Relationship between objective supply chain complexity and effective supply

The current literature gives spatial insights into the relationship between objective supply chain complexity and effective supply chain complexity. In general, research of complexity in supply chains is quite recent and has several limitations.200201202203 _{While several authors} are investigating the structural elements (“objective” dimensions) of supply chain complex- ity and the effects on certain outcomes204205_{, it falls short in explaining the relationship be-} tween supply chain complexity and effective supply chain complexity (except Manuj and Sahin206 _{and Perona/Miragliotta}207_{). A comprehensive model of objective supply chain com-} plexity and effective supply chain complexity along with strategies to cope with it and re- lated outcomes is lacking.

It´s important to note that most of the studies view supply chain complexity on the level of “objective” complexity, where the degree of complexity is derived from the number and variety of structural properties defining a supply chain (e.g. number of products, custom- ers, suppliers, facilities, etc.) and their interactions. As complexity not only arises from those complexity elements, but also from the complexity inherent in the process of deci- sion-making, additional measures of complexity has to be considered. In the literature this can be referred to the concept of supply chain decision-making complexity.208 _{Hereby, the} literature on cognitive and decision-making processes provides insights to the concept of supply chain decision-making complexity. According to Wood and Campbell decision-

200 _{See de Leeuw et al., 2012.} 201

See Nilsson and Gammelgard, 2012. 202

See Serdarasan, 2013. 203

See Blome et al., 2014. 204

See Wycisk et al., 2008. 205 _{See Meyer, 2007.} 206 See Manuj/Sahin, 2011. 207 See Perona/Miragliotta, 2004. 208 See Manuj/Sahin, 2011.

maker has to cope with a task´s objective (=problem attributes that can be enumerated) and perceived complexity (=unattended level of complexity leading to observed out- comes), which is related to the difficulty at arriving at a problem solution. To do so cogni- tive skills are applied to make decisions.209210 _{Therefore, supply chain decision-making} complexity is associated with the volume and structure of information cues involved when making a supply chain related decision.211212 _{Addressing this to a supply chain problem,} Robinson/Swink and Swink/Robinson found out that objective and perceived complexity are not always positively correlating. In their study supply chain managers were able to find better solutions for problems with high objective complexity due to the use of manage- rial tools (for example information systems) and applying cognitive skills, which resulted in a lower level of perceived complexity.213214 _{A survey based study regarding task complexity} was conducted by Handley/Benton with the aim to show effects of objective task com- plexity on coordination and control costs in the context of outsourcing activities.215

In a supply chain “objective” complexity arises from all the elements - which can be enu- merated - embedded in the supply chain and their interactions, leading to uncertainty. Decision-makers have to deal with the generated uncertainty and are confronted with an effective supply chain complexity when managing supply chain complexity. As supply chain complexity increases, information cues also increases and decision-making is more complex for supply chain managers. Given these aspects it is proposed that:

P3: Higher levels of objective supply chain complexity will lead to higher levels of effective supply chain complexity.

209 See Wood, 1986. 210 See Campbell, 1988. 211

See Efstathiou et al., 2002. 212 _{See Serdarasan, 2009.} 213 See Robinson/Swink, 1994. 214 See Swink/Robinson, 1997. 215 See Handley/Benton, 2013.

Author Definition Antecedents

Wilding216 Supply chain complexity is the deterministic chaos (=aperiodic,

bounded dynamics in a deterministic system with sensitivity on initial conditions, and has structure in phase space), parallel inter- actions (=interactions that occur between different channels of the same tier in a supply chain network), and demand amplification (=amplifying change in demand as it passes between organiza- tions) exhibited by a supply chain.

Deterministic chaos, parallel interactions, demand amplifi- cation

Vachon/Klassen217 Supply chain complexity is the result of an information processing

dimension for complexity and a technological dimension. Note:

Information processing dimension: uncertainty (inherent noise or variations in the existing in the system) vs complicatedness (the level and type of interactions present in the system)

Technological dimension: structural (i.e. related to physical prod- uct and process) vs infrastructural (related to management sys- tems)

Recent investments in ad- vanced manufacturing tech- nology; High value of pur- chased materials; Large num- ber of rejects of incoming ma- terial; High scrap rate; Large number of rejects at final in- spection;

Relatively large size of supply network; Considerable product variety; High frequency of changes made in scheduling; High level of make-to-order production

Bozarth et al.218 Supply chain complexity is the level of detail complexity (=distinct Number of customers, prod-

216

See Wilding, 1998.

217

See Vachon/Klassen, 2002.

number of components or parts that make up the supply chain) and dynamic (=unpredictability of a system´s response to a given set of inputs, driven by the interconnectedness of many parts that make up the supply chain) complexity exhibited by the products, processes, and relationships that make up a supply chain (in- cludes upstream, downstream, and manufacturing complexity)

ucts, components, suppliers; Heterogeneity of customer needs; Shorter product life cycles; Considerable demand variability; One-of-a-kind/low volume manufacturing; Sched- ule instability; Long and/or unreliable supplier lead-times; Globalization of supplier base

Manuj/Sahin219 Supply chain complexity is the structure, type, and volume of in-

derdependent activities, transactions, and processes in the supply chain that also includes constraints and uncertainties under which these activities, transactions and processes take place.

Supply chain decision-making complexity is the difficulty faced by a decision-maker when managing a supply chain. It is a measure of the collective effort required for problem definition, data collec- tion, problem analysis, solution implementation, and control.

Supply chain size and struc- ture; customer expectations; environmental conditions; globalization; organizational restructuring

de Leeuw et al.220 Supply chain complexity is the level of detail and dynamic com-

plexity of supply chains.

Uncertainty, diversity, size, variability, structure, speed, lack of information synchroni- zation, lack of cooperation Choi et al.221

Choi and Krause222

Supply network complexity is the sum of firms that collectively supply a given part or subassembly to buying firm and their inter-

Number of suppliers, degree of differentiation among suppli-

219

See Manuj/Sahin, 2011.

220

See de Leeuw et al., 2013.

connectedness. ers, level of interrelationships between suppliers

Milgate223 _{Supply chain complexity comprises of uncertainty (upstream,}

downstream), technological intricacy (product, process), and or- ganizational systems (internal, external).

Uncertainty (late deliveries from suppliers, quality level of incoming materials and parts, customer-related forecast er- ror); technological intricacy (total number of raw material parts, number of product lines); organizational system (product variety, breadth of supplier base, export orienta- tion)

Table 4: Definitions of supply chain complexity

222

See Choi/Krause, 2006.