Coordinating for Flexibility in e-Business Supply Chains

The widespread use of information technoiogy (IT) to create electronic linkages among supply chain panners with the objective of reducing transaction costs Journal of Managcmeni Information Sy.srem.t /Whner 2004^5. Vol. 21. No. 3. pp. 7-45. 0 2()1).'5 M.E. Shaipclnc. 0742-1222 / 2005 $9.50 + 0.00. 8 GOSAtN, MALHOTHA, AND EL SAWY may have unintended adverse effects on supply chain flexibility. Increasing business dynamics, changing customer preferences, and disruptive technological shifts pose the need for two kinds of flexibility that interenterprise infonnation systems must address—the ability of interenterprise linkages to suppon changes in offering characteristics (offering flexibility) and the ability to alter linkages to partner with different supply chain players (partnering flexibility). This study explores how enterprises in supply chains may forge supply chain linkages that enable both types of flexibility jointly, and allow them to deal with ubiquitous change. Drawing on March and Simon's coordination theory, we propose two design principles: (1) advance structuring of interorganizational processes and Information exchange thill allows partnerinj! organizations to be loosely coupled, and (2) IT-supponed dynamic adjustment that allows enterprises to quickly sense change and adapt their supply chain linkages. This study reponsonasurvey of41 supply chain relationships in the IT industry. For design principle, our empirical investigation of factors shows (I) that modular design of interconnected processes and structured data connectivity are associated with higher supply chain flexibility, and (2) that deep coordinationrelated knowledge is critical for supply chain tlcxibility. Also, sharing a broad range of information with panners is detrimental to supply chain flexibility, and organizations should instead focus on improving the quality of information shared. For Industry managers, the study provides clear insights for information infrastructure design. To manage their interdependencies, enterprises need to encapsulate their interconnected processes in modular chunks, and suppon these with IT platforms for infomiation exchange in structured formats. Enterprises also need to nurture their execution capabilities by putting in place the infomiation systems to prtK'css information exchanged with panners. augmenting their understanding of factors such as how panner actions need to trigger adaptive responses. For researchers, the study initiates a new stream of theorizing that focuses on the role of the infomiation infrastmcture in tTianaging the tension between competing goals of otfering flexibility and pannering nexibility. KFV WORDS AND PHRASES: coordination theory, information technology infrastructure, interorganizational systems, supply chain tlcxibility. There's a lot of talk In the electronics-industry supply chain about integrating systems, collaborating with panners. and standardizing processe.s and document-exchange formats. But despite all that is being said—or perhaps precisely because so much is being said—few companies really know how to proceed. They have invested in software that is expected to link internal systems with customer and supplier platforms. And many are joining the RosettaNet Consonium. which is defining standards for communicating over the Internet. But the big question still remains: How can companies replicate and manage the electronic relationships they have established with one or a few partners across a supply chain composed in many cases of hundreds or thousands of entities? [9J COORDtNATING FOR FLEXIBlLtTY IN E-BUSINESS SUPPLY CHAINS 9 ENTERPRtsES HAVE INCREASINGLY COME TO RECOGNIZE that their performance depends, to a large extent, on their role in supply chain ecologies and the competitiveness of the supply chains they panicipate in [ 19.21.39]. Earlier reseaich on infonnation technoiogy (IT) in supply chains has been more focused on using IT to create stronger bonds between enterprises to improve information fiows and derive transactional efficiencies—leading to "electronic integration" [35. 85]. The lock-in from highly partner-specific or oflering-specitlc IT infrastructure investments has not been given due attention, but in a dynamic and highly competitive landscape this may severely constrain supply chain performance and the scalability of supply chain integration. In electronic data Interchange (EDI) implementations, for instance, it has been found that increased transaction specificity, switching cosis, and uncenainty may create the possibility of opponunistic behavior and reduce pannering options 115). Prominent manufacturers have been known to actually use EDI as a way of inhibiting their suppliers' relationships with others by imposing a system that is both proprietary and difficult to implement 179]. Increasing business dynamics, changing customer preferences, and disruptive technological shifts, on the other