See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/354888357

Structural Equation Modeling for Analyzing the Barriers and Benefits of E-

procurement

Conference Paper · July 2014

CITATIONS READS

0 11

4 authors, including:

Peral Toktaş-Palut Ecem Baylav

Dogus Universitesi Dogus Universitesi
14 PUBLICATIONS   180 CITATIONS    3 PUBLICATIONS   69 CITATIONS   

SEE PROFILE SEE PROFILE

Seyhan Teoman
Maltepe University
7 PUBLICATIONS   38 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Integrated green supplier selection and lot sizing problems under different quantity discount schemes View project

Border Crossing View project

All content following this page was uploaded by Seyhan Teoman on 28 September 2021.

The user has requested enhancement of the downloaded file.

8th International Conference on Industrial Engineering and Industrial Management
XX International Conference on Industrial Engineering and Operations Management
International IIE Conference 2014
Malaga, Spain. July 23-25, 2014

Structural Equation Modeling for Analyzing the

Barriers and Benefits of E-procurement

Peral Toktaş-Palut1, Ecem Baylav, Seyhan Teoman, Mustafa Altunbey

Abstract We perform an empirical study to analyze whether it would be benefi-

cial for a company to switch from traditional procurement system to e-
procurement system. For this purpose, we determine the main barriers and benefits
of e-procurement systems, and using Structural Equation Modeling, we analyze
the effects of the barriers and benefits on the e-procurement adoption decision.
The results denote that barriers (benefits) of e-procurement systems have negative
(positive) effect on the adoption decision. We also find that the effect of the bene-
fits is higher than that of the barriers, indicating that it would be beneficial for the
company to adopt the e-procurement system.

Keywords: Barrier; Benefit; E-procurement; Structural Equation Modeling.

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-

1Peral Toktaş-Palut ( e-mail: [email protected])

Department of Industrial Engineering, Doğuş University, 34722, Istanbul, Turkey.
2

stand the adoption process of e-procurement in Hong Kong. Panayiotou et al.

(2004) work on a case study about the Greek purchasing process and indicate the
problems which may occur. The authors also study e-procurement system design.
Gunasekaran et al. (2009) analyze the current state of e-procurement in SMEs lo-
cated in the Southcoast of Massachusetts, and they also examine the factors that
affect the e-procurement adoption.
In the light of the previous studies on e-procurement systems, this study aims at
investigating the effects of the barriers and benefits of e-procurement on its adop-
tion decision. For this purpose, by using Structural Equation Modeling (SEM), we
perform an empirical analysis for a retail store chain which operates in book and
stationary sector in Turkey.
SEM can be used for multivariate data as it is appropriate for illustrating the re-
lations between exogenous and endogenous latent variables in one model (Kline,
1998). SEM is a widely used tool especially for psychology, sociology, and econ-
ometrics and there are several studies applying SEM in the literature. Thus, we on-
ly mention the studies in a related field. Madeja and Schoder (2003) examine the
impacts of e-procurement adoption process on e-business success. Lee and
Quaddus (2006) conduct a study in Singapore about the impacts of buyer-supplier
relationship on e-purchasing adoption decision. Vaidyanathan and Devaraj (2008)
study the impacts of the quality of information flow process and the quality of lo-
gistics fulfillment on the satisfaction of e-procurement performance. Finally,
Devaraj et al. (2012) investigate the effects of mixing flexibilities and purchase
volumes on e-procurement performance.
The rest of the paper is organized as follows. The theoretical background, re-
search hypotheses, and data collection are given in Section 2. The data analysis
and results are presented in Section 3. Finally, concluding remarks are given in
Section 4.

