A CONCEPTUAL MODEL OF SUPPLY CHAIN FLEXIBILITY
Leslie K. Duclos, University of Northern Iowa, Cedar Falls, IA 50614-0125
Rhonda R. Lummus, Iowa State University, Ames, IA 50011-2063
Robert J. Vokurka, Texas A&M University - Corpus Christi, Corpus Christi, TX 78412
ABSTRACT
This paper presents an integrated model of supply chain
flexibility. It examines flexibility classification schemes
and the commonalities of flexibility typologies published in
the literature to create a theoretical foundation for analyzing
the components of supply chain flexibility. From this
representation, the paper identifies the cross-enterprise
nature of supply chain flexibility and the need to improve
flexibility measures. Opportunities are identified for future
cross-functional research that builds on this theoretical
foundation and leads to more effective formulation of
supply chain strategies.
INTRODUCTION
Industries are increasingly facing intensifying global
competition, rapid technology advances, and increasingly
more demanding customer expectations. The traditional
model of mass production is being restructured and
reengineered to improve a firm’s competitiveness in this
new environment. As companies have improved their
internal operations by increasing product quality while
reducing costs, firms have achieved parity on these
dimensions in many industries. These companies are now
looking to develop competitive advantages in areas such as
delivery, flexibility, and innovation. All of these emphasize
the importance of time. Firms have found that a successful
initiative to accomplish this objective is through supply
chain management. The Academic Alliance Forum (1999)
suggested that traditional competition of company versus
company is changing toward a business model where supply
chains compete against supply chains.
As the basis of competition expands to the supply chain and
time becomes increasingly important, a critical issue will be
the flexibility of the supply chain. The benefit of supply
chain flexibility lies in the ability to facilitate the
development of meaningful organizational strategies and
guidelines that improve overall firm performance. Gupta
and Somers (1996) make a strong argument for a linkage
between business strategy, manufacturing flexibility, and
the financial and growth performance of the firm. If
manufacturing flexibility improves performance, supply
chain flexibility, which would include the manufacturing
flexibility of a manufacturing firm within the supply chain,
should further improve performance when measured across
the entire supply chain. Before that can be confirmed, the
dimensions of supply chain flexibility must be defined. In
addition, performance measures must be identified which
measure supply chain performance across supply chain
nodes to determine if real change in customer value has
been added.
This paper provides a brief review of flexibility definitions
and flexibility classification schemes from current literature.
A review of the limited literature on supply chain flexibility
will then be discussed. Finally, a model of supply chain
flexibility and its components is proposed.
FLEXIBILITY IN THE LITERATURE
Most of the previous literature on flexibility has focused on
internal manufacturing flexibility. As supply chain
flexibility would also include the internal ability of a firm to
be flexible, manufacturing flexibility research can be used
to help determine the components of supply chain
flexibility. Three recent articles have provided to the
research community a fairly comprehensive review of the
manufacturing flexibility literature (D'Souza & Williams,
2000; Koste & Malhotra, 1999; Vokurka & O'Leary-Kelly,
2000). These articles also serve to represent the current
state of research in manufacturing flexibility as the research
moves from a conceptual to an empirical focus.
It is generally agreed that manufacturing flexibility does not
refer to a single variable, but rather it is a multi-dimensional
construct. Vokurka and O’Leary-Kelly (2000) expanded the
different dimensions developed by Browne, Dubois, et al.
(1984) (eight dimensions) and Sethi and Sethi (1990)
(eleven dimensions) to fifteen identified dimensions of
manufacturing flexibility. Further, they suggest a
contingency relationship between manufacturing flexibility
and firm performance. In their examination of past studies,
they found four general forces -- strategy, environmental
factors, organizational attributes, and technology --
comprise the dominant forces influencing manufacturing
strategy.
