ory of innovation diffusion, the assumption is that the

longer the length of Internet adoption, the more complex

its application to SCM. This suggests that the diffusion of

Internet technology is adopted through certain channels

over time among members of the supply chain. According

to Rogers (1995), most innovations have an S-shaped rate

of innovation over time, and adopters of a particular

innovation can be classified into one of five groups:

innovators, early adopters, early majority, late majority

and laggards. This classification helps explain the impor-

tance of the length of Internet adoption in SCM practice

as it takes time to learn and integrate Internet technology

to existing systems (von Hipple 1988; Kraut, Rice, Cool

and Fish 1998; Dewett and Jones 2001). Thus, the next

section specifies the antecedents of CFO based on extant

literature and insights from these theoretical perspectives.

The Antecedents of CFO

The resource dependence theory and relational mar-

keting norms suggest different constructs that encourage

the tendency toward CFO in functional interdependence

and relationships among supply chain participants. The

present study posits that different constructs supporting

CFO must be considered simultaneously to integrate and

unify research findings in this area. It is hypothesized that

the antecedents of CFO will positively impact the level of

supply chain responsiveness and customer satisfaction,

and the length of Internet adoption will positively mod-

erate the performance constructs (see Figure 1).

Interfunctional cooperation, the degree to which organi-

zational departments undertake voluntary-coordinated

action and jointly strive together to achieve individual

and mutual goals (Skinner, Gassenheimer and Kelley

1992), is likely to support CFO. Cooperation between

functions enables a firm’s supply chain to build

meaningful relationships (Liedtka 1996) and work

Interfunctionalcooperation

Customer satisfaction

Operational linkages

Cross-functionalorientationInformation exchange

Participativemanagement style

Technology integration

Length of Internetadoption

Supply chain responsiveness

H1

H2

H3 H4

Figure 1

A MODEL LINKING A FIRM’S CROSS-FUNCTIONAL ORIENTATION TO CUSTOMER SATISFACTION AND SUPPLY CHAINRESPONSIVENESS



together to enhance SCM performance (Kahn 1996).

Numerous studies in SCM have noted the importance of

cooperation for improving interdepartmental relations

and integration of supply chain activities (e.g., Pinto,

Pinto and Prescott 1993; Ellinger et al. 2000b). Inter-

functional cooperation reflects interdependence among

supply chain functions, and expectation of joint behavior

toward some common goal of interests. For example, a

CFO encourages functions scattered within and across

organizations to communicate and cooperate with

each other to enhance the final output of the supply

chain. Thus, the more an organization values inter-

functional cooperation, the more likely CFO will occur

in SCM.

Operational linkages, the degree to which the systems,

functions, activities and processes of the supply chain

have been linked to facilitate operations, is likely to

foster CFO. It is clear that different functions contribute to

the final output of an organization, and thus the cap-

abilities of the supply chain are derived from

operational linkages of activities and processes encoura-

ging CFO. For example, computerized inventory systems

and just-in-time delivery (Frazier, Spekman and O’Neal

1988) are interlinked to facilitate the flow of goods,

services and information. Operational linkages in SCM

support CFO as members in the supply chain need to

control interdependence and reduce risks through col-

lective inputs. Also, improvements in real-time commu-

nications on the Internet are likely to have positive

effects on SCM performance (Grabowski and Roberts

1999).

Information exchange, the degree to which members of

the supply chain expect open sharing of information. This

construct is guided by relational norms of exchange

where willingness to share information among supply

chain members is likely to support CFO. For example,

open sharing of information on customer requirements

can help improve NPD. Information exchange is closely

related to the concept of communication, which is central

to channel performance in Mohr and Nevin’s (1990) work

and is a prerequisite for building trust (Morgan and Hunt

1994). Both communication and trust strongly support

intra- and interfirm relationships across functions in SCM

(e.g., Daft and Huber 1987). Moreover, advances in the

application of the Internet in SCM (Lancioni, Schau and

Smith 2003; Eng 2004b) facilitate CFO through commu-

nications and flexibility of working with individuals from

different parts of the world.