hand, have created a greater need for flexibility. Smallerscale environmental change may only create the need to change process parameters for existing supply chain relationships, Ixit where severe discontinuities are "competencedestroying" [76] for the enterpri.se's panners, structural change in the supply chain may be needed. Dynamic strategies, where frequent "pannering" is an essential feature of supply chain organizing, can also help organizations maintain their competitiveness by continually orchestrating new sources for value cre^ion [69]. In reeent times, severe supply chain disruptions have created a new appreciation for supply chain llexibility. After the events of September 11,2001. supply chains of large manufacturers struggled to cope with production changes at their panners. Ford Motor Company, for example, had to close five plants in North America due to pans shonages 146]. The role ofthe IT infrastructure in responding to and shaping business options with agility is recognized as critical 138. 61 ]. In a stable environment, an enterprise may have chosen to forge highly specific and efficient process linkages and information exchange mechanisms with select panners. but in the dynamic environment of the electronic economy, enterprises need to develop more robust and reconfigurable linkages that can deal with changes in the business environment 120]. We are now at an interesting crossroads where IT applications for interenterprise information exchange can take advantage of a new breed of interaction capabilities derived from flexible markup formats and ubiquitous and low-cost connectivity. There has also been a proliferation of technology platforms, using lighter-weight proiocols for creating electronic bonds, such as e-marketplaces (e.g.. E-Steel) or hubs (e.g.. Covisint). as well as lools for interenterprise integration (e.g., Webmethods) 171. Funher. there are a number of industry and IT vendor-driven effbns to standardize business processes and data exchanges between enterprises, which are expected to yield network externality benefits in easing pannering across enterprises and in dealing with change in the context of existing piirtncrships [55]. Interoperability frameworks for venical markets (such as the Information and Content Exchange and RosettaNet specifications [60]) and for to GOSAIN, MALHOTRA, AND EL SAWY horizontal markets (such as Microsoft BizTalk) have been developed and have had a limited deployment 137]. Although earlier research has examined strategic contingencies and typologie.s of interorganizational infonnation systems (IS) [I I], we still lack understanding ofthe capabilities of an interorganizationa] infrastructure that will enable flexible .supply chains and theory to guide its development [80]. Also, research on the details of structuring interorganizationai relations and infrastructure has not been given due attention [711. In this study, we ftKus on providing insights for designing information infrastructure and relevant information processing capahilities that would suppon supply chains' progress on the road to flexibility. We expect that stune of the required technology and organizing practices may not yet be fully in place, even for the most progressive enterprises, so we may not see the anticipated flexibility effects—but we should be able to better understand the relevant factors and how they play out in constrained settings. In the strategic alliances literature, two general types of flexibility have been specified—modification and exit 183]. Modification flexibility refers to the ability of panners to adjust their behaviors or the terms of the alliance agreement in response to changes in the environment or needs of their panners. Exit Oexibility refers to the easeof exit from an alliance that no longer satisfies the partner or meets the panner's needs. We adapt this typology for supply chain coordination. The IT infrastructure supponing interenterprise linkages needs to similarly provide flexibility on two dimensions—the ability to support a change in oHering characteristics in conjunction with existing partners and the ability to panner with new supply chain players. We approach the goal of designing flexible linkages between supply chain enterprises from a dynamic coordination perspective—-we seek infonnation processing antecedents that allow organizational entities to quickly ctwrdinate in the face of change. Advance structuring and dynamic adjustment-based information processing pathways have been proposed to enable better Information prwessing outcomes for organizations 145]. The fonner refers to things you do up-tront to reduce the information processing needed to cope with change. The latter refers to increased infonnation processing capabilities that allow for "on-the-fiy" adaptation. We investigate specific factors that would advance otfering flexibility and pannering flexibility through these pathways: Research question: How can enterprises in supply chains u.se "advance