2 Research Background and Data Collection

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

In the third step, Interpretive Structural Modeling (ISM) technique (Warfield,

1973) is applied to determine the barriers and benefits that have high driving pow-
er and the capability to influence the other drivers. Based on the results of the ISM
model, the numbers of barriers and benefits are decreased to 3 and 7, respectively.
Finally, these barriers and benefits are entered into the SEM model. In this step,
another five-point scale questionnaire is prepared. Here, the aim is to analyze the
effects of these barriers and benefits on the e-procurement adoption decision and
the necessity of the e-procurement system for the company. The questionnaire is
uploaded to the Intranet of the company. Among 916 people working in a related
field, 277 respondents answer the questionnaire, resulting in a response rate of
30.24%. Among these responses, 21 cases contain missing values, giving a per-
centage of 7.58%. Since sample size is especially important for SEM, Bayesian
imputation is used to estimate the missing values.
The barriers of e-procurement systems taken into consideration in this study are
given below (Eadie et al., 2007; Eei et al., 2012):
Lack of e-procurement knowledge/skilled personnel (R1). Mainly related to
personnel issues such as older generations that have not kept up to the advances in
IT related fields, but relying heavily on traditional forms and means of procure-
ment.
Lack of adequate technical/IT infrastructure (R2). Need of adequate IT infra-
structure to carry out e-procurement processes and/or technology to operate IT.
Inadequate IT infrastructure of suppliers/business partners (R3). The external
parties of the supply chain do not have adequate IT infrastructure compatible with
the e-procurement system.
On the other hand, the benefits of e-procurement systems considered in this
study are as follows (Morris et al., 2000; Eadie et al., 2007; Eei et al., 2012):
Easier access to market data and enhanced intelligence (N1). Enables to moni-
tor and scan external sources of data and intelligence easily and to share infor-
mation with others pro-actively.
Quicker response to problems through real-time information (N2). Increased
speed in transactions, tracking and reporting through real-time information helps
quicker problem solving and reactive decisions.
On-line and real-time reporting (N3). Real-time reporting system that enables
management to have a fast and reliable way to compare the spending with budget,
allowing quick reaction to problems.
Improved supply chain transparency (N4). Transparency of product specifica-
tions, prices, contract details, such as the contractual conditions, time, terms of or-
ders, etc., making these visible to relevant parties both internally and externally.
Simplified and streamlined purchasing process (N5). E-procurement solutions
simplify the purchasing process by bringing all suppliers together, accessible from
a single e-platform and eliminating the need for a paper form, while providing
streamlined procedures to expedite order to payment processing.
4

Integrated information sharing (N6). Accelerates the flow of important infor-

mation between internal and external business partners; also provides real-time
information sharing within a broader structure.
Improved communication and collaboration in supply chain (N7). E-
procurement allows sections of electronic documentation to flow through the sup-
ply chain. As it improves the speed of returns and makes it easy to communicate
requirements in a quicker and more accessible manner, it will result in a better un-
derstanding of requirements and due compliance.
This study uses SEM to analyze the effects of the barriers and benefits of e-
procurement on its adoption decision and we have two main research hypotheses
given below:
Hypothesis 1 (H1). Barriers of e-procurement systems have negative impact on
the adoption decision.
Hypothesis 2 (H2). Benefits of e-procurement systems have positive impact on
the adoption decision.
In addition to these hypotheses, we are also interested in understanding whether
the effects of the barriers or benefits are higher on the e-procurement adoption de-
cision. Accordingly, we may recommend the company to adopt the e-procurement
system or not.

3 Data Analysis and Results

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.

Table 1 Goodness-of-fit measures for the measurement model

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

Table 2 Results for the measurement model

Latent Factor Latent Factor

Indicator AVE CR Indicator AVE CR
variable loading variable loading
Barriers 0.490 0.742 Benefits 0.624 0.924
* *
R1 0.654 N1 0.743
R2 0.774* N2 0.790*
*
R3 0.665 N3 0.748*
N4 0.809*
N5 0.865*
N6 0.756*
N7 0.810*
*
Significant at the 0.001 level (two-tailed).

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.

