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Implications of Cloud Based Supply Chain Collaborations Jeroen Radstaak University of Twente P.O. Box 217, 7500AE Enschede The Netherlands
[email protected] There are many different definitions available on what characterizes cloud, but the most comprehensive is the definition of the National Institute of Standards and Technology (NIST) that is nearly 800 words long . This paper’s scope is limited to the service model Software as a Service (SaaS) in a community cloud. SaaS is defined by NIST as a service mode that provides the consumer the capability to use the provider’s applications running on a cloud infrastructure .
ABSTRACT Cloud computing enables Supply Chain Collaboration (SCC) to be more efficient, sustainable and agile. In practice, cloudenabled SCC could be hard to be implemented without a proper understanding of the SCCs’ challenges and success factors. Current literature on these challenges and success factors is scarce. This study contributes to the existing literature by creating a framework from previously researched factors and validating this framework through case studies.
Several literature has tried to define and explain the phenomenon of cloud-based SCCs [1,3,8,11]. However, which factors influence the success of cloud-enabled SCCs is still unknown.
This study aims to: (1) research the challenges and the critical success factors of cloud-based SCCs and (2) validate the research findings through case studies. A framework including the research findings is proposed and used in the case studies for validation. The framework consists of how formalized coordination mechanisms, network administrators and suitable governance will influence the success of SCCs to address their challenges.
Therefore, this study aims to: (1) assess the challenges and the success indicators of cloud-based SCCs and propose a framework for SCCs based on existing literature, and (2) validate the framework by observing cloud based SCCs in practice. The main contribution of this paper is providing SCCs with a grip on how to achieve success by providing influenceable factors that can contribute to the success of SCC.
1.1 Problem Statement
Cloud computing, collaboration, supply chain, network, coordination, interorganizational system
SCCs are increasing in quantity . Accordingly, influencing the success of the SCCs becomes more important. Literature on best practices or how to succeed in implementing these collaborations is limited. Different researches discovered different factors that could influence the success of a collaboration , however due to cloud based SCCs being fairly new, these factors have not been evaluated much in existing SCCs.
1. INTRODUCTION The interest in supply chain management has increased since the 1980’s . Over the years, the approach has evolved from competition between companies to competition between the entire value chains. This competition also results in the necessity of collaborations in the value chain , which resulted in Supply Chain Collaborations (SCCs). These SCCs had a varying success rate in achieving the perceived benefits. Nevertheless, many SCCs are not succeeding as planned which results in high costs and eventually havoc .
Research on implementations of cloud software in SCCs is scarce. Observation of these companies can enforce existing research that has been done on this topic.
1.2 Research Questions Based on the problem statement, the research addresses two research questions. First question applies to the research on which known aspects influence the SCCs successfully. The second question is aimed to evaluate these aspects in existing SCCs
In these SCCs, technology is an important factor. Without support of an information system it is difficult to create a successful SCC . The technology changes over the years and more opportunities emerged, an example is cloud applications. The cloud enables, among others, data exchange, high availability and high scalability for SCCs . However, these benefits do not automatically result in less negative implications in the SCCs.
RQ1: What are the challenges of cloud-based SCCs?
RQ2: What aspects influence the success of cloudbased SCCs?
Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. 25thTwente Student Conference on IT, July 1st, 2016, Enschede, The Netherlands. Copyright 2016, University of Twente, Faculty of Electrical Engineering, Mathematics and Computer Science.
In section 2, we will explain the methodology used in this paper. Next, the framework based on existing literature is introduced in section 3 The following three sections are based on conducted case studies in which the framework of section 3 will be compared to the case studies.
The conclusion, limitations and future work are presented in section 7. Finally, the paper finishes with the acknowledgments in section 8.
Additionally, challenges that rise during the different phases of collaboration can have an influence on the sustainable success. Therefore also these challenges will be considered.
All of the elements that are explained in this section are summarized in figure 1.
The research in this paper consists of two parts. In the first part, literature will be reviewed to answer the first research question (RQ1) and the second research question (RQ2). Next, validation will be done by conducting case studies among several SCCs.