Koste and Malhotra (1999) also conducted a comprehensive
review of the manufacturing flexibility literature and
proposed four elements of flexibility to be used for
measuring an organization's flexibility along each
dimension. They mapped these elements to ten commonly
cited manufacturing flexibility dimensions further refining
the definition of each dimension. They proposed a
hierarchy of flexibility dimensions using previous literature
that studied the relationships between flexibility dimensions
and building upon the work of Hyun and Ahn (1990).
Finally, through a survey, they attempt to determine if the
elements can indeed be used to measure the flexibility
dimensions.
D’Souza and Williams (2000) focus on the seven
manufacturing flexibility dimensions proposed by Gerwin
(1993) and then collapse the seven into four dimensions:
volume flexibility, variety flexibility, process flexibility,
and materials handling flexibility, each with two elements:
range and mobility. Like Koste and Malhotra (1999) they
attempt to operationalize and study the elements and
determine if the elements can be used for measuring the
different dimensions of manufacturing flexibility.
The hierarchy of flexibility dimensions (Figure 1) as
proposed by Koste and Malhotra (1999) provide support
for the argument that much of the focus on flexibility
concentrates on flexibility within a single plant. The lower
three tiers -- Individual Resources, Shop Floor, and Plant --
have a single plant, internal focus. Not until reaching the
fourth level is there recognition that flexibility for the
business unit is actually a combination of flexibility in many
functional areas. However, when reviewing the attempts by
Koste and Malhotra (1999) and D'Souza and Williams
(D'Souza & Williams, 2000) for measuring a dimension of
flexibility, it may be argued that the measurements overlap
into multiple functional areas.
For example, volume flexibility refers to the ability to
quickly and efficiently adjust output to match demand.
Having a wide range of volume for which a plant can
operate efficiently as measured by production costs, quality
levels, or system profitability indicates a high level of
flexibility. One question in this measure should be how to
include the cost of changing input volumes? Where is the
impact of changing the quantity ordered from a supplier
measured? As quantities are changed, does this impact
product cost? The inputs appear to be outside of the
manufacturing dimensions. Does the cost of changing input
volumes, then, fall into some set of marketing dimensions
that have yet to be defined?
Similar discussions can be included for the dimension of
product flexibility. Product flexibility has been defined as
the ability of the plant to introduce new products or modify
existing products. Again, the focus is on the plant. But for
an organization to bring a new product or a modified
product to market more parts of the "system" must be
considered than just internal plant operations. How do the
issues in product flexibility relate to marketing? To
research and development?
The manufacturing flexibility literature has recognized that
manufacturing flexibility is not only a potential element of a
manufacturing strategy, but it may also be a component of
marketing and R&D strategies as well (Hyun & Ahn, 1990;
Sethi & Sethi, 1990). It is also recognized as one element of
a business strategy, with certain dimensions impacting
growth and financial performance of the firm (Gupta &
Somers, 1996). However, while the manufacturing
flexibility literature provides a "bottom-up" view of
flexibility in an organization, it is perhaps business strategy
literature that provides the "top-down" view.
One strategy for gaining and keeping a competitive
advantage in a dynamic environment is to create a flexible
organization (Sanchez, 1995). It is proposed that with a
wide range of different strategic options, the organization
can more quickly respond to its environment. Sanchez
proposes that strategic flexibility is composed of two
dimensions: Resource flexibility -- the extent to which a
resource can be applied to a range of alternative uses, the
costs and difficulties associated with the switching from one
resource to another, and the time required for the switch and
Coordination flexibility -- flexibility in those processes that
redefine product strategies, reconfigure chain of resources
to produce product, and re-deploy those resources needed to
produce the product.
This idea is further supported and developed by Lau (1996).
He defines strategic flexibility as "a firm's ability to respond
to uncertainties by adjusting its objectives with the support
of its superior knowledge and capabilities" ( p. 11). He also
proposes a framework for attaining strategic flexibility
(Lau, 1994) that provides a broad picture of flexibility for
an organization. It is this work that begins to recognize that
flexibility is associated not only with manufacturing
capabilities, but also for linkages to and from manufacturing
units with suppliers and customers -- the supply chain.
