Outcomes of supply chain complexity 44

Supply chain complexity has several impacts on supply chain performance measures.251252253 _{According to Manuj/Sahin outcomes of supply chain complexity are often}

unplanned or unexpected and/or undesirable.254 _{This is in alignment with the nature and}

characteristics of complex systems, where given inputs lead to uncertain and unpredicta- ble outcoumes. Table 6 provides an overview of the impact of supply chain complexity on outcomes.

According to van der Vaart/van Donk performance measures can be grouped into:255

- Overall-related measures (e.g. profit)

- Service-related measures (e.g. delivery reliability) - Cost-related measures (e.g. transportation costs)

Some studies state that supply chain complexity impacts both, efficiency (cost) and effec- tiveness (service) of supply chain operations.256257 _{Therefore, supply chain complexity af-}

fects all performance dimensions along the supply chain and consequently is a key issue confronting supply chain managers.

251 See Perona/Miragliotta, 2004. 252 See Choi/Krause, 2006. 253 See Deloitte, 2003. 254 _{See Manuj/Sahin, 2011.} 255

See van der Vaart/van Donk, 2008. 256

See Perona/Miragliotta, 2004. 257

As stated earlier not all sources of supply chain complexity are bad and reducing it would not necessarily leads to improvements in performance. De Leeuw et al. see an important task of supply chain managers to examine the trade-offs of managing/reducing supply chain complexity and related outcomes (e.g. investments in additional inventory may re- duce complexity related to uncertainty, but it will increase costs and assets and it requires appropriate capabilities to manage inventory).258

In addition to the findings mentioned above, it is important to note that not all complexity sources have the same impact on performance measures. For example, Bozarth et al. found out that dynamic supply chain complexity has a stronger effect on manufacturing plant performance than static supply chain complexity.259 _{Similar to these Manuj/Sahin}

provide findings of their qualitative study regarding the linkage between specific complexi- ty antecedents and the most relevant strategies and outcomes. Additionally they found out that there is a link between supply chain complexity and outcomes, and effective supply chain complexity and outcomes.260

In regard to the relationship between effective supply chain complexity and outcomes, the studies of Robinson/Swink and Swink/Robinson showed that the effective supply chain complexity and outcomes are not always correlated positively. They found out that deci- sions of supply chain managers lead to better solutions, when confronted with more com- plex problems (due to the application of human cognitive processes).261262

258

See de Leeuw et al., 2013. 259 _{See Bozarth et al., 2009.} 260 See Manuj/Sahin, 2011. 261 See Robinson/Swink, 1994. 262 See Swink/Robinson, 1997.

Author Effect on:

Manuj/Sahin263 _{Total costs; transaction costs; cycle times; incoming material quality; outbound delivery}

performance; inventory turnover; uncertainty; reserve capacity requirements

Bozarth et al.264 _{Manufacturing plant performance (in terms of manufacturing schedule attainment and unit}

manufacturing cost performance)

Choi/Krause265 _{Transaction cost; supplier responsiveness; supplier innovation; supplier risk}

Bode/Wagner266 _{Supply chain disruptions on the demand side}

Vachon/Klassen267 _{Delivery performance (delivery speed and delivery reliability)}

Stock et al.268 _{Operational performance (cost, delivery speed and reliability, quality, flexibility) and finan-}

cial performance (sales growth, return on investment, market share) Closs et al.269 _{Holdings costs; service levels; inventory levels; delivery reliability}

Handley/Benton270 _{Control costs; coordination costs}

Milgate271 _{Delivery performance (upstream: late deliveries by suppliers, quality of incoming material;}

manufacturing: throughput time; downstream: delivery lead-time, late delivery)

Adani et al.272 _{Operative performance (components running capital costs, obsolescence costs, finished}

products running capital costs, transportation costs, administrative costs); economic per- formance (operating profits, average yearly turnover increase)

263

See Manuj/Sahin, 2011.

264

See Bozarth et al., 2009.

265 See Choi/Krause, 2006. 266 See Bode/Wagner, 2015. 267 _{See Vachon/Klassen, 2002.} 268

See Stock et al., 2000.

269

See Closs et al., 2010.

270

See Handley/Benton, 2013.

271

See Milgate, 2001.

Tavares Thome et al.273 _{Manufacturing performance}

- Cost (unit manufacturing cost, procurement costs, manufacturing overhead costs) - Delivery (delivery speed, delivery reliability, manufacturing lead time, procurement

lead-time)

- Flexibility (product customization ability, volume flexibility, mix flexibility, time to market)

- Quality (manufacturing conformance, product quality and reliability, customer ser- vice and support)

Hu et al.274 _{Quality and productivity}

Table 6: Outcomes of supply chain complexity

273

See Tavares Thome et al., 2014.

Therefore, the propositions for this thesis relating the outcomes of supply chain complexity and effective supply chain complexity are:

P5a: Supply chain complexity negatively affects performance measures (overall- related, service-related, cost-related) along the supply chain.

P5b: Effective supply chain complexity negatively affects performance measures (overall-related, service-related, cost-related) along the supply chain.

It can be stated that supply chain complexity negatively affects various performance measures. Furthermore, derived from supply chain complexity – there is also a direct link between effective supply chain complexity and outcomes. Fur future research it is neces- sary to investigate quantitatively the relationship between supply chain complexity and outcomes on the one hand, and the link between effective supply chain complexity (as the link between supply chain complexity and effective supply chain complexity can be mod- erated by implemented complexity coping strategies) on the other hand, to see which strategies (and to which extent) have an impact on the management of supply chain com- plexity and therefore have an impact on the outcomes of supply chain complexity and as- sociated effective supply chain complexity (similar to the study of Manuj/Sahin, where the study participants were able to identify outcomes of supply chain complexity and effective supply chain complexity but had difficulties to quantify them275_{). Furthermore specific com-}

plexity components of supply chain complexity should be linked to certain performance outcomes. The following illustration presents the relationships between the various con- structs of the model.

275