SEM For Analyzing The Barriers and Benefits of E-procurement-July .2014 Malaga
SEM For Analyzing The Barriers and Benefits of E-procurement-July .2014 Malaga
SEM For Analyzing The Barriers and Benefits of E-procurement-July .2014 Malaga
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Seyhan Teoman
Maltepe University
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1 Introduction
Supply chains can be managed more effectively through the developments in the
information and communication technology. One of the developments in supply
chains is the e-procurement system, which helps the integration of the procure-
ment process throughout the supply chain. Morris et al. (2000) define e-
procurement as a system that utilizes Internet technologies and services to auto-
mate and streamline an organization’s processes – from requisition to payment.
E-procurement, which has become one of the fundamental elements of a supply
chain, is still in the development phase and there are several studies in the litera-
ture on this subject. Gunasekaran and Ngai (2008) state that without the adoption
of e-procurement systems, the supply chain of a company cannot be integrated
successfully. The authors conduct a questionnaire-based survey in order to under-
In this study, we consider a retail store chain which operates in book and station-
ary sector in Turkey. The company has an annual procurement volume of approx-
imately 100 million USD, which covers its demand for more than 20,000 different
stock keeping units provided by 185 suppliers. Although the company uses tradi-
tional procurement methods, the senior management wants to decide whether to
adopt an e-procurement system or not based on its barriers and benefits.
First, 20 barriers and 20 benefits of e-procurement systems are determined
through a detailed literature review.
In the second step, eight top managers from the company have rated these bar-
riers and benefits on a five-point scale. By taking the geometric mean of their re-
sponses and after a brainstorming session, we get the final set of 14 barriers and
15 benefits that are rated above three.
3
We use Anderson and Gerbing’s (1988) two-step approach in this study, where the
measurement model is estimated prior to the structural model. The AMOS 16.0
software is used to test the measurement and structural models based on the max-
imum likelihood estimation method.
The measurement model has two latent variables, i.e., Barriers and Benefits,
with three and seven indicators, respectively. We test the measurement model us-
ing the confirmatory factor analysis (CFA) method as described in Hair et al.
(2010). Here, we present the results for the final measurement model. We calcu-
late several goodness-of-fit measures based on the recommendations of Jöreskog
and Sörbom (1993) and Hu and Bentler (1998): Comparing the magnitude of 2
with the number of degrees of freedom, i.e., 2 df ; standardized root mean
square (SRMR); goodness-of-fit index (GFI); adjusted goodness-of-fit index
(AGFI); normed fit index (NFI); comparative fit index (CFI); and root mean
square error of approximation (RMSEA). The recommended values for these fit
indices and the results for the measurement model are given in Table 1. As one
can see from the table, all values are within the recommended ranges indicating
that the measurement model has a good fit.
After evaluating the fit of the measurement model, we assess the construct va-
lidity that consists of convergent validity and discriminant validity.
5
We test the convergent validity by examining the factor loadings first. All fac-
tor loadings are significant at the 0.001 level and except two of them all are above
0.70. Only R1 and R3 have factor loadings of 0.65 and 0.67, respectively; but
since these are above 0.50, they are also acceptable. Second, the average variance
extracted (AVE) is calculated for each latent construct. AVE values are calculated
as 0.49 and 0.62 for Barriers and Benefits, respectively. Since an AVE of 0.50 or
higher suggests adequate convergent validity, one can see that the AVE for Barri-
ers is just below this critical level. Third, we calculate the construct reliability
(CR), which is also an indicator of convergent validity. CR values are calculated
as 0.74 and 0.92 for Barriers and Benefits, respectively. Since they both exceed
the threshold of 0.70, this also validates convergent validity. The results for the
measurement model can be found in Table 2.
Recommended value
Goodness-of-fit measure Result
(Schermelleh-Engel et al., 2003)
2 df ≤ 3.00 2.118
SRMR ≤ 0.10 0.052
GFI ≥ 0.90 0.957
AGFI ≥ 0.85 0.923
NFI ≥ 0.90 0.957
CFI ≥ 0.95 0.977
RMSEA ≤ 0.08 0.064
To test the discriminant validity, the AVE values for the constructs are com-
pared with the square of the correlation estimate between these two constructs.
The correlation estimate between Barriers and Benefits is calculated as 0.30. Since
6
AVE values for both constructs are greater than the squared correlation estimate,
this result provides good evidence of discriminant validity.
After assessing the convergent and discriminant validities, we examine the
standardized residual covariances and modification indices to identify the prob-
lems in the measurement model. Since all standardized residual covariances are
less than |4.00|, we conclude that the standardized residual covariances indicate no
problem in the measurement model. On the other hand, we also examine the modi-
fication indices. High modification indices suggest that the fit could be improved
significantly by freeing the corresponding path to be estimated. Since the modifi-
cation indices of the measurement model are reasonable, this result also provides
good evidence of model validation.
After testing the measurement model, we test our structural model and our
main focus is to test the hypothesized relationships. The structural model consists
of two exogenous variables (Barriers and Benefits) and one endogenous variable
(Adoption). Recall that the exogenous variables Barriers and Benefits have three
and seven indicators, respectively. On the other hand, the endogenous variable
Adoption has a single indicator, which is measured through the question that in-
vestigates the necessity of the e-procurement system for the company.
The goodness-of-fit of the structural model is evaluated with the same
measures used to test the measurement model and the results are given in Table 3.
The results denote that the structural model fits the data well.
Recommended value
Goodness-of-fit measure Result
(Schermelleh-Engel et al., 2003)
2 df ≤ 3.00 1.836
SRMR ≤ 0.10 0.050
GFI ≥ 0.90 0.956
AGFI ≥ 0.85 0.926
NFI ≥ 0.90 0.955
CFI ≥ 0.95 0.979
RMSEA ≤ 0.08 0.055
Once we evaluate the goodness-of-fit measures for the structural model, we an-
alyze the path coefficients and loading estimates, which are given in Figure 1. It
can be seen that the path coefficient estimate between Barriers and Adoption is
0.15 and it is significant at the 0.05 level. Thus, our first hypothesis is supported,
i.e., barriers of e-procurement systems have negative effect on the adoption deci-
sion. On the other hand, the path coefficient estimate between Benefits and Adop-
tion is 0.48 and it is significant at the 0.001 level. Thus, our second hypothesis is
also supported, i.e., benefits of e-procurement systems have positive effect on the
adoption decision. As stated before, besides these hypotheses, another point of in-
7
4 Conclusion
The aim of this study is to analyze the effects of the barriers and benefits of e-
procurement systems on the e-procurement adoption decision. An empirical analy-
sis has been performed for a retail store chain which operates in book and station-
ary sector in Turkey.
Using the ISM technique, the barriers of e-procurement that have high driving
power and the capability to influence the other drivers are found to be lack of e-
procurement knowledge/skilled personnel; lack of adequate technical/IT infra-
structure; and inadequate IT infrastructure of suppliers/business partners. On the
other hand, the important benefits are easier access to market data and enhanced
intelligence; quicker response to problems through real-time information; on-line
and real-time reporting; improved supply chain transparency; simplified and
streamlined purchasing process; integrated information sharing; and improved
communication and collaboration in supply chain.
Once we determine the main barriers and benefits of e-procurement systems,
they are integrated into the structural equation model. The results denote that bar-
8
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