structuring" and "dynamic adjustment" approaches to achieve both offering flexibility and partnering flexibility? Theoretical Developmeni Supply Chain Flexibility THE OUTCOME OE tNTEREST IN THIS STUDY is supply chain flexibility. Supply chain flexibility refers to the extent to which supply chain linkages are able to adapt to changing business conditions rather than being forced into committed adaptation to a COORDtNATING FOR FLEXlBtLlTY IN E-BUSINESS SUPPLY CHAINS 11 given environment. Supply chain processes are derived from integration of enterprise processes, so fiexibiiity may be derived from both internal enterprise flexibility and flexibility of the connections. In this study, we focus onty on the flexibility of the linkages—how well the competencies of multiple organizations may be combined in temporary alignments in response to customer needs. This is panicularly relevant in the electronic economy, as "the locus of production is no longer within the boundaries of a single firm, hut occurs instead at the nexus of relationships between a variety of panics that contribute to the production function" [65, p. 1149J. Supply chain flexibility is composed of two types: 1. Offering flexihility: Offering flexibility refers to the ability ofa supply chain linkage to suppon changes in product or service offerings produced in conjunction with current panners, In response to changes in the business environment. In the IT industry, change is rapid, and a typical wholesale distributor may chum over its complete stock-keeping units (SKU) in a period of two years, thus making offering flexibility very important. 2. Partnering fh'xihility: Pannering flexibility refers to the ease of changing supply chain partners, in response to changes in the business environment. Changing supply chain partners is fairly typical in the IT industry—a typical wholesale distributor, for instance, may add ten new vendors a month to renew its product line, while taking on new roles such as channel assembly and system integration. Both oflering flexibility and pannering flexibility are to be evaluated from the perspective ofa focal firm embedded in a supply chain relationship. For example, consider a wholesale distributor. A (focal enterprise), iUid a value-added reseller (VAR), B. Offering flexibility refers to the ahility ofthe A-B linkage to suppon a change in their joint offering—products sourced by A. integrated and resold by B. with hoth A and B responsible for promotional activities. Piirtnering flexibility refers to the ability of A to work with a new VAR. C, as an alternative to B. Achieving Offering Flexibility In our interviews with supply chain managers in the IT industry, the inability of existing supply ehain linkages to handle change wa.s mentioned as a key obstacle. A supply chain manager at a large personal computer manufacturer expressed concerns about their ability to quickly change product offerings: We are mainly a design and procurement organization. Major components for our notebooks are sourced from . We have greatly reduced our inventory and are closely integrated with . with whom we operate on a just-in-time (JIT) supply line basis. However, we are concemed that we have substantially less volume flexibility compared to the scenario of having a different, Ie.ss-integrated supplier. Given the long lead time (typically four to six weeks) to source components, we run the risk of lost sales 12 GOSAtN. MALHOTRA. AND EL SAWY opportunity, as we might be out-of-stock for SKU A but still building SKU B. Our competitors are able to flex components, but we are locked in and cannot react. Offering flexibility Is based on the ahility of collaborating enterprises to quickly change priKess structures or alter the structure of information sharing tor modifying thecharacteristicsof a product or service offering. The need for this fiexibiiity arises from the limited life cycle of existing offerings and variability in user demand. Variability can also be amplified across complex supply chains, where suppliers at the back end of the chain swing left and right based on what an original equipment manufactun;r (OEM) projects that it needs to build [74]. Achieving Partnering Flexibility At a major router manufacturer, it was observed that specific interenterprise IT characteristics may hinder the ability to quickly link up with new panners: We are in the continuous process of evaluating who can best meet our needs. Tf a new third-party logistics provider becomes available, how can our company get up to speed to using them? . . . In the pa.st. the problem has been physical changes, such as location, system changes, and interface changes, which can take as much as six months. The current strategy for coordination with our partners relies on hardwired APIs (application interfaces). When anything changes, they break We need to move toward more abstract specifications that will enable us to handle changes much better. Pannering flexibility represents the ease