The impact of information technology on the competitive advantage of logistics firms in China
| DOI | https://doi.org/10.1108/02635570610712564 |
| Date | 01 December 2006 |
| Published date | 01 December 2006 |
| Pages | 1249-1271 |
| Author | Fujun Lai,Xiande Zhao,Qiang Wang |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
The impact of information
technology on the competitive
advantage of logistics firms
in China
Fujun Lai
School of Accounting and Information Systems,
University of Southern Mississippi, Long Beach, Mississippi, USA
Xiande Zhao
Department of Decision Sciences and Managerial Economics,
Chinese University of Hong Kong, Shatin, Hong Kong,
People’s Republic of China, and
Qiang Wang
School of International Trade and Economics,
University of International Business and Economics, Huixin Dong Jie,
Beijing, People’s Republic of China
Abstract
Purpose – This paper seeks to examine the impact of information technology (IT) on the competitive
advantages of third-party logistics (3PL) firms in China.
Design/methodology/approach – A questionnaire-based mail survey was conducted in mainland
China. Spline regressions were used to model the relationship between IT and competitive advantages.
Findings – This study found that IT could significantly influence a firm’s competitive advantage,
and the effects are nonlinear.
Research limitations/implications – The modeled relationship between IT and competitive
advantages may not hold in different cultural environments and industrial settings. The sample size
was small.
Practical implications – A higher IT focus may improve a firm’s competitive advantage. To
achieve competitive advantages efficiently, it is essential to integrate IT, align IT strategy and
business strategy, obtain IT-related management skills, and achieve IT competency. 3PL managers
can expect competitive advantages from their investments in IT to begin showing up when the
deployment of IT is higher than the average relative to competitors.
Originality/value – This paper is a pioneering study that investigates the relationship between IT
and competitive advantages in 3PL firms; is a pioneering study on IT and its impact on competitive
advantages in China’s 3PL firms; and provides valuable guidance and insights for 3PL managers to
improve competitive advantages using information technology.
Keywords Information,Technology led strategy, Competitiveadvantage, Logistics data processing, China
Paper type Research paper
1. Introduction
Logistics has evolved dramatically from a passive, cost-absorbing function and
supportive role to a primary role. It can help companies to achieve competitive
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Impact of
information
technology
1249
Industrial Management & Data
Systems
Vol. 106 No. 9, 2006
pp. 1249-1271
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570610712564
advantages by providing customers with superior services (Sum and Teo, 1999;
Bowersox and Closs, 1996; Bowersox and Daugherty, 1995). With increased global
competition and higher customer expectations, an increasing number of companies are
outsourcing their logistics activities to third-party logistics (3PL) firms so that they can
concentrate on their core competencies (Vaidyanathan, 2005).
Effectiveinformation technology(IT) becomes necessaryto support logisticsprocesses
(LaLonde and Masters, 1994). IT may help automate routine logistics activities, thus
enabling managersto focus on strategic issuesand core competencies. Some studieshave
reported that IT can improve logistical efficiency, effectiveness, productivity, flexibility,
cost, and service quality (Bhatnagar et al., 1999; Closs et al., 1997; Daugherty et al.,1995;
Lunce and Smith, 2000; Suominen and Takala, 2006). Meanwhile, intermediate supply
chain activities,such as distribution,can be enabled and supported by the use of IT (Lewis
and Talalayevsky,1997). Additionally,IT is essential for global logisticsmanagement, in
particularto coordinate worldwidedistribution, productdesign, production, procurement,
and inventory (Huanget al .,2001).
Owing to the high cost of advanced IT applications and a lack of expertise, the IT
adoption rate of logistics user firms is low (Sum et al., 2001). This low IT adoption rate in
logistics user firms means that there are ample opportunities for 3PL providers to adopt
and exploit IT (Bhatnagar et al., 1999). Additionally, for 3PL firms, IT is a critical
determinant of performance, because they must integrate their systems with those of
their clients. IT links supply chain members, such as manufactures, retailers,
transportation firms, and distributors (Vaidyanathan, 2005). As a bridge connecting
supply chain members, IT in 3PL firms plays an essential role in synchronizing and
coordinating complex supply chain activities across logistics users and t heir customers.
Empirical evidence on the ways in which IT influences the competitive advantages
of 3PL firms is very limited. The literature on logistics and IT is mainly from the
perspective of logistics users. Very few studies have addressed the relationship
between 3PL firms’ competitive advantage and IT. One of our research objectives was
to provide empirical evidence and quantitative support for this relationship.
Another objective of the present study was to investigate China’s logistics industry.
With high economic growth and huge market potential, China has attracted not only
business attention, but also a growing amount of academic interest. However, research
on China’s logistics industry is limited, and more studies are needed. In the following
sections, we first review the related studies and describe the research methodology. We
then present the results of the data analyses. Subsequently, we discuss the managerial
implications and, finally, make some concluding remarks.
2. Literature review and hypothesis development
2.1 Logistics in China
With the entry ofChina into the World Trade Organization(WTO), the logistics industry
in China is set to groweven faster. China’s logistics industryhas reported annual revenue
growthrates of 31 percent for 1999, 35 percent for2000, 55 percent for 2001, and more than
50 percent for 2002-2004(Bolton and Wei, 2003). In 2004, logisticscontributed RMB845.9
billionof added value, which is 6 percentof GDP, and 19.5 percent of the added valueof the
service sector (Ou, 2006). According to a report that was jointly published by the China
Federation of Logistics and Purchasing and Mercer Management Consulting (2002), the
outsourcing of logistics and transportation will also continue to expand by roughly
IMDS
106,9
1250
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