Table 3 Goodness-of-fit measures for the structural model

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

terest is to examine whether the barriers or benefits of e-procurement systems

have higher impact on the adoption decision. Since the path coefficient estimate of
Benefits is higher than that of the Barriers, we conclude that benefits of an e-
procurement system overweigh its barriers. Thus, it would be beneficial for the
company to adopt the e-procurement system. However, it is also noteworthy that
the squared multiple correlations (i.e., R2) of Adoption is calculated as 0.21.
Therefore, adding other latent constructs that may affect the e-procurement adop-
tion decision would increase the variance explained.

Fig. 1 Results of the path analysis

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

riers (benefits) of e-procurement systems have negative (positive) effect on the e-

procurement adoption decision and the effect of benefits on the adoption decision
is higher than that of the barriers. Thus, based on this analysis, it would be benefi-
cial for the company to adopt the e-procurement system. As a further study, be-
sides the barriers and benefits of e-procurement systems, other factors could also
be included into the models.

References

Anderson JC, Gerbing DW (1988) Structural equation modeling in practice: A review and rec-
ommended two-step approach. Psychological Bulletin, 103(3), 411–423.
Devaraj S, Vaidyanathan G, Mishra AN (2012) Effect of purchase volume flexibility and pur-
chase mix flexibility on e-procurement performance: An analysis of two perspectives. Journal
of Operations Management, 30(7–8), 509–520.
Eadie R, Perera S, Heaney G, Carlisle J (2007) Drivers and barriers to public sector e-
procurement within Northern Ireland’s construction industry. Electronic Journal of Infor-
mation Technology in Construction, 12, 103–120.
Eei KS, Husain W, Mustaffa N (2012) Survey on benefits and barriers of e-procurement: Malay-
sian SMEs perspective. International Journal on Advanced Science, Engineering and Infor-
mation Technology, 2(6), 14–19.
Gunasekaran A, McGaughey RE, Ngai EWT, Rai BK (2009) E-Procurement adoption in the
Southcoast SMEs. International Journal of Production Economics, 122(1), 161–175.
Gunasekaran A, Ngai EWT (2008) Adoption of e-procurement in Hong Kong: An empirical re-
search. International Journal of Production Economics, 113(1), 159–175.
Hair JF, Black WC, Babin BJ, Anderson RE (2010) Multivariate Data Analysis. Pearson Prentice
Hall, New Jersey.
Hu L, Bentler PM (1998) Fit indices in covariance structure modeling: Sensitivity to
unparameterized model misspecification. Psychological Methods, 3(4), 424–453.
Jöreskog KG, Sörbom D (1993) Structural Equation Modeling with the SIMPLIS Command
Language. Scientific Software, Chicago.
Kline RB (1998) Principles and Practice of Structural Equation Modeling. The Guilford Press,
New York.
Lee W, Quaddus M (2006) Buyer-supplier relationship in the adoption of e-purchasing in the
small and medium printing industries in Singapore: An empirical test using structural equa-
tion modelling. Proceedings of the Tenth Pacific Asia Conference on Information Systems,
337–345.
Madeja N, Schoder D (2003) The adoption of e-procurement and its impact on corporate success
in electronic business. The Third International Conference on Electronic Business, Singapore.
Morris A, Stahl A, Herbert R (2000) E-Procurement: Streamlining Processes to Maximize Effec-
tiveness. Luminant Worldwide Corporation, USA.
Panayiotou NA, Gayialis SP, Tatsiopoulos IP (2004) An e-procurement system for governmental
purchasing. International Journal of Production Economics, 90(1), 79–102.
Schermelleh-Engel K, Moosbrugger H, Müller H (2003) Evaluating the fit of structural equation
models: Tests of significance and descriptive goodness-of-fit measures. Methods of Psycho-
logical Research Online, 8(2), 23–74.
Vaidyanathan G, Devaraj S (2008) The role of quality in e-procurement performance: An empir-
ical analysis. Journal of Operations Management, 26(3), 407–425.
Warfield JN (1973) Binary matrices in system modeling. IEEE Transactions on Systems, Man,
and Cybernetics, SMC-3(5), 441–449.

View publication stats