of changing supply chain panners in response to changes in the business environment. Flexibility in tenns of the ability to change panners quickly corresponds to a fundamentally different latent ability from offering flexibility. A pannering change is a more serious disruption than a volume spike or a feature change, as it requires more work to assess the new panner and redesign partner-linked processes and systems. In EDI implementations, it has been found that adoption requires substantial investment and integration effon. resulting in high switching costs and transaction specificity, thereby undermining pannering flexibility [ 15[. On the other hand, open EDI systems increase market coordination by reducing asset specificity and by making additional panners available 158]. Whereas IS improve the efficiency of coordination between buyers and suppliers 1441, managerial innovations—such as modular product designs, "quick-connect" interfaces, and use of IT to support concurrent processes and real-time acquisition of market infonnation—-significantly improve a firm's coordination flexibility 128.62]. We posit that improvement in an enterprise's information processing capabilities with reference to a supply chain relationship will allow its supply chain linkages to better suppon reconfiguration of offerings and paitnerships. Two pathways are presented in the next section to achieve this goal. COORDiNATtNG FOR FLEXtBILlTY IN E-BUSINESS SUPPLY CHAINS ! ?> Theoretical Framework Past research on supply chain flexibility has examined antecedents related to the design and support of operational processes 139]. Design principles based on separation of abstract requirements and concrete satisfiers and uncoupling of information and goods flow have been suggested to improve supply chain flexibility 113]. Information architecture designs have also been suggested to achieve flexibility [2]. In this study, we propose to examine information infrastructure antecedents that improve the dynamic coordination between interacting supply chain entities and that lead to flexibility. These information infrastructure antecedents require attention to both technology and process design 114]. Our theoretical development draws upon an overarching framework of March and Simon's coordination theory [45]. Coordination may be based on preestablished schedules—coordination by plan—and coordination that involves transmission of new information—coordination by feedback. This coordination typology has been investigated in interpersonal coordination in organizational settings 177]. In an interenterprise setting, we propose that coordination outcomes, allowing for flexihility goals to be attained, can be achieved through (see Figure I): 1. Advance structuring: By appropriately structuring interorganizational information flows and interconnected processes, enterprises can reduce the effort involved in adjusting to changing business environment. 2. Dynamic adjustment: Through IT-supponed learning and adaptation, enterprises can effectively and quickly reconfigure a set of interorganizational processes appropriate for a changed business environment. Companies such as Cisco and Dell, which excel in marshalling networks of suppliers, service providers, producers, infrastructure companies, and customers, are exemplars of these strategies. In their use of the advanced structuring pathway, these companies leverage the Intemet to standardize technical hookups and speed up the organizing of interchanges for critical data for existing and new panners. They are also archltecting business process "chunks" that can be deployed to implement interenteiprise processes from standardized pans. In their use of the dynamic adjustment pathway, these companies continually evaluate their value propositions for their customers and the competencies of their panners, standing ready to make changes to their panner network and the associated valuecreation processes. The extent of information sharing in their interconnected environment is so strong that a manager at Avnet, a parts distributor for Cisco suggests, "If]or all practical purposes, we a/c Cisco" [75. p. iOO). Dynamic adjustment requires making changes "on-the-fly" as necessitated by the business environment. As an example, in the face of a disniption, the supply chain processes need to be dynamically reconfigured so that different supply chain players remain in sync; "If supplier A is the constraint and can't get the supplies to me until tomorrow, there's no need to have the others waste transaction costs to fly the Iremainingl inventory into my plant today. You have to find out who is the constraint land] immediately communicate that 14 GOSAtN. MALHOTRA. AND EL SAWY Advance StructuringBased Approach Dynamic Adjustment Based Approach Infonnation Processing Antecedents Figure I, Overall Framework Supply Chain FiexibiiityPartnering Flexibility and Offering Flexibility Coordination Outcomes to the rest of your supply base so they're all