Participative management style, the degree to which

members of the supply chain are encouraged to partici-

pate in decision making at all levels of an organization

(Hodgetts, Luthans and Slocum 1999). A participative

management style is likely to facilitate CFO as collective

decision making considers the input of different functions

in the supply chain. Christopher (1998) notes that a

major reason for failure in gaining efficiency in the supply

chain is the attitude of protecting individual functions

rather than securing participation across business func-

tions. Consistent with the resource dependence theory

and the relational marketing perspective, participation

allows members of the supply chain to manage uncer-

tainty of interdependence, and provides behavioral gui-

dance for individuals to work together for the benefit of

the entire supply chain. A participative management style

encourages the integration of disparate functions to

achieve common supply chain goals (Lancioni 2000), and

thus gravitates toward CFO.

Technology integration, the degree to which supply chain

activities and functions have been networked together

using technologies is likely to foster CFO. The use of

technology facilitates CFO by (1) enabling different

functions to work together and combine resources

regardless of physical proximity (see e.g., Eng 2004a),

(2) increasing the speed of response to changes in the

business environment (Van Hoek, Harrison and Christo-

pher 2001), for example, responding to new business

requirements and (3) eliminating and/or reducing waste-

ful processes in the supply chain (Bondra and Davis 1996),

for example, reducing the amount of paperwork. Exam-

ples of technology integration practices for SCM abound

through various industry initiatives such as

e-procurement, real-time demand forecasting and colla-

borative e-commerce. In particular, the application of the

Internet in SCM has created new opportunities (Lancioni

et al. 2003) and new ways of value creation (Boyle and

Alwitt 1999).

Research Hypotheses

The perceived customer satisfaction of collective mem-

bers in the supply chain is important for CFO as different

functions contribute to and affect the final output or

consumer satisfaction. This supply chain level concep-

tualization of satisfaction is appropriate here given the

focus on CFO outcomes. Despite recognition of the

influence of cross-functional processes on performance in

NPD (e.g., Kahn and Mentzer 1998) and total quality

management literature (e.g., Hendricks and Singhal

1997), a direct assessment of customer satisfaction from

the intra- and interfirm viewpoint of SCM is often over-

looked. The operations strategy literature has noted the

importance of the relationship between processes in

determining customer value delivery (Skinner 1969;

Ward, McCreery, Ritzman and Sharma 1998). Also, the

channel management literature has found that channel

members satisfaction affects trust, which is important for

intra- and interfirm relationships of CFO in SCM. Thus, it

can be hypothesized that:

H1: The higher the level of CFO, the stronger

the relationship between CFO and customer

satisfaction.



As responsiveness is associated with organization and

interdependence of functions and processes in the supply

chain (Christopher 1998), different functions oriented

toward one another in SCM are likely to affect supply

chain responsiveness. Literature on NPD has noted that

the use of multifunctional teams accelerates product

development (Eisenhardt and Tabrizi 1995), though CFO

may cause delays of response time for supply chain

activities (e.g., product introduction) in decisions invol-

ving multiple functions (Cespedes 1995). Literature on

market orientation considers interfunctional coordina-

tion between different departments in an organization as

fundamental for creating superior value for customers

(Narver and Salter 1990). The influence of CFO on supply

chain responsiveness in SCM has not yet been examined.

This suggests that:

H2: The higher the level of CFO, the stronger the

relationship between CFO and supply chain

responsiveness.

The application of Internet technology in SCM pro-

motes information flows in CFO regardless of physical

distance by improving communications (Brynjolfsson and

Hitt 2000; Eng 2004a), and by removing hierarchical levels

in an organization (Dewett and Jones 2001). This means

that the longer the length of Internet adoption, the

stronger the link between CFO in terms of flexibility and

ability to learn and improve performance in response to

environmental changes. Thus it can be hypothesized that:

H3: The longer the length of Internet adoption, the

stronger the relationship between CFO and custo-

mer satisfaction.

H4: The longer the length of Internet adoption, the

stronger the relationship between CFO and supply

chain responsiveness.

METHODOLOGYThe present study seeks to examine CFO in the supply

chain in business-to-business settings. This is consistent

with the notion that CFO is an organizationwide phe-

nomenon, i.e., not merely concerned with a specific

supply chain activity and/or a mechanism for CFO such

as multifunctional teams for NPD. Thus, the unit of

analysis for this research is the senior management view

of CFO with knowledge of intra- and interfunctional

nature of SCM.