3.1 SCC challenges The success of a SCC partly depends on successfully addressing challenges that arise. Failure in doing so, could lead companies to havoc. Several challenges can be faced [3,4,9]: (1) information system challenges, for instance incompatible infrastructure and legacy systems, a lack of standardized Service Level Agreements (SLA); (2) operational challenges, such as a mismatch of execution parameters and missing cost-benefit evaluations; and (3) organizational challenges, such as a lack of trust or conflicting goals, which will also be further detailed in the following sections.
By following these approaches we hope to gain some insights about aspects that influence the success of cloud implementation in SCCs.
2.1 Literature Review Literature study is necessary to answer the research questions. With literature study we gain better insight in the known factors that influence the success of cloud based solutions in SCC. This knowledge also results in more specific questions for the case study.
If these challenges are not addressed properly than they can result in a failure of the SCC even before the SCC is in the operational phase.
2.2 Case Study Case study method is selected to verify the results from literature review in practice. The case study method gives a better insight in a more complex system  like cloud based SCCs. For the case studies, several companies that were involved in implementing cloud solutions into the SCCs, are analyzed to gain insight in what influenced the outcome of the implementation. Several semi structured interviews are conducted, in which a protocol is followed to confirm results from literature review. This protocol is available as an appendix to this paper.
3.2 Governance Models Governance is important as it can contribute to interorganizational arrangements on efficiency and effectiveness . Therefore it is important to think about what governance type to choose for the SCC. Provan and Kenis  distinguish three different governance types: (1) Shared, in which the network depends on the involvement of all organizations and without a unique or separate governance entity; (2) Lead Organization, is the opposite of shared organization because one organization governs the network and takes the lead, and (3) Network Administrative Organization (NAO), in which a separate organization is created to govern the network .
The case study sections are completely based on the interviews with the experts, except for the analysis in which the case study is compared to the proposed framework.
3. THEORETICAL FRAMEWORK
Provan and Kenis  proposed four predictors to establish which governance type is best suitable for the SCC and Bosdriesz  added a fifth predictor. Each predictor is briefly explained in the following section.
While not many practical studies have been conducted, there is some existing literature that provides us with a number of elements that influence the success of a cloud based SCC. This ranges from a suitable governance type that depends on individual factors to using formalized coordination mechanisms and appointing network administrators. Each of these elements come from existing literature and will be explained in the following sections.
Table 1. Governance Forms and Key Predictors  Governance Forms
Number of Participants
Figure 1. Theoretical framework 2
Need for Network Level Competencies Low
Information Technology component Low
Low density, highly centralized
Network administrative organization
Moderate density, NAO monitored by members
Moderate to many
3.4 Network Administrators
None to low
The empirical study of Cristofoli also shows that network administrators can have a positive influence on the performance of a network . To achieve this positive influence, an administrator is expected to foster an environment suited for good partner interaction, maintaining harmony  and developing ways to cope with complex strategies or operations.
4. CASE STUDY A
Trust is described by Provan and Kenis as “the willingness to accept vulnerability based on positive expectations about another’s intentions or behaviors”. Trust is most important in a shared governance, because the partners need to trust each other before they will collaborate. It is less important in a lead or NAO governance because every organization only has to trust one company and not everyone else.
Case study A was conducted by interviewing two experts who gave their opinion based on practical experience. Both experts were involved in an IT provider that provided SaaS for SCCs, but as it was not successful in the beginning, one expert decided to leave the IT company. The other one is still involved in the company. The first section is about the profile and performance of the IT Company in which both experts participated, the second section is about the challenges they faced in this company, followed by the discussion of the success factors from the research framework.
3.2.2 Number of Participants Governance of a network can become more difficult with a higher number of participants. Shared governance becomes very inefficient with a high number of participants, because decision making and dispute solving becomes more difficult. A lead or NAO organization is more suitable for many people because the direct involvement of all organizations is not required [1,15,16].