running on the same schedule, so they're not expending resources when you're not going to be able to produce your subassembly anyway" 122]. We now propose antecedents that allow for augmented information processing to effectively deal with change through each ofthe pathways. Design Principle 1: Advance Structuring In this approach, the primary theoretical basis for realization of flexibility outcomes is a planned structuring of information and process linkages yielding loose coupling among interacting components. Loose coupling is a dialectical concept in organization theory that emphasizes the simultaneous existence of rationality and indeterminacy in a system [541. Loose coupling between systems implies the existence of elements that are linked ("coupled") to preserve some degree of determinacy. At the same time, these elements are subject to spontaneous change, leading to some degree of independence ("looseness"). The antecedents in the model are identified on the basis that they advance both the "looseness" and the "coupling" (Table I). Loose coupling reduces interdependencies, allowing organizational components to more easily deal with change, and it also makes it easier for them to be disentangled and recombined into new configurations. This is expected to result in both offering flexibility and pannering flexibility (Figure 2). Standardization of Process and Content Interfaces. This refers to explicit or implicit agreement on common specifications for information exchange formats, data repositories, and processing tasks at the interfaces between interacting supply chain panners. Standardization of process and content interfaces would require business panners to agree on the syntax, semantics, and pragmatic aspects of documents that are to he exchanged for the specific process being coordinated. The lack of standardization means that exchanges are idiosyncratic to each relationship. For example, a distributor in the IT industry reports spending $17 per SKU manually updating information for the 100.000 SKUs that need to be changed over a year—because manuiacturers COORDtNATING FOR FLEXIBa.lTY IN E-BUSINESS SUPPLY CHAINS 15 Table 1. Coordination by Adjustment Approach How "coupling" is helped How "looseness" is helped Standardization of interfaces Modular interconnected processes Structured data connectivity Provides common technical grammar. Makes processes seamlessly interlinked. Provides grammar for coding data exchange between enterprise applications. Lowers specificity to reduce switching costs. Modular interfaces reduce dependencies. Structure reduces information processing costs. Characteristics of [nrurmation Infrastructure Supply Chain Flexibility Standardization of Process & Content Interfaces OHering Flexibility X Partnering Flexibility Modular InterConnected Processes Structured Data Connectivity Figure 2. Advance Stmcturing Approach use different reponing formats. On the other hand, the use of standards such as UCCnet standards for product data in the grocery industry is expected to cut costs by as much as $40 billion by providing a common business language (38j. Standards play an imponant role in structuring relationships between companies— they help reduce the extent to which market exchanges are personalized and the scope for moral hazard, shirking, and opportunistic behavior [82]. Coordination theory suggests that standardization allows for management of interdependencies, making the 16 GOSAIN, MALHOTRA. AND EL SAWY infrastructure more flexible and capable of supporting change [45, 50). The eifect of standardization on pannering flexibility is expected to be positive, given that standardization creates network effects I23|, reducing the variety of asset and informational specifications, making a wider set of users possible, increasing frequency of transactions, and reducing market uncenainty (3]. The effect of standardization of interfaces on offering flexibility is also expected to be positive, as it helps in the establishment of a technical grammar that reduces the amount of information that needs to be exchanged between enterprises and enables social conventions to be established to facilitate coordination in the face of change [4]. TTierefore, we propose HI: An enterprise in a .supply chain relationship will have higher levels of supply chain flexibility (both offering Jlexibillty and partnering flexibility) with higher levels of standardization of its business process and information exchange interfaces. Modular Interconnected Processes. This refers to the breaking up of complex processes into subprocesses (activities) that are performed by different organizations independently (such that subprocesses occur through overlapping phases, or better .still, fully simultaneously) with clearly specified interlinked outputs (5]. In the IT industry, for example, whenever a high-volume wholesale distributor is approached by a new manufacturer requesting the distributor to carry its product line, the distributor