Sample and Data Collection

The sample for this study was drawn from 500 U.K.-

based companies in the food service sector using sector

standard industrial classification (SIC) codes of the Dun

and Bradstreet’s Key British Enterprises (2001). The sample

was restricted to one industry to avoid any potential

interindustry differences or idiosyncrasies that might

confound the results. The present study focuses on food

service suppliers that prepare or manufacture food products

to sell or supply to food stores or restaurants. The compa-

nies in this sector are prime users of electronic marketplaces

(Eng 2004b). This sector provided a suitable context for the

study’s focus on customer satisfaction and service respon-

siveness of functional areas in the supply chain, as it is

critical for food service companies to ensure quality of

perishable products and maintain competitiveness.

Data were collected through a key single-informant

technique using a mail survey questionnaire. Criteria for

selecting key informants were used (Campbell 1955),

which include knowledge and responsibility of overall

SCM activities for their companies and use of the Internet

in SCM such as being a member of Internet exchanges in

the industry, in order to assess the length of Internet

adoption as a moderator of SCM performance. Telephone

screening was performed to identify key informants’

names and business titles such as supply chain director or

manager. This generated a final sample of 358 companies

for the survey.

The questionnaire was pretested through interviews

with 12 supply chain managers in the food service sector,

and through feedback from two academic peers. Refine-

ments were made on the instructions that directed

respondents to the company’s supply chain relationships

and focused on interaction of functional areas among

supply chain participants. The clarity of the questionnaire

content was also improved by providing additional

explanations in brackets for constructs of interfunctional

cooperation and technology integration.

The final questionnaire was mailed to the key infor-

mants together with a prepaid postage return envelope

and a cover letter explaining the purpose of the study and

assurance of anonymity. The resulting sample consisted of

112 usable questionnaires, or about 31 percent response

rate, after sending a reminder letter and questionnaire to

late or nonrespondents. A comparison of the first 20 and

the last 20 respondents indicated that nonresponse bias

was not a problem (Churchill 1991). Of these 112 ques-

tionnaires, 58 were suppliers of ready meals and/or pre-

cooked food products, 32 were suppliers of frozen and/or

chilled food products and 22 were suppliers of meat and

poultry products. More than half, or 57 percent, of the

total 112 cases employed more than 100 but fewer than

250 employees, 18 percent employed more than 250

employees, 14 percent employed more than 50 but fewer

than 100 employees, and 10 percent employed fewer than

50 employees.

Measurements

Table I presents the factor intercorrelation matrix, and

Table II provides the scale items and parameter estimates

for measurement relations. As shown, all constructs in the



model with the exception of length of Internet adoption

were measured with multiple items on adapted 7-point

Likert scales.

CFO is a second-order construct and its indicators or

antecedents are first-order constructs. The measures used

for the five indicators of CFO were based on well-validated

measures reported in previous research. Interfunctional

cooperation was measured by four items adapted from

Heide and Miner (1992). This measure focuses on coop-

erative behavior among different functional areas in the

supply chain. Operational linkages were measured by

three items adapted from Cannon and Perreault (1999).

This construct is concerned with interdependence among

functions in the supply chain. Information exchange was

measured by four items adapted from Cannon and Per-

reault (1999), emphasizing sharing of information among

members of the supply chain. Participative management

style was measured by six items adapted from Power,

Sohal and Rahman (2001), which is important for

encouraging collective inputs from different functions for

CFO in the supply chain. The technology integration

scale was developed based on a review of SCM literature

(e.g., Christopher 1998), and measured by three items

encompassing key business functions of the supply chain:

customer fulfilment capability, logistics lead-time man-

agement and technology integration with supply chain

partners.

The customer satisfaction scale was measured by four

items adapted from Cannon and Perreault (1999), which

have been validated in the context of satisfaction of

supplier performance. As the firm’s senior management

views of intra- and interfirm supply chain operations are

likely to encompass different functional inputs to the

supply chain, managers are in a position to assess the

perception of satisfaction in relation to members of the

supply chain. Supply chain responsiveness was measured

by five items developed from extant literature and field

research in SCM (Handfield and Nichols 1999; Lancioni

et al. 2003). This measure takes an objective approach by

focusing on managers’ perceptions of SCM performance

outcomes. The length of Internet adoption was calculated

based on the time period Internet was adopted for SCM.

This is consistent with the view that organizations require

time to learn how to effectively use any new communi-

cations related to technology (Kraut et al. 1998). Thus, the

moderating effect of the length of Internet adoption

could be calculated.

