Managing uncertainty through supply chain flexibility: reactive vs. proactive approaches

Figures & data

Figure 1. The conceptual model.

Table 1. Typology of supply chain uncertainty.

	Case 1	Case 2	Case 3	Case 4
Type of operations	Engineering to order	Make-to-order	Assembly-to-order	Make-to-stock
Level of uncertainty
Demand	Highly uncertain	Highly uncertain, customers frequently change orders, high mix uncertainty	Highly uncertain product mix, high product variety, demand fluctuating over time	Low demand uncertainty (orders received well in advance)
Supply	Highly uncertain supply lead time	Low supply uncertainty, relatively short lead time	Highly uncertain supply lead time and material price	Low supply uncertainty for most materials
Process	Moderately uncertain, very high complexity	Highly uncertain in terms of cycle time, yield, availability	Moderately uncertain: low process similarity, high variability in processing time	Stable process, low uncertainty

Table 2. Flexibility strategies adopted.

	Case 1	Case 2	Case 3	Case 4
Type of operations	Engineering to order	Make-to-order	Assembly-to-order	Make-to-stock
Strategies/enablers
Safety stock	Low	High	High	Moderate
Safety lead time	High	Low	Low	Low
Capacity buffer	Low	High	Low	X
Backup supplier	High	Low	X	High
Lead time reduction	X	X	X	Low
Setup time reduction	X	X	High	X
Component commonality	Moderate	High	Moderate	Low
Postponement	High	High	Moderate	X
Risk pooling	X	X	X	X
Flexible supply contract	X	X	X	X
Subcontracting/outsourcing	High	X	X	X
Alternative routing/modes of transportation	X	X	Low	X

Table 3. Dominant problem for each company that hinders supply chain flexibility.

	Most obvious flexibility attributes	Problems	Impacts
Case 1	Ability to produce various types of products	Problems with cash availability that prevents the company to obtain sufficient materials in due time	Poor on-time delivery (only about 70%) Idle resources because of waiting for materials
Case 2	No frozen schedule, customers are allowed to change orders any time	Long setup time Frequent breakdown	Large inventory buffer (up to 6 weeks demand) Fluctuated capacity utilization
Case 3	No limit on minimum order quantity, some customer orders have a quantity of one unit Ability to produce a very large number of products variants	There is only one very dominant supplier that limits supply flexibility Long supply lead time	Poor on-time delivery reliability to customers High inventory of raw materials (about 3–4 months)
Case 4	None looks obvious in Case 4	Limited warehouse capacity that prevents forward buying for materials	On-time delivery of about 90% which is quite low for highly predictable demand Lost sales

Figure 2. Illustration of power structure and flexibility configuration for Case 2.

Figure 3. Illustration of power structure and flexibility configuration for Case 3.