provides that manufacturer with a complete set of documentation that it needs to complete, agreements it needs to execute, and clearly speciHed responsibilities for promotions, marketing, and so on. This allows the manufacturer to go ahead and prepare for getting into the distribution pipeline. Thus each player can work independently on the set of activities in its domain. Modular architectures create information structures that provide the "glue" that holds loosely coupled parts of a modular organizational design [631. A modular system is composed of units or modules that are designed independently but still function as an integrated whole by panitioning information into visible design rules and hidden design parameters 15|. Modular organizational systems allow for their components to be disaggregated and recombined into new configurations, bestowing greater flexibility for the system as a whole [65[. Modular structures also enable adaptation at the subsystem level, as innovation can be achieved without undue constraints from other parts of the system [27]. As long as process components adhere to a modular architecture, changes in panners can be accomplished easily, as only interface linkages are affected. Therefore, we expect that modular process organizations will enhance the level of partnering flexibility. Modularly organized systems have the property of encapsulation—the hiding of internal complexity from extemal processes—allowing self-contained tasks to be created that reduce the potential for harmful interaction. In addition, modular partitioning eliminates the need for aniculate and frequent interaction between panies and lowers the coordination costs [70]. This will also allow the panners to evolve and reconfigure their internal processes and systems with relatively low synchronization requirements allowing for greater offering flexibility. Therefore, COORDtNATING FOR FLEXtBILlTY IN E-BUSWESS SUPPLY CHAINS 17 H2: An enterprise in a supply chain relationship will have higher levels of supply chain flexibility (both offering flexibility atid partnering flexibility) with higher levels of modularity of its interconnected proce.tses. Structured Data Connectivity. Structured data connectivity refers to the ability to exchange structured transaction data and content with another enterprise in electronic form. In the IT industry, for example, there are a number of options for creating infonnation sharing linkages between supply chain partners. These can range from the exchange of structured or tagged documents over the Web, all the way down to "screen scraping"—a technique that tries to extract enterprise data from its presentation on the Web. Structured connectivity' allows for information exchanges to be coded and provides a grammar for infonnation to be expressed. Stmctured transaction sets, such as the EDI ASC X.I2, allow for transmission of coordination infonnation with little ambiguity across industries. Structured data connectivity allows for the coordination on pertonnance of tasks by collaborating actors [26]. The network enables change infonnation to he communicated with existing panners. enhancing offering flexibility. Structured data connectivity also creates "electronic brokerage" effects [81] that facilitate switching as well as communication of change among supply chain panners, leading to higher partnering flexibility. Therefore, H3: An enterprise in a .supply chain relationship will have higher levels of supply chain flexibility (both offering jle.xibitity and partnering Jle.xihility) with higher levels of support for .structured data connectivity. Design Principle 2: Dynamic Adjustment The second set of postulated hypotheses is based on enterprise-level learning and adjustment of information processing based on prior knowledge and interaction with panners (Figure 3). In the dynamic adjustment approach, the coordinating entities Ieam to quickly adjust to diverse information structures across panners or over time. The primary theoretical basis is the learning-biised sense-and-adapt paradigm [30] for dealing with change. Augmented learning is expected to lead to the ability to quickly reconfigure processes in response to change. In contrast with the advance structuring pathway, the dynamic adjustment approach is expected to work better when resources have attributes (e.g., tacitness or social complexity) that make them difficult to shans or transfer without close integration [32]. lt is also expected to better enable an enterprise in a supply chain relationship to continuously "morph" in changing environments [59[. In order to understand capabilities that suppon the sensing of change and adaptation to change, processes in reaction to a generic supply chain event were broken down into three stages, and relevant information processing constructs for each phase were identified. Table 2 shows the different phases of the adaptation process in response to a supply chain event. It is clear that infonnation