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Electronic data interchange (EDI) refers to a technology used to exchange information and data across organizations. Its rapid diffusion over the past decade is attributable to the productivity and service improvements associated with its adoption. Firms initiating EDI with suppliers have reduced lead time length and uncertainty, order and data storage costs, inventory levels, and order errors, while those instituting EDI with customers have noted the same plus increased customer satisfaction and market share[1-3]. EDI affects the entire channel of distribution, not only by affecting information speed but also by fostering integration and alliances[4,5]. Indeed, enhanced competitiveness, productivity, flexibility and interorganizational networking have led some to suggest that these information systems are a prerequisite for doing business in today's environment[6-8].
A common theme in the literature is the connection between EDI technology adoption and just-in-time (JIT) strategy. The marriage of JIT and EDI is the result of both focusing on small lot production or order sizes. Despite the fact that the link has often been proposed, no empirical study has adequately addressed the relationship between EDI and JIT[9-11]. While EDI has received considerable attention and the benefits are well documented, much of the research has focused on case studies, and actual EDI usage may be lower than the literature would suggest[12-14]. Furthermore, while the link has been made between EDI and alliances in general, no empirical study has evaluated the direct relationship between the extent of JIT flows (reflective of a time-based competitive advantage) and the extent of EDI flows.
The focus of the research is on the link between JIT and EDI. A richer managerial understanding, however, requires that the JIT/EDI connection be established in a framework of organizational adoption of innovation. Figure 1 presents the overall framework of the study. In addition to modelling the relationship between JIT strategy and EDI technology adoption, the framework includes three contextual variables that may confound the relationship between JIT and EDI: size, environmental uncertainty, and production complexity. Examining these variables is also important because they may predict EDI adoption. In the next section, JIT and the three contextual variables are defined and interrelationships among them are hypothesized. Hypotheses are presented concerning the effects of context and JIT extent on EDI adoption. A model is tested holistically using LISREL and results are presented.
Context and JIT strategy: relationships among independent constructs
The meaning of JIT and context
JIT is a waste elimination strategy that takes time and inventory out of the system. Through reduced machine set up times, lot sizes are driven down. Because the firm manufactures in small lots, purchases from suppliers are typically made in small lots: this drives down the amount of original parts or material inventories on hand. Small lot size manufacturing allows the firm to efficiently sell on a small lot (or JIT) basis to customers (if desired). It also reduces lead time, creating a more responsive organization. Because machine output velocities at different production stages are finely matched, quality problems are easily spotted as bottlenecks. Improved product quality has many implications: scrap and rework costs and associated space requirements are reduced, quality control inspectors are eliminated, and after sales service and repair costs are slashed[15,16].
Context refers to an organization's immediate operating environment that is uncontrollable by management in the short run. Size describes the physical scale of operations, and environmental uncertainty refers to the rate of change or unpredictability in externalities including technologies, customers, competitors and markets. Production complexity refers to the complication involved in manufacturing and operations and is operationalized by the number of stock-keeping units (SKUs). The greater the number of SKUs, the more complex manufacturing tends to be, for example.
Size and JIT strategy
Size and JIT may associate positively reflecting the proclivity of larger organizations to formalize relational exchange with trading partners (either up or down a channel of distribution). JIT purchasing is often imposed by large organizations on small suppliers, while the benefits of JIT adoption to small firms has been questioned[17-18]. Larger firms may be better positioned to adopt a JIT strategy. Substantive implementation costs may be reflected in more:
* specialized knowledge applied to devising more direct factory flows;
* formalized product quality programmes;
* supplier and third-party service provider quality certification programmes;
* inbound or outbound small lot shipments of variable size;
* integration of production plans with those of suppliers and customers.
Larger firms may also be better able to dedicate resources to becoming preferred JIT suppliers. Geographic proximity is a JIT supplier selection determinant, and larger organizations may possess the financial muscle to erect new factories or field warehouses near customers' production facilities. However, growth (and hence size) resulting in part from effective JIT implementation cannot be ruled out and thus our hypothesis is bidirectional. Organizations that have intensively adopted JIT programmes may have grown faster than less aggressive counterparts, and thus JIT strategy may foster size[19,21].
H1: An organization's size and the extent of JIT are positively associated.
Environmental uncertainty and JIT strategy
The second hypothesized link among …