4.1 Profile ZP IT is a Dutch IT company that was established in 2014 and currently has 5 employees. One of the experts is the co-owner and the other was a co-owner for the first year after which he decided not to continue in the venture due to a disappointing number of new customers.
3.2.3 Goal Consensus We speak of a high goal consensus if members generally agree on network-level goals. Shared governance is more likely to be effective with a high goal consensus. With a lower goal consensus, a lead organization could be the right fit because there is no direct contact between members necessary . NAO does need a high goal consensus between the members involved with the NAO itself .
They developed a collaboration platform for in the cloud (SaaS) that is used by roughly 900 users from 30 different customers. These customers take part in varying types of SCCs. The structure between the SCCs companies and the platform is shown in figure 2.
3.2.4 Need for Network Level Competencies
The platform is used as a generic product that can be partly customized to fit specific SCCs. It has features that are comparable to that of social media. Companies can add other companies as connections and manage what information to share and when to share information. This is achieved by a combination of (1) operational configuration, what processes set which consequential processes in motion, and (2) privacy settings, who can view what information.
The need for network level competencies can predict the best governance. A shared governance is less suitable when the need for network level competencies is high, because this would mean that every company has to have high competencies in its own organization. Therefore, lead and NAO governance are better suited for handling high network level competencies [1,15].
3.2.5 Information Technology component
The value proposition is providing an Omni-channel solution which can reduce cost and CO2. Different collaborations use the IT platform and therefore the employees of ZP IT are involved with multiple collaborations. Most of the SCCs have implemented the SaaS and are currently using it to support their operational process.
Bosdriesz proposes a fifth predictor named the Information Technology component . A strong IT technology component brings new challenges to network governance. Bosdriesz proposes: “we believe that the bigger the IT technology component is within a network, the bigger the need for a more structured and formalized type of governance” . However, lead organizations cannot be a good fit because of concerns about data regulation . Therefore, a NAO would best suit a collaboration with a big IT component.
ZP IT has been struggling in the beginning to gather a customer base due to maturity problems. However, recently they have acquired large transport companies as customers that see the benefits of using their platform to facilitate their SCC.
3.3 Coordination Mechanisms Many studies show that performance can be influenced by formalized coordination mechanisms . Examples are definition of the network agenda , establishment of ground rules and laying down rules for decision-making [5,13] . The positive influence of establishing coordination mechanisms to shared-governance networks’ success has been shown by Cristofoli et al [5,6] in an empirical study. The networks that had a high network performance, made use of formalized coordination mechanisms on which the network could rely on. Therefor,e this could also have a positive influence on the SCC’s sustainable success.
Figure 2. Case A’s collaborations structure
maintaining a successful SCC, but also mediation in disputes could be useful in preventing organizations to stop collaborating.
4.2 Challenges The experts described several challenges which they confronted. The main issue which prevented the early success of the IT platform was the reluctance of big collaborations to use a platform from a small start-up company. As the expert states: “We are not comparable to SAP or Microsoft and organizations do not want to depend on such a small company”. They also pointed out that at the start (2014) cloud based solutions were less common and therefore seen with suspicion. This has changed in recent years and companies have no problem with cloud solutions anymore.
5. CASE STUDY B The case study B was executed by interviewing the leading person from a company that tries to orchestrate the collaboration of the entire supply chain.
5.1 Profile XZ is a coordinating company, that was established 2012 and only has one employee who is also the director. XZ tries to achieve a supply chain collaboration. This company manages the project and the ownership of the company under the supervision of different shareholders that represent the components of the SCC. The IT company that creates the collaboration platform is a shareholder. The members of the SCC are from an industrybased community.
The experts also noticed challenges during the planning phase, in which the companies are designing the collaboration structure of the SCC. The experts stated: “The interests of these companies can differ and it is especially hard when they try to get it all in an agreement, because everyone wants to come out on top”.
The goal of the SCC is to increase efficiency and accessibility to the members while reducing cost and CO2.
Another challenge for the companies in the SCC is the implementation of the new platform with their current software. As the expert stated, “every system has to be able to connect, every system has differences, so you need integration which is doable but not easy”. The companies often have older local systems that are not compatible with newer technologies like web services, in these cases it is still necessary to do a manual import which drastically decreases the benefits of the platform.
