Supply and Demand Effects on Supply Chain Flexibility: An Empirical Exploration

• Author: Santanu Mandal
• Published date: 01 July 2015
• DOI: http://doi.org/10.1002/kpm.1475
• Date: 01 July 2015

■Research Article

Supply and Demand Effects on Supply

Chain Flexibility: An Empirical

Exploration

Santanu Mandal*

Doctoral Research Scholar, Department of Operations and Information Technology, IBS Hyderabad,

Hyderabad, India

Supply chain flexibility has been an important supply chain capability in providing firms the necessary alternate

configurations and hence safeguarding them from disruptions. This study investigates the influence of supply and

demand competence on supply chain flexibility and its influence on a firm’s operational and relational performance.

While the former competence refers to production and supply management-related activities, the latter refers to

distribution and demand management-related activities. Within this framework, process compliance, that is, how

well supply chain management processes are internally executed by the firm’s employees, is observed as an enabler

(moderator) on the relationship between supply chain competence and supply chain flexibility. Further, the model

also explores the moderating influence of environmental uncertainty on the linkage between supply chain flexibility

and firm performance. The model is empirically validated based on perceptual data collected from 163 supply chain

professionals through web-based survey. Implications for both managers as well as practitioners are also provided.

Copyright © 2015 John Wiley & Sons, Ltd.

INTRODUCTION

Supply chain flexibility has become a critical supply

chain capability recently when firms are facing an

increasing number of disruptions. Flexibility repre-

sents the capability of a firm to respond to unde-

sired changes in its core processes and in the

marketplace. Supply chain flexibility therefore is

one of the competitive weapons that a firm possess

in today’s market (Candace et al., 2011; Soon and

Udin, 2011; Chiang et al., 2012; Fayezi et al., 2014;

Jin et al., 2014; Fayezi et al., 2015).

Recent supply chains disruptions are therefore

are the critical reasons for firms to devise risk miti-

gating capabilities. A supply chain disruption is an

unexpected situation that can result in a negative

outcome for a firm and its supply chain perfor-

mance. Recent firms are facing an increase in the

number of supply chain disruptions (Wagner &

Bode, 2008; Gligor & Holcomb, 2012). For example,

Dole suffered a large revenue decline after their

banana plantations were destroyed after Hurricane

Mitch hit South America in 1998; Ericsson lost 400

million Euros after their supplier’s semiconductor

plant caught fire in 2000; in 2001, Land Rover had

to lay off 1400 workers after their supplier became

insolvent, and Ford had to close five plants for sev-

eral days after all air traffic was suspended follow-

ing 11 September 2001 incidents; tsunami in the

Indian ocean affected severely the tourism and the

fishing industry in 2004; Dell had to recall 4 million

laptop computer batteries made by Sony because of

afire hazard in 2006; floods in Thailand disrupted

both auto (e.g., Toyota and Honda) and electronics

(e.g., Samsung and Apple) supply chain operations

leading to huge losses in 2011; the same year also

witnessed the earthquake in Japan that halted pro-

duction of General Motors and Apple (Martha &

Subbakrishna, 2002; Chopra & Sodhi, 2004; Brennan,

2011; Kate & Kim, 2011). This earthquake severely

affected semiconductor and automotive companies

like HP, Honda, Toyota, and Nissan that lost mil-

lions of dollars.

Flexibility emerged since 1980s and since then to

the early 2000s, allied research focused on how a

firm’sflexible manufacturing and product develop-

ment capabilities could respond to environmental

*Correspondence to: Santanu Mandal, Doctoral Research Scholar,

Department of Operations and Information Technology, IBS

Hyderabad, Hyderabad, Andhra Pradesh 501203, India.

E-mail: shaan.nitw@gmail.com

Knowledge and Process Management

Volume 22 Number 3 pp 206–219 (2015)

Published online 28 May 2015 in Wiley Online Library

(www.wileyonlinelibrary.com) DOI: 10.1002/kpm.1475

Copyright © 2015 John Wiley & Sons, Ltd.