Contingency Factors in the Configuration of Information Systems for Continuous Replenishment: a Case Study in Indonesia

Contingency theory provides a theoretical framework for analysing the implementation differences in the configuration of Information Systems for Continuous Replenishment in the retail sector. The configuration can be broken down into three arrangements: data processing and sharing arrangement, technical arrangement, and information management arrangement. The contingency factors, and their influences on the configuration of these arrangements, have been explored and tested in a case study in Indonesia. INTRODUCTION Continuous Replenishment (CR) is considered to be one of the best practices in Efficient Consumer Response (ECR). The adoption level of CR is high due to the compelling business advantages it offers. CR is characterised by moderate complexity and low compatibility [2] which forces companies to adopt various approaches in its implementation due to different contingency factor situations in the companies’ business environment. Myers et al. [15] took as a sample some companies from a list of the Council of Logistics Management (CLM) and found that CR implementation was indeed customised to the individual companies’ situation. A Joint Industry Project on Efficient Consumer Response (JIPECR), based on a study of US companies, concluded that there are three scenarios for CR practices [11]. The Voluntary Interindustry Commerce Standards (VICS) organisation presented four scenarios regarding the assignment of CR tasks (forecasting, order generating and delivery) between partnering companies [21]. This research aims to explore and test the influences of those contingency factors that cause differences in the configuration of one component of CR, i.e. Information Systems (IS). The unit of analysis is a grocery retail company in Indonesia. CONCEPTUAL FRAMEWORK Given the research aim as described in the previous section, the main concepts in this paper are: Continuous Replenishment, contingency factors, and Information Systems. Definitions of these terms are provided below. Continuous Replenishment Continuous Replenishment (CR) is an inventory management concept, which is characterised by continuous monitoring of sales and the inventory level, and exchange of this information with trading partners using Information Technology (IT). The main objective of CR is to reduce the risk and costs of stock-out, to reduce inventory holding costs and replenishment lead-times, and to increase service level in the supply chain. Contingency factors Contingency factors have the following characteristics: 1) they are a subset of the moderating factors in the organisational context, 2) they influence the degree to which a system will achieve its objectives, and as a result 3) they urge the system to fit its structure to its organisational context in order to be effective [8]. Information Systems An Information System (IS) is a system that consists of four basic elements: data, process, technology, and management; with the objectives of supporting the operations, management and decision-making functions in organisation [7]. These elements are positioned in three arrangements: data processing and sharing, technical, and information management [16]. The objectives in designing the arrangements are to effectively and efficiently: 1) use and share data and information, 2) select and deploy IT to support these activities, and 3) manage the activities. Studying the configuration of the IS component of CR using contingency theory involves analysing the design of the three arrangements, and identifying the factors that determine the shape of the design. For the retail business environment, a conceptual research framework can be constructed as presented in Figure 1. Table 1 indicates the aspects that will be observed in each arrangement. The contingency factors that potentially influence the design of these aspects are given in Table 2. The operationalisation of the contingency factors and detailed references are provided in Nasution [16]. Figure 1. Conceptual research framework 1 In this paper, inventory management covers the activities of inventory forecasting, inventory status control, product ordering and order delivery Aspects in technical arrangement Management sub-systems