The cloud platform (SaaS) is in the development phase, which involves the IT company and XZ. Some pilot projects have been conducted with other members to get feedback and influence the members to engage in a contractual relationship to use the platform. However, currently the company has run into issues with the IT company. The IT company was set to deliver the platform in 2014 but only half of the functionality was released. The current development of the collaboration is on hold because of these issues.
However the biggest challenge according to one of the experts is when the collaboration starts. As he states “collaboration is starting, but then you need to create enough volume in demand in a very short period. And if that volume is not achieved in these short periods, the collaboration falls apart.” Therefore it is critical to achieve enough volume before trust in the collaboration is not enough anymore.
The composition of the SCC is shown in figure 3.
4.3 Factors ZP IT is involved with multiple SCCs and therefore no suitable government form could be chosen for a specific SCC. However their opinion on network administrators and coordination mechanisms could be helpful and was thus asked.
4.3.1 Formalized coordination mechanisms Both of the experts did not have experience with collaborations that used formalized coordination mechanisms like shared marketing, use of ground rules or joint communication systems. Nevertheless, the setting of ground rules for sharing benefits of the SCC could possibly benefit the SCC according to the experts: “We also advise our customers that they do not take the profit completely for themselves, because it will not create sustainable collaborations”.
Figure 3. Case B’s collaborations structure
5.2 Challenges The main challenge is to get the platform delivered. According to the interviewee: “The IT company did not have any experience in the current sector and they had a standard platform that had to be used in a different way”. The standard platform had to be altered according to the specific requirements, but in the end the IT company just wanted to use the standard platform. Currently the whole development is on hold, because of the nonexistent trust in getting the platform delivered. It is not easy to change the IT company, because they are a shareholder of company XZ.
4.3.2 Network administrators The experts viewed network administrators as theoretically very appealing, but do not see it in the current SCCs that are facilitated by ZP IT. However, the expert could see some benefits in mediation of disputes: “Theoretically this would be great, but in practice they just release their anger and organizations just stop collaborating”.
Collaboration setup was very tough according to the interviewee: “People could not really see what the advantages were”. This made it hard to get the parties willing to participate in the collaboration.
4.4 Discussion The biggest challenges pointed out by the experts is the trust that is necessary in the starting phase of a SCC even if the volume in demand is not conform to the expectations. The trust in a SCC is therefore highly ranked by the experts, which is a predictor of a suitable governance.
5.3 Governance The framework provided five indicators which indicate what governance model fits the collaboration. In this section, we attempt to find how the collaboration is described on these indicators.
The experts did not notice the use of formalized coordination mechanisms or network administrators in the SCCs, however they do think that this would increase the sustainability. Especially the sharing of benefits was explicitly mentioned for
5.3.1 Trust Trust is important in this collaboration according to the expert from XZ and essential for a successful collaboration. However 4
according to the interviewee “There are trust issues but they do not talk about them”. This could however change as stated by the interviewee: “I think it will be discussed when the SCC is into production”.
5.4 Factors The factors are described by the interviewee of company XZ but are applicable to the whole collaboration.
An example of a possible trust issue is that the transport becomes entirely transparent and more efficient by the use of the platform. This decreases the income for the carriers, which decreases the trust in the collaboration, however this is not spoken out loud.
5.4.1 Formalized coordination mechanisms
The members of the supply chain are not obligated to participate in the collaboration. The collaboration starts with a small pilot, but the number of participants will probably increase after successful implementations. The possible customer base is the entire supply chain.
The collaboration uses some formalized coordination mechanisms. For example a protocol as explained by the interviewee: “a standard message and also a standard process, which was determined by the sector”. Also the planning of transport is shared across the collaboration to achieve a higher efficiency. However, no additional coordination mechanisms exist as stated by the interviewee: “we do not do coordination, but only gather the information and send these to the parties involved”.