sharing and coordinationrelated knowiedge are critical enablers, which enable change to be sensed and t8 GOSAIN, MALHOTRA. AND EL SAWY Characteristics of Information Infrastructure C Quality of N. Information Sharing J Supply Chain Flexibility Offering Flexibility X Partnering Flexibility Breadth of Information Sharing Deep Coordination-Related Knowledge Figure 3. Coordination by Dynamic Adjustment Approach appropriate actions to be initiated in response. Therefore, these are proposed as antecedents in the dynamic adjustment approach. Breadth and Quality of Information Sharing with Supply Chain Partners. An ability to share information allows enterprises to sense the need for change in their current process configuration and develop mechanisms for dealing with change. Information sharing is tundamental to the learning required ibr deliberate change [42], panicularly in dynamic environments [47]. Information sharing is needed to a[[ow an enterprise to sense the needs ofthe panners and communicate its own needs to the partners. As an example, the director of logistics strategic planning at a manufacturer suggested, "Information sharing is key to a dynamic supply chain like ours—we need to be able to track product as it moves through the chain and to extend this to channel panners and end customers. If we provide ASNs (advanced shipping notices) to our channel panners, they can be more efficient in receiving product. Better visibility also allows us to reconfigure our channel to end-customer needs—so that product may be drop-shipped or channel-assembled as appropriate." We identify two key dimensions of infonnation sharing—the breadth and the quality of information shared. It is proposed that in order to sense and rapidly respond to change, enterprises in supply chains need to share information in a broad range of areas (information about sensed events, about change, about action fomiulation. and feedback relaled to the changej, and information that is high in quality |49J—relCOORDiNATtNG FOR Ft-EXIBIUTY IN E-BUSINESS SUPPLY CHAINS Tahle 2. Enabling Sense-and-Adapt Processes Phase Enterprise learning and adaptation activity Enablers Sense Sense need for change in offering/partners. Exchange information with partner. Recognize type ot changes in process/content neededAdapt Design/plan for change. Communicate changes fo panner. Make the requisite change. Informafion sharing—sensing change. Information sharing—about change. Organization memory of past episodes. Knowiedge of partner competency. process and content. Understanding of causai iinkages. Information sharing—actions. Information sharing—feedback. evance, timeliness, completeness, and value added. Breadth of information is needed to be able to react to unanticipated change, as information awareness positions a business unit to be continually attuned to change [ I6|. High-quality information— information that is highly time specific and specific to the knowledge needs of an enterprise—is expected to he more suitable for making inferences in an effective and efficient manner [12]. Change in organizations is a process in which finding and acquiring extemal information, and combining it with internal infonnation. Is critical. To the extent that enterprises are able fo quickly adapt to change, they would be expected to be able to deal with changes required in the context of a given relationship leading to offering flexihility. The network-emheddedness perspective suggests that prior ties, both direct and indirect, create a social network in which most firms are embedded, and it becomes an imponant source of information for them about the reliability and capabilities of their current and potential panners [291. Enterprises that engage in broader and higher-quality information exchanges with current panners are likely to he better aware of new opponunities and more ready for potential panners, whereas those without this information may not be able to sense and adapt to key industry events [43]. Funher, greater shaiing of intormation would also allow collective meanings and consensus on action to emerge faster wilh new panners. yielding pannering flexibility. Therefore, H4: An enterprise in a supply chain relationship will have higher levels of supply chain flexibility (both offering fle.xibility and partnering flexibility) with a higher quality of information sharing with supply chain partners. H5: An enterprise in a supply chain relationship will have higher levels of supply chain Jle.Kibility (both offering Jlexibility anil partnering Jlexibility) with a broader range of information sharing with supply chain partners. 