EXTENDING FLEXIBILITY DIMENSIONS TO THE
SUPPLY CHAIN
The components of manufacturing flexibility play an
important role in supply chain flexibility. However, as the
supply chain extends beyond the enterprise, supply chain
flexibility must also extend beyond one firm’s internal
flexibility. A limited number of authors have begun to
discuss flexibility from a supply chain perspective. In their
paper on matching the supply chain to the marketplace,
Mason-Jones, Naylor, et al. (2000) do not discuss supply
chain flexibility per se, but discuss the importance of
matching supply chain improvement initiatives to the
customer demand. They stress the importance of combining
the lean concepts of eliminating waste with the agility
concepts of exploiting opportunities in a volatile market.
Their definition of leagility includes creating a supply chain
capable of delivering to an unpredictable marketplace that
includes a decoupling point along the chain where product
becomes unique. Prior to the decoupling point lean
concepts are applied and product built to forecast. After the Logistics flexibility – ability to cost effectively receive and
point, customer orders drive supply chain processes. deliver product as sources of supply and customers change
(customer location changes, globalization, postponement)
Vickery (1999) defined five supply chain flexibilities based
on previous operations literature. The author states that Supply flexibility – ability to reconfigure the supply chain,
supply chain flexibility “should be examined from an altering the supply of product in line with customer demand
integrative, customer-oriented perspective.” Flexibilities
viewed as directly impacting a firm’s customers and the Organizational flexibility - the ability to align labor force
responsibility of two or more functions, whether internal or skills to the needs of the supply chain to meet customer
external to the firm, are included. The five defined service/demand requirements
flexibilities include: Product flexibility, Volume flexibility,
New product flexibility, Distribution flexibility, Information Systems flexibility - the ability to align
Responsiveness flexibility. information system architectures and systems with the
changing information needs of the organization as it
While Vickery's descriptions of flexibility are appropriate, responds to changing customer demand
most of the responsibility for one of the types of flexibility Each supply chain flexibility component is discussed in
lies with one functional area of a particular firm.
Manufacturing is generally responsible for volume Figure 1: Components of Supply Chain Flexibility
flexibility, marketing is generally responsible for Inter-Node IS
distribution flexibility, research and design is responsible Supplier(s) Flex.
for new production introduction flexibility, etc. By
Market
focusing on these flexibilities from an internal perspective Flex.
much of the contribution of a supply chain perspective is
lost. Logistics
Flex.
Supply
SUPPLY CHAIN FLEXIBILITY COMPONENTS Flex.
Info. Sys. Flex.
Previous literature on flexibility fails to consider the cross-
functional, cross-business nature of supply chain
management. A complete definition of supply chain Prod. Sys. Flex.
flexibility components will include the flexibility
Node/Unit
dimensions required by all activities in the supply chain Flex.
needed to successfully meet customer demand. Flexibility
in the supply chain adds the requirement of flexibility Organizational Flex.
within and between all partners in the chain including
departments within an organization and the external
partners including suppliers, carriers, third-party companies,
and information systems providers. It includes the flexibility
to gather information on market demands and exchange
information between organizations.
Logistics
Supply Flex.
Six components of supply chain flexibility have been Flex.
identified from the literature on manufacturing flexibility,
strategic flexibility and the limited writings on supply chain Customer
flexibility. These six components are defined here and their (s)
relationships further described in Figure 1. Inter-Node IS
Flex.
Production system flexibility (both manufacturing and
service) – ability to configure assets and operations to react the complete paper associated with this proceedings
to emerging customer trends (product changes, volume, paper. Full references available upon request.
mix) at each node of the supply chain
Market flexibility – ability to mass customize and build
close relationships with customers including designing and
modifying new and existing products