5.3.3 Goal Consensus
5.4.2 Network administrators
5.3.2 Number of Participants
The goal consensus is strongly related to their benefits. The different components of the supply chain are all benefited in some way by the collaboration. Getting the insight in transportation efficiency can save a lot of cost for the buyers. The carriers are benefited by communicating everything digital, which decreases the administration. The suppliers do not have a direct benefit but have to increase their service level to the buyers, which they can do with this platform.
The company XZ is the network administrator. XZ tries to convince the whole supply chain to participate in the collaboration or as stated by the interview as: “I am the spider in the web”. However, it is not the role of XZ to solve disputes or create a harmonious environment; this is the responsibility of the individual companies
5.5 Discussion In this part, each of the facts from the interviews will be compared with the framework to find out if the collaboration has the elements that could help achieve success.
The main conflicting goal consensus are the carriers, according to the interviewee: “an example is that for the carriers it is a risk when everything is transparent, because part of the profit they have is because of being inefficient”. However, besides the transporters, the goal consensus is high.
The best suited governance according to the framework (figure 1) is indicated by the properties. Especially the high need for trust and network level competencies directs towards NAO. Also the other properties could fit this governance. Currently, they already use a separate entity that manages the collaboration. The NAO also works as a network facilitator and mediator.
5.3.4 Need for Network Level Competencies The platform needs a high network level competency. The platform integrates the different parts of the supply chain and tries to keep the integration with each company as simple as possible.
The SCC also uses several coordination mechanisms and a network administrator, albeit in a reduced form.
The integration with the platform can exist in two forms in this collaboration. Companies that have a higher maturity in the IT can integrate with the platform. However, if the maturity is low, a web application is also available. Therefore, the need of network competency in the independent companies is quite low in contrast to the XZ company.
Company XZ seems to fit most of the elements that are proposed by the framework, which could influence the success. However, the collaboration is not a successful one. The reason that prohibits the success currently, is not connected to the success elements but is caused by the big challenge they face with the IT. The IT company is also a shareholder in the collaboration so it is not easy to change to another IT company. Therefore this has to be solved before any further steps into cloud based collaboration can be taken.
5.3.5 Information Technology component The information technology is a large component in the collaboration. A lot of valuable information is processed by the platform and therefore it is important that this is securely managed by a company that cannot benefit from this information. Therefore it is important that the platform is managed by an independent IT company and not a company from inside the collaboration.
6. CROSS CASE ANALYSIS The two companies that were analyzed in the case studies have a different role within SCCs. But also the SCCs themselves are different. The challenges of each case are summarized in table 3 and further discussed in the following sections.
5.3.6 Governance within the collaboration
Table 3. Properties of XZ collaboration
The collaboration is governed by a separate entity in which shareholders represent different parts of the collaboration. Each shareholder tries to keep the wishes of their part in mind while trying to collaborate with each other. This form matches the NAO governance.
Lack of volume
Interest differences between companies; maintaining a high trust
Goal consensus; Achieve a high level of trust
Compatibility with older local IT systems
In conclusion we found the following properties for the XZ collaboration: Table 2. Properties of XZ collaboration Governance Forms
XZ Moderate collaboration density
Number of Participants
Moderate to many
Need for Network Level Competencies High
Information Technology component High
The most distinguished difference is that company XZ uses an IT company that is also shareholder in the collaboration whereas the company ZP IT is always outside of the SCC, because they only provide a facilitating role for the SCC.
could have given more insights on what influences the success of the operation and if this corresponds to the framework. Another limitation is that in the first case study, the suitable governance part of the framework could not be validated because the company provided the platform for several SCCs and was not involved enough with one of the SCCs to give a clear image of the governance choices.
This could explain the why XZ faced major challenges with the delivery of the IT platform. In the SCC of XZ, the IT company is a shareholder and XZ could not easily change to another IT provider when it did not work out. Of course it is always costly to change from IT providers, but with the IT company outside of the collaboration you have at least the liberty to do so if deemed necessary.
7.2 Future Work The amount of case studies is not enough to validate the existing research on what influences the SCC’s success, therefore more case studies should be conducted to validate the framework. This could also give the opportunity to change or add to the framework.