ANALYSIS AND RESULTS

Measure Validation

Measure validation involved a series of confirmatory

factor analyses (CFAs) (Bollen 1989; Bagozzi, Yi and

Phillips 1991) estimated with LISREL VIII (Joreskog and

Sorbom 1993). First, exploratory factor and reliability

analyses were undertaken to purify the scales and ensure

consistency of the items. The analyses identified one item

of interfunctional cooperation, and one item of informa-

tion exchange did not load as expected in the exploratory

factor analyses; there were also relatively low item total

correlations (see Table II). These items did not tap into the

core domain of the constructs based on a visual inspec-

tion. They were deleted from subsequent analyses. Sec-

ond, CFA was applied to the first-order constructs

(antecedents of CFO) and the second-order construct of

CFO by converging first-order constructs to a single

higher-order construct. Tables II and III show the overall

acceptability of the measurement model in terms of the

model’s fit to the data using a w2 and adjunct fit indexes.

Specifically, the model fit for the CFA of first-order con-

structs was reasonable; with a w2 of 551.89 (df5361) and

the GFI, CFI and IFI values were 0.89, 0.92 and 0.98,

respectively. The model fit for the CFA of first- and

second-order constructs was good; with a w2 of 282.72

(df5138) and the GFI, CFI and IFI values were 0.91, 0.96

and 0.98 respectively. The values of standardized loadings

Table I

CONSTRUCT CORRELATIONS (P VALUES)

Components F1 F2 F3 F4 F5 F6 F7 F8

F1: Interfunctional cooperation 1.00

F2: Operational linkages 0.28� 1.00

F3: Information exchange 0.37� 0.23�� 1.00

F4: Participative management style 0.35� 0.42� 0.33� 1.00

F5: Technology integration 0.32� 0.38� 0.43� 0.51� 1.00

F6: Customer satisfaction 0.25�� 0.45� 0.46� 0.21�� 0.36� 1.00

F7: Supply chain responsiveness 0.34� 0.31� 0.42� 0.48� 0.37� 0.33� 1.00

F8: Length of Internet adoption 0.05 0.07 0.04 0.04 0.06 0.08 0.05 1.00

�Significant at p<0.01.��Significant at p<0.05.



Table II

PARAMETER ESTIMATES FOR MEASUREMENT RELATIONS

Constructs Standardized loadinga

Interfunctional cooperation (15strongly disagree and 75strongly agree) (0.80)b

1. We always act in the spirit of cooperation. 0.82c

2. We try to accommodate each other when making decisions that affect joint (mutual) outcomes. 0.86 (13.87)

3. We frequently discuss problems and opportunities. 0.71 (11.49)

4. We provide each other with timely information. 0.75 (12.82)

5. When planning new products or product changes, we use a team approach thatinvolves all functional areas.�

Operational linkages (15strongly disagree and 75strongly agree) (0.75)b

1. Our business activities are closely linked to each other. 0.85c

2. We regard every function essential to our operations. 0.81 (14.52)

3. Some of our operations are closely connected with suppliers. 0.86 (11.45)

Information exchange [In our relationship with suppliers it is expected that . . .](15very inaccurate description and 75very accurate description) (0.83)b

1. Proprietary information is shared with each other. 0.86c

2. We share relevant customer and cost information. 0.82 (15.38)

3. We include each other in product development meetings. 0.74 (12.10)

4. We always share supply and demand forecasts. 0.81 (14.72)

5. Top managers frequently meet with each other to discuss departmental needs.�

Participative management style (15strongly disagree and 75strongly agree) (0.78)b

1. Senior managers actively encourage change and implement a culture oftrust, involvement and commitment in moving towards ‘‘best practice.’’

0.76c

2. There is a high degree of unity of purpose throughout our supply chain, and we haveeliminated barriers between individuals and/or functions.

0.88 (15.19)

3. ‘‘Champions’’ of change are effectively used to drive ‘‘best practice’’ in oursupply chain activities.