20 GOSAIN, MALHOTRA, AND EL SAWY Deep Coordination-Related Knowledge. This construct is conceptualized as a metaconstruct consisting of three dimensions related to know-what, know-how, and know-why. 1. Knowledge of partner competencies, processes, and content: This dimension refers to the availability of a knowledge map of partner competencies, processes, and content that are needed for supply chain coordination and reconfiguration. In order to effectively coordinate with existing and potential supply chain partners, an enterprise needs to he aware of the specific process competencies of other players and to understand what it would take to connect to them [401. Panner knowledge bases that capture interpartner protocols and associated ruies need to he in place to suppon agile interenterprise pannering \12\. A planning and development executive at a wholesale distributor in the IT industry pointed to the need for knowledge about partner processes: "In this industry, often when we buy and when we sell is out of sync: a culture of incentives and deals is the heroin that you can't get off. What we need to emerge from this is not only an understanding of when people buy and how they buy, but also how product is stocked down the supply chain. There should not be any redundant activity in the channel. While we are highly integrated with the carriers, may make to forecast and not use our back-order queues."To the extent that enterprises understand how to effectively coordinate with existing panners and quickly coordinate with appropriate partners in a given situation, they will be able to improve otfering and punncring flexibility outcomes. 2. Organization memory of past change episodes: This dimension reflects the ability to evoke remembrance of past experiences that are relevant to understanding and dealing with a given change situation. Organizations enrich their sense-making by combining it with interpretations trom the past [78| and can proactiveiy capture and "memorize" interactions across touch points to differentiate offerings for customers [56]. Organization memory is imponant because intelligence is fundamentally a memory-based process and learning involves the dynamic modification of memory. Stored information from an organization's history can he brought to bear on present decisions. In conversations with product managers in the IT industry, we found that over time they tended to pay special attention to exceptions and beginning/end of product life cycles episodes to develop a keen sense of what to expect in terms of product volumes. A software publisher, for instance, had leamed to discount reseller orders close to product release, as they tended to inflate actual demand. Organization memory may be supponed or augmented by IT thiough suppon for knowledge acquisition, retention, maintenance, search, and retrieval functionality [73]. Organizational memory of past change is particularly needed in the context of dynamic business environments, since the functional units in which expenise is created and shared are frequently dismantled as organizations move on to collaborating with new partners. Past research on social coordination in the symbolic interactionism tradition has found that in a social relationship, panies create a shared past and a projected future, with the existence of memor>' allowing people to adjust responses to each other quickly in a remarkably subtle manner, responding instantaneously in micro-interacCOORDINATING FOR FLEXIBILITY IN E-BUSINESS SUPPLY CHAINS 21 tions [36], The presence ofa memory of past supply chain episodes would, therefore, aid in linking up effectively with current panners for offering changes and in making better pannering decisions and adjusting proce.sses and content for new panners. 3. Understanding of causal linkages: This dimension captures the ahility of an enterprise to take a desired supply chain outcome and then decide on the changes in its processes, infonnation flows, and content that would be needed to achieve it. At an individual level, deeply held images of how the world works—mental models—constrain how people make sen.se ofthe world and how they act [68]. At an organizational level, a decision architecture that is based on a fundamental awareness ofthe specific knowledge needed for decision making along with appropriate location of decisionmaking authority prepares organizations for fast clock-speed, infonnation-rich environments [47], Causal knowledge is deep knowledge about why something occurs, which is often shared in the form of organizational stories and enables organizations to coordinate strategy for achieving goals or outcomes [84[. An understanding of causal linkages hetween a change in process or information flow and the effect it has on a supply chain outcome enables an enteiprise to quickly adapt to changing circumstances. This could he an adaptation within an existing relationship or to new panners. Given these dimensions of deep coordination-related knowledge, we propose H6: An enterprise in a supply chain relationship will have higher le\'els of supply chain flexibility (both offering fle.xihility and partnering flexibility) with deep coordination-related knowledge (knowledge of partner competencies and processes, organizational memory of change epi.sodes, and understanding of causal linkages). Research Metiiodology