Interesting is that in both case studies, a high trust among the SCC members is deemed essential. In case A it is seen as one of the biggest challenges and maintaining a high trust is essential for the SCC of case B.
8. ACKNOWLEDGMENTS First of all I would like to thank supervisor, Dissa R. Chandra, for her invaluable input and guidance during the process of making this paper and for assisting in the case studies. Furthermore, the assistance from Jos van Hillegersberg, head of the Department Industrial Engineering and Business Information Systems on the University of Twente, in providing contact info of experts from SCCs. An additional thanks goes to the three experts who cleared time for an interview. Finally I would like to thank my fellow students who reviewed the paper, which further increased the quality.
The challenges faced by the companies can partially be solved by using the influenceable aspects. An example is the operational challenge mentioned in case study A. If a high level of trust is needed due to a lacking volume in demand, than a network administrator could succeed in convincing the several parties in investing for a prolonged period. The organizational challenges could possibly be influenced by choosing the most suitable governance type. Case study B mentioned issues that could arise in the goal consensus but also in the trust. Choosing the NAO form could be the best mixture in trust and goal consensus. Finally, the IT challenges in case study B could have been prevented by using more formalized coordination mechanisms. More specific ground rules could have been established on what to expect from the IT company and what alternatives would be in case the IT company does not meet the expectations.
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7. CONCLUSION Available research contributed to the framework that is proposed in figure 1 which illustrates the answers to both research questions. The first part of the framework is the answer to RQ1, which consists of the challenges that cloud-based SCCs face: (1) IT, (2) operational and (3) organizational challenges.
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A. INTERVIEW PROTOCOL
A.1 Interview Setup
How do you measure the size of the systems? (such as transactions) How involved are you in the collaboration(s)? Has this changed in recent years?
The interview is conducted face-to-face or by telephone and has a total duration of around 45-60 minutes. The interview starts with a short introduction of maximum 10 minutes, during which the interviewer and interviewee get acquainted and the goal of the interview is introduced. Permission is asked to record the interview and to process for the research.
A.3.2 Indicators of SCC’s success
The next 35-50 minutes consists of questions and discussion of the SCC. The interview is semi-structured, so the interviewee can introduce other relevant topics.
A.3.3 Challenges faced by the company
The interviews are transcribed afterwards and processed anonymously. The case studies are randomly ordered and the company names are changed to aliases.
A.2 Interviewee Characteristics Three experienced experts on cloud implementation for SCC are interviewed. Two belonged to the same company that created a platform to support multiple SCCs and the third managed a SCC. All three are from the Netherlands and were selected based on their background and experience.
What is the current phase of the collaboration? What challenges did you face and which were most difficult? o During current phase? o During planning/contract phase? o During implementation/startup phase? o During operational phase? How did you overcome these challenges?
A.3.4 Questions about success factors
A.3 Interview Questions The following questions are meant as a guideline for the interviews. The questions are discussed, in a not particular order, during the interview. Follow-up questions will follow immediately after the question if the answer is not satisfying enough or if further explanation is necessary. The detail of discussion depends on the interviewee.
Furthermore the interviewees were interviewed before by my supervisor D.R. Chandra, who provided me with the recordings, therefore it was not necessary to go very in-depth into the company profile, business model or governance.
A.3.1 Profile questions
How do you measure the SCC success? Do you measure order fulfillment rate? If so, how? Do you measure reduction of cost caused by the SCC? If so, how? Do you measure CO2 reduction? If so, how?
How many employees does your company have? How many customers?
Do you have problems with partners trusting each other? o How is this trust improved? (for example by an NDA) o Are the benefits shared between the members? Does everyone has the same goal in mind? o How do you try to get a goal consensus? Does the collaboration use coordination mechanisms? o What is coordinated by this mechanism? Is there someone who acts like a manager, managing the collaboration? Do the companies in the collaboration have a mediator/facilitator that foster a good environment? o Are there working rules? o Is there mediation in disputes between companies? o How are the partnerships strengthened?