0.83 (14.28)

4. We proactively pursue continuous improvement rather than reacting to crisis/‘‘fire-fighting.’’ 0.76 (11.06)

5. Ideas from production operators are actively used in assisting management. 0.85 (15.79)

6. Our supply chain has effective ‘‘top-down’’ and ‘‘bottom-up’’ communication processes. 0.78 (11.73)

Technology integration (15strongly disagree and 75strongly agree) (0.81)b

There is a high degree of technology integration between and across business functionsin our supply chain for:

1. Customer fulfilment capability (order placement, processing, delivery and support) 0.87c

2. Logistics lead-time management (production, distribution, commercial and planning) 0.91 (14.87)

3. Integration with supply chain partners (inventory management, forecastingand collaborative planning)

0.85 (13.04)

Customer satisfaction (15needs improvement and 75superior performance) (0.85)b 0.79c

1. Product quality 0.82 (13.41)

2. Delivery performance 0.74 (16.34)

3. Sales, service, and/or technical support 0.86 (15.19)

4. Speed in reacting to customer service problems 0.75 (18.12)

Supply chain responsiveness (15needs improvement and 75superior performance) (0.83)b 0.81c

1. Management of distant facilities 0.81 (12.67)

2. Reduce the level of paperwork in a supply chain system 0.84 (18.70)

3. Track shipments 0.89 (15.44)

4. Develop innovative new products/services 0.73 (17.79)



provided preliminary evidence of validity and significant

at p<0.01. Furthermore, the item reliabilities and t-values

are above the minimum threshold required (Bagozzi and

Yi 1988). Cumulatively, these results suggest unidimen-

sionality, internal consistency and adequate reliability for

these measures.

Discriminant validity between all constructs was exam-

ined by comparing the correlation of a pair of latent

variables: one was set at unity and another in which the

correlation was free to vary (Venkatraman 1989). In every

case, significant decreases in w2 were observed for the

unconstrained model, providing support that the results

were sound. Table I shows that f values range from 0.04 to

0.51, and none of the confidence intervals had a value of

one (p<0.01) to jeopardize discriminant validity. Con-

vergent validity was examined by the LISREL estimates of

paths from individual items to latent factors. All factors

were statistically significant (p<0.01), with parameter

estimates five to 28 times as large as the standard errors.

As noted above, measures of the validity of w2 and other

descriptive fit statistics as indices of model fit support the

null hypothesis that the first-order constructs converge to

a single higher-order construct. The second-order con-

struct explains 38 percent, 30 percent, 56 percent, 48

percent and 32 percent in variation of the first-order

constructs (see Figure 2).

Tests of Hypotheses

The structural relations among the hypothesized rela-

tionships were examined with path analysis. Table IV

shows a good fit of the model with a w2 of 517.81

(df5279), the ratio of w2 to degrees of freedom is 1.86, and

the GFI and CFI values are 0.86 and 0.97, respectively. The

structural model explains 35 and 37 percent, respectively,

of the variance in the two endogenous theoretical con-

structs, customer satisfaction and supply chain respon-

siveness.

Hypothesis 1 predicts that CFO will be positively related

to customer satisfaction. The coefficient for the relation-

ship between CFO and customer satisfaction is positive

and significant 0.57 (t56.51, p<0.01), supporting

Hypothesis 1. There is also support for Hypothesis 2 that

the relationship between CFO and supply chain respon-

siveness is positive and significant 0.41 (t55.42, p<0.01).

These results support that CFO in SCM is positively

related to customer satisfaction and supply chain

responsiveness (Table V).

To test whether length of Internet adoption moderated

the relationship of CFO with customer satisfaction and

supply chain responsiveness, the sample was divided at

the mean into a long- and a short-Internet adoption

group. The parameter from CFO to customer satisfaction

was first constrained to be equal and another the corre-

lation was free to vary; and vice versa for CFO to supply

chain responsiveness. The results are significant for both

Hypotheses 3 and 4 with w2 differences of 17.93 (p<0.01)

and of 12.13 (p<0.01), respectively.

DISCUSSIONThe overall findings of this study suggest that CFO in

SCM has positive effects on customer satisfaction and

supply chain responsiveness in terms of improved effi-

ciency among different functions in the supply chain.

Several important implications for theory of SCM

emerged from this study. First, CFO as a supply chainwide

phenomenon is likely to have an impact on value creation

in the supply chain. Firms can increase their opportunity

to identify complementary resources and to create value

for their business and customers as they interact and

combine resources among different functions in the sup-

ply chain. Second, the consequences of CFO are broad

and substantial; they include all processes contributing to

final outputs of the supply chain as well as spanning both

departmental and firm boundaries. A collective view of

the allocation of resources in a supply chain is required to

account for performance implications. Third, control of

dependence among functions is an important task of SCM

particularly in interfirm supply chain relationships. For

example, relational norms can help firms control their

dependence on other parties by developing common

objectives.

