The Impact of Structure of Interdependence on Supplier Performance in the Local Pineapple Processing Supply Chain in Thailand: a Mixed Method Research*

This research aims at studying the impact of the interdependence structure of a local pineapple processing supply chain on supplier performance, which may help increasing value of low-grade pineapples. The study utilizes a mixed research methodology between quantitative and qualitative methods designed to enhance the cause and effect of the research outcomes. The sample groups are consisted of pineapple farmers, middle men, local processors and retailers in Prachuap-Khiri-Khan Province, Thailand. The results from the quantitative method show that the interdependence structure has a positive effect on supplier performance. Total interdependence has more influence than dependence asymmetry does, in connection with improving supplier performance. According to interviews with the following four groups of participants, pineapple farmers, middle men, local processors and retailers, the ones who have total interdependence with their regular customers have high performance. The total interdependence creates trust among supply chain members, leading to regular pineapple purchases after launching to the market. This should be beneficial to suppliers because their inventory of fresh pineapples can be substantially reduced, while customers may be confident in quality, taste and price of fresh pineapples. This study may be served as guidance for developing an interdependence structure within the supply chain. Moreover, it may contribute to supplier performance improvement in different aspects, such as product quality, agreement on cost and service in fulfillment of the current and future demands. Keywords—Pineapple Supply Chain, Mix research method I. BACKGROUND AND MOTIVATION In current business condition, every supply chain has faced high competition in market. Their performance need to be improved to survive. Not only general supply chains, an agricultural supply chain is also on this same situation. Supplier performance is one important factor to maintain the whole supply chain performance and competitive advantage. Many previous researches have attempted to recognize factors that can improve supplier performance. The structure of interdependence that exists in the buyer–supplier relationship can affect supplier performance. The nature of interdependence is characterized by the structure of reciprocal dependence between two supply chain members, where dependence refers to one firm's need to maintain a relationship with another firm in order to achieve desired goals [1]. The supplier performance can be improved through the high level of total interdependence in the relationship with their customers. This is because the relationship is motivated to develop a cooperative long term relationship [2]. 3318 © IEOM Society International Proceedings of the 2016 International Conference on Industrial Engineering and Operations Management Kuala Lumpur, Malaysia, March 8-10, 2016 The pineapple processing supply chain is nominated as it can add value to a low grade of fresh pineapple. The pineapple is processed in local area as it can reduce transportation cost and time. This supply chain also can bring revenue in the local people. Moreover, a strategy of ministry of agricultural and cooperatives in year 2010-2014 had supported to develop cropping, processing and exporting pineapple sustainably. In preliminary data, the supplier performance is quite low as they face uncertainty yield and price of fresh pineapple in each year. This should be improved to meet requirement of ministry of agricultural and cooperatives. Prachuap-Khiri-Khun Province is a sample in this research as 43 percentage of total pineapple crop in this province. Therefore, the aim of this paper is to identify the impact of the interdependence structure of a local pineapple processing supply chain on supplier performance. To achieve this research objective, a survey method is applied. The result of the survey method is guided to develop qualitative research method. The aim is to more understand to support the interdependence structure existing in this chain. II. CONCEPTUAL FRAMEWORK The conceptual framework is proposed as a way of analysing the causal relationships among two main constructs (Fig. 1). Fig. 1. A conceptual framework of the impact of the interdependence structure of a local pineapple processing supply chain on supplier performance Fig. 1 presents the conceptual framework of this study, setting out the relationship between two constructs that are a major focus on this paper: interdependence structure and supplier performance The structure of interdependence consists of total interdependence and dependence asymmetry. The former is an important factor to raise higher degree of partnership developing between two supply chain members which can improve supplier performance [3]. The sum of both firms’ dependence is applied to measure the total interdependence (supplier dependence + customer dependence). The latter is found that can harm the development of partnerships as it leads to take exploitation between each other and unstable relationship [2]. This will reduce supplier performance and the whole supply chain performance. The level of dependence asymmetry is measured by the difference between suppliers’ dependence on its customers and the customers’ dependence on its suppliers (supplier dependence customer dependence) [3]. Supplier performance in this research is focused on only cost return and business growth according to purchasing with their regular customers [4]. In the local pineapple supply chain in Prachuap-Khiri-Khan Province, Thailand, both structures of interdependence are exits but no evidences to confirm that they can improve or reduce supplier performance as found in previous research. To improve supplier performance in this chain, the following hypothesis is proposed: H1: The higher the level of structure of interdependence, the higher the level of supplier performance. III. RESARCH METHODOLOGY This research employs a mix research method in the explanatory sequential design that can be divided into two phases: a quantitative and qualitative method. A. Phase I The quantitative research method has been selected with the suggested use of four criteria for maintaining efficient research: internal validity, external validity, reliability and objectivity [1, 5]. The impact of the interdependence structure of a local pineapple processing supply chain on supplier performance is tested by a survey method. The five-point Likert scale of questionnaire was adapted from [3] and [4]. However, as the questionnaire is translate from English to Thai language, preStructure of Interdependence Total Interdependence (SD+CD) Dependence Asymmetry (SD-CD) Supplier Performance H1 3319 © IEOM Society International Proceedings of the 2016 International Conference on Industrial Engineering and Operations Management Kuala Lumpur, Malaysia, March 8-10, 2016 testing with a group and a redesigning of the questionnaire is required in order to improve the quality of the answers Sekaran [6]. The pilot study was performed and the questionnaire was improved following the comments from the pilot-study participants. A number of statistical techniques are employed to test assumptions and hypotheses in the framework. Two main types of statistical techniques are implemented in this study: validation and reliability of measures, and Partial Least Square Path Modeling (PLS). 1) Sample and data collection: Data were collected in March-April 2014. The 620 questionnaire were sent to pineapple farmers, middle men, manufacturers, processed pineapple retialers in Prachuap-Khiri-Khan Province, Thailand. The 252 questionnaires were returned, resulting a response rate of nearly 42.06% as shown in Table 1. TABLE 1: The sample size of this research Sample The number of questionnaires The returned questionnaires Farmers 450 167 Middle men 70 20 Manufacturers 30 16 Retailers 70 14 Total 620 217 2) Noparametric statistics: As sample size ia divied into 4 groops:farmers, distribitors, processers, and retailers, the return questionnaires can be conbined by Kruskal-Wallis H Test. The hypothesis is at least one population is diferent from others. The result if this test at α=0.01. This hypothesis is rejected that the four population is not diffrent. Therefore, the four sample size can be combined to be one sample size [7]. 3) Validation and reliability of measures: Validity is the ability of a construct’s indicators to measure accurately the concept under study [8]. Meanwhile, Reliability is “the consistency of the a measure of a concept” [9, p71]. Reliability is concerned with the extent to which any measuring procedure yields the same results on repeated trials [10]. a) Convergent validity is indicated when there is a high correlation between measurement scores attained using two distinct instruments measuring the same concept [6, 11, 12]. Average Variance Extracted (AVE) is measured for convergant validity. b) Discriminant validity of a reflective construct is assessed by Corrected Item-Total Correlation, which should be higher than 0.3 [13]. c) Cronbach’s alpha ia a scale reliability of internal consistency [14] ,which should be higher than 0.6. d) Composite reliability is of more than 0.6 denotes an acceptable level of reliability [15]. The proportion of variance (R) and factor loading of each measurement item (observed item) assess unidimensionality The results of validity and reliability of the structure of interdependence (supplier dependence (SD) and customer dependence (CD)) and supplier performance (SP) are shown in Table 2, 3 and 4. TABLE 3: Validity and Reliability Test of Supplier Dependence. Variable Corrected Item-Total Correlation R Factor Loading Cronbach’s Alpha Composite Reliability AVE SD1 0.43 0.34 0.60 0.68 0.83 0.50 SD2 0.38 0.22 0.47 SD3 0.53 0.43 0.66 SD4 0.51 0.37 0.61 SD5 0.34 0.22 0.48 3320 © IEOM Society International Proceedings of the 2016 International Conference on In