The findings suggest that the antecedents of CFO based

on relational norms and resource dependence theory can

have some positive outcomes on customer satisfaction

and supply chain responsiveness. Specifically, relationship

Constructs Standardized loadinga

5. Achieve or maintain short time from product/service concept to introduction 0.85 (12.63)

Length of Internet adoption

Length of time Internet has been used in supply chain management 0.82c

w25551.89, df5361; GFI50.89; CFI50.92; IFI50.98

a t-values from unstandardized solution are shown in parentheses.b Construct reliabilities are shown in the parentheses.c Fixed parameter.�Denotes items that were deleted in scale purification.



norms that support cooperation, information exchange

and participation encourage CFO on which behavior

of supply chain participants can be guided

to enhance supply chain performance. Also,

interdependence in supply chains characterized by

operational linkages and technology integration implies

that customer satisfaction and supply chain responsive-

ness are influenced by an orientation that guides behavior

and action. These findings suggest that the nature of

interdependence and norm-based characteristics in

Table III

STANDARDIZED LOADINGS OF CROSS-FUNCTIONAL ORIENTATION (CFO) FIRST- AND SECOND-ORDERMEASUREMENT MODEL

First-order construct Indicator (parameter) First-orderloadings

Second-orderloadings (CFO)


0.75 (5.14)

We always act in the spirit of cooperation. 0.79a

We try to accommodate each other when making decisions thataffect joint (mutual) outcomes.

0.75 (9.89)b

We frequently discuss problems and opportunities. 0.71 (9.71)We provide each other with timely information. 0.74 (9.63)

Operational linkages 0.73 (5.11)

Our business activities are closely linked to each other. 0.73a

We regard every function essential to our operations. 0.68 (11.03)Some of our operations are closely connected with suppliers. 0.74 (10.31)

Information exchange 0.87 (6.89)

Proprietary information is shared with each other. 0.81a

We share relevant customer and cost information. 0.74 (12.87)We include each other in product development meetings. 0.65 (11.50)We always share supply and demand forecasts. 0.78 (14.82)


0.62 (5.11)

Senior managers actively encourage change and implementa culture of trust, involvement and commitment in moving towards‘‘best practice.’’

0.83a

There is a high degree of unity of purpose throughout our supplychain, and we have eliminated barriers between individualsand/or functions.

0.74 (14.71)

‘‘Champions’’ of change are effectively used to drive ‘‘best practice’’in our supply chain activities.

0.71 (10.61)

We proactively pursue continuous improvement rather than reactingto crisis/‘‘fire-fighting.’’

0.74 (11.04)

Ideas from production operators are actively used in assistingmanagement.

0.77 (10.61)

Our supply chain has effective ‘‘top-down’’ and ‘‘bottom-up’’communication processes.

0.74 (11.42)

Technologyintegration

0.72 (5.28)

Customer fulfillment capability (order placement, processing,delivery and support)

0.64a

Logistics lead-time management (production, distribution,commercial and planning)

0.73 (12.31)

Integration with supply chain partners (inventory management,forecasting and collaborative planning)

0.78 (14.78)

Goodness of fit: w25282.72, df5138; GFI50.91; CFI50.96; IFI50.98

a Fixed parameter.b t-values from unstandardized solutions are shown in parentheses.



supply chains can be used to enhance performance by

encouraging CFO that is likely to use a combination of

resources, skills and interfirm relationships for more

effective performance than to rely on individual functions

that are susceptible to duplication of tasks and develop-

ment of incoherent goals.

The findings from the moderating effect of the length of

Internet adoption on the relationship of CFO with both

customer satisfaction and supply chain responsiveness are

consistent with prior research, which shows significant

relationships between the earliness of adoption of Inter-

net technology and both its diffusion and infusion in an

organization (Eder and Igbaria 2001). In a SCM context,

the effects of the length of Internet adoption between

short and long periods differ significantly. Experience in

using information technology positively affected

CFO in a firm’s ability to enhance customer satisfaction

and supply chain responsiveness. Research on fast

product development has noted that experience is a

pivotal strategic competence in shortening adaptive

processes for product innovation (Eisenhardt and

Tabrizi 1995). With the aid of technology integration in

CFO, the application of the Internet is likely to

facilitate responsiveness through real-time information

and unprecedented reach. Surprisingly, the adoption

of the Internet in SCM, whether for supply chain inte-

gration or CFO, has not received much research

attention.


Customer satisfaction

Operational linkages

Cross-functionalorientation

Information exchange


Technology integration

Supply chain responsiveness

0.35

0.37

0.38

0.30

0.56

0.48

0.32

Figure 2

MODEL TESTS AND INFLUENCES OF CROSS-FUNCTIONAL ORIENTATION ON CUSTOMER SATISFACTION AND SUPPLYCHAIN RESPONSIVENESS

Table IV

RESULTS OF PATH ANALYSIS

Paths Standardized parameter estimatea

Cross-functional orientation ! Customer satisfaction 0.57 (6.51)

Cross-functional orientation ! Supply chain responsiveness 0.41 (5.42)

Goodness of fit: w25517.81, df5279; GFI50.86; CFI50.97; IFI50.99

a t-values from unstandardized solution are shown in parentheses.



Managerial Implications

CFO affects supply chain performance through norms

and resource dependencies in intra- and interfirm busi-

ness relationships. Managers can encourage specific

behaviors to facilitate exchange and flow of information

across different functional areas in SCM. For example,

rapid flow of information among functions in SCM is a

source of competitive advantage. Managers can choose

appropriate mechanisms to develop cooperative and par-

ticipative behaviors through reward systems and com-

mitment of resources. To realize the benefits of CFO,

managers must understand different supply chain func-

tions and manage them toward achieving collective

interests. An understanding of different supply chain

functions can help managers prioritize allocation of scarce

resources and select value-added business activities.

Although no prior research has yet examined a CFO in

supply chains, the results of this study suggest that CFO

plays a significant role in explaining SCM performance.

This orientation extends research on multifunctional

and/or cross-functional teams in NPD literature not only

by recognizing the potential of coordinating interdepen-

dent activities to achieve faster product to market but also

by identifying norm-based and resource dependence

characteristics that can be developed to encourage CFO.

For example, CFO can help firms improve communica-

tions beyond NPD activity in supply chains, and increase

the opportunity to share knowledge and combine

resources.

Finally, managers must explore the application of

information technology and the Internet in deriving the

benefits of CFO. As exploring new ways to satisfy custo-

mers takes time and requires learning, managers must

realize that having the latest technologies may not

necessarily enhance performance. As indicated by the

moderating effect of the length of Internet adoption on

the relationship of CFO with customer satisfaction and

supply chain responsiveness, decisions on adoption of

certain technologies or the Internet can affect future

performance. With increased transparency of supply

chain information and efficient marketplace through

SCM Internet applications (Eng 2004b), managers can

seek new ways to achieve customer satisfaction and sup-

ply chain responsiveness based on CFO as opposed to

solely depending on transactional efficiency of coordina-

tion and information asymmetry in supply chains.

Limitations and Further ResearchA major limitation of the study is the use of single-

informant data from companies, particularly data for

judging multiple functions of the whole supply chain.

While customer satisfaction and supply chain respon-

siveness could be collected from multiple functions

within an organization, for practical reasons it would be

difficult to obtain data from multiple respondents. Senior

executives also have an overall prism in regard to knowl-

edge of the whole supply chain, and their views on

perceptual performance have been commonly used in

previous studies (e.g., Ruekert et al. 1987; Spanos and

Lioukas 2001). The data for this study were limited to the

food service sector in business-to-business settings, and

hence, the generalizability of the study is limited to

similar contexts. There are also other supply chain and

organizational variables such as strategic leadership and

organizational structure that may impact CFO. While the

moderating effect of the length of Internet adoption has

been shown to have significant effects CFO and SCM

performance, the measure used was limited to the length

of Internet adoption. The research sample was relatively

small, which may have led to nonresponse bias, despite

evidence pointing to the contrary. All these limitations

should be considered in interpreting the results, and they

suggest avenues for further research.

Table V

MODERATING EFFECT OF INTERNET ON THE RELATIONSHIP OF CROSS-FUNCTIONAL ORIENTATION TO VALUE CREATIONAND FIRM PERFORMANCE

Path Moderator Standardizedcoefficient

w2 difference

Cross-functional orientation ! Customersatisfaction


Long period/experience

0.48 (3.79)� w2 (1)517.93�

Short period/inexperience

0.12 (1.79)��

Cross-functional orientation ! Supply chainresponsiveness


Long period/experience

0.52 (2.67)� w2 (1)512.13�

Short period/inexperience

0.28 (2.15)��

� Significant at p<0.01.�� Significant at p<0.05.



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