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Journal of Purchasing & Supply Management ∎ (∎∎∎∎) ∎∎∎ –∎∎∎

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Exploring supply chain flexibility in a FMCG food supply chain Jorieke H. M. Manders a,n, Marjolein C. J. Caniëls b, Paul W. Th. Ghijsen b a

Faculty of Management, Science and Technology, Open University and School of Technology and Logistics, Fontys University of Applied Sciences, Tegelseweg 255, 5912 BG Venlo, The Netherlands b Faculty of Management, Science and Technology, Open University, Valkenburgerweg 177, 6419 AT Heerlen, The Netherlands

a r t ic l e inf o

a bs t r a c t

Article history: Received 6 January 2016 Received in revised form 30 May 2016 Accepted 1 June 2016

Empirical studies about supply chain flexibility have mainly focused on one (manufacturing) company, occasionally incorporating the adjoining view from a supplier, distributor, or retailer. The present paper argues that a dyadic perspective is not sufficient and that an integrated perspective is required. In-depth case study data was collected and analyzed. The data covers eight organizations in a fast-moving consumer goods (FMCG) food supply chain, including suppliers, the main manufacturer, the logistics service provider, and retailers. Drawing on network theory and stakeholder theory, the study analyzed how these eight organizations experience flexibility across the supply chain. The findings show that each chain member implements flexibility to fulfill the direct needs of the next-tier chain member. Organizations at different positions in the supply chain prioritize other flexibilities. There is no support for overall supply chain flexibility. & 2016 Elsevier Ltd. All rights reserved.

Keywords: Supply chain flexibility Flexibility dimensions Goals Network theory Stakeholder theory FMCG food supply chain

1. Introduction Supply chain flexibility is crucial in today's business environment, which is characterized by complexity, continuous change, and uncertainty. Organizations must be flexible to cope with globalization, technological change and innovation, as well as changing customer needs and expectations (Pujawan, 2004; Tachizawa and Thomsen, 2007; Marley et al., 2014). The literature presents many different definitions of flexibility and no uniform concept is broadly accepted. The challenge of developing and maintaining flexibility does not stop at the boundaries of the firm (Bessant et al., 2003). Firms operate within value streams involving many firms that are organized in supply chains (Volberda, 2009). Several studies have argued that in order for a firm to achieve a level of flexibility that adds value to customers, it must look beyond manufacturing flexibility and include a supply chain or value chain perspective (Krajewski et al., 2005; Schmenner and Tatikonda, 2005). This reasoning implies that supply chain flexibility should be broadly defined and should include all types of flexibility that have a direct impact on a firm's customers (Kumar et al., 2006). However, there is no consensus about the dimensions underlying supply chain flexibility (Soon and Udin, 2011).

Most empirical studies have focused on a single manufacturing company, occasionally incorporating the adjoining view from a supplier, distributor, or retailer and, at best, taking a dyadic perspective. Few studies on supply chain flexibility have included three or more tiered organizations. To date, only four studies have investigated three or four tiers (Reichart, 2007; Yi et al., 2011; Schütz and Tomasgard, 2011; Singh and Sharma, 2013). Even these studies still overlook that, for flexibility across the supply chain, it is not sufficient to investigate the dyadic perspective of several supply chain members. It is also necessary to study the relationships between all these parties from an integral point of view. Following stakeholder theory and network theory, the present study emphasizes the importance of investigating the role of supply chain members in decision making about flexibility-oriented activities and processes in the supply chain. The aim of this study is to address the above-mentioned research gap by examining supply chain flexibility from an integrated viewpoint of multiple supply chain members. The study's key assumption is that, for supply chain flexibility, the organizations within the supply chain should be integrated to act collectively to enhance supply chain flexibility in their supply chain. The research questions are:

 Corresponding author. E-mail addresses: [email protected] (J.H.M. Manders), [email protected] (M.C.J. Caniëls), [email protected] (P.W.Th. Ghijsen). n

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How do supply chain members experience flexibility, and in particular, supply chain flexibility? What are their reasons for being flexible? Which flexibility dimensions are prioritized as the supply chain

http://dx.doi.org/10.1016/j.pursup.2016.06.001 1478-4092/& 2016 Elsevier Ltd. All rights reserved.

Please cite this article as: Manders, J.H.M., et al., Exploring supply chain flexibility in a FMCG food supply chain. Journal of Purchasing and Supply Management (2016), http://dx.doi.org/10.1016/j.pursup.2016.06.001i

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J.H.M. Manders et al. / Journal of Purchasing & Supply Management ∎ (∎∎∎∎) ∎∎∎–∎∎∎

Table 1 An overview of flexibility dimensions. Business area

Flexibility dimension

Product development

Product development flexibility New product design flexibility Product modification flexibility

The ability to respond to changing customer needs with new products and modifications to existing products The ability to design and introduce new products into the system

Stevenson and Spring (2007)

The ability to customize (standard) products to meet customer specifications

Vickery et al. (1999); Lummus et al. (2003)

Procurement flexibility

The ability to respond to changing requirements regarding the sourcing, purchasing and supply of goods The ability to find more suppliers for each specific material, component or service The ability to respond to changing requirements in terms of location and/or delivery date The ability to respond to changing needs in the ordering, delivery and receipt of supplied goods

Mandersa

Procurement

Sourcing flexibility Supply flexibility Purchasing flexibility

Manufacturing

Manufacturing flexibility Volume flexibility Mix flexibility Operations flexibility Process flexibility

Logistics

The ability to easy add capacity to the system

Logistics flexibility

The ability to align, adapt and adjust the process of the goods flow including the inbound and outbound activities and the storage of the goods to the changing customers’ needs The ability to transport and produce products by different paths throughout the processing centers of the system The ability to have a number of alternative paths a part or product can take through the system in order to be completed The ability to move the different products between processing centers throughout the system using multiple paths The ability to adjust inventory and transport to provide a widespread access to products and meet customers’ needs The ability to respond to changes in the delivery requests regarding location and/or delivery date The ability to adjust the storage capacity and/or move the stock between locations to transfer the goods/products in time

Routing flexibility Material handling flexibility Physical distribution flexibility Delivery flexibility Storage flexibility

Marketing flexibility

Launch flexibility Responsive flexibility Organization

Network flexibility Organizational flexibility Labor flexibility Worker flexibility Inter-organizational relationship flexibility

(Financial) information Information systems flexibility Spanning flexibility

a

The ability to manage production resources to meet customer requests The ability to adjust (increase or decrease) capacity, batch sizes, output levels and/or quantities in response to customer demand The ability to change the variety or combination of produced or delivered products and/or performed activities The ability in which an activity can be done in different ways using alternative process plans, processes and available assets The ability to produce a range of different (types of) products or fulfill different activities in a certain fixed situation

Expansion flexibility

Inbound logistics flexibility

Marketing

Description

Source Zhang et al. (2002b)

Sánchez and Pérez Pérez (2005) Based on Tachizawa and Thomsen (2007) a

Manders

Nair (2005) Based on Beamon (1999); Lummus et al. 2003; Sánchez and Pérez Pérez (2005) Based on Beamon (1999); Zhang et al. (2003) Based on Sethi and Sethi (1990) ; Vokurka and O’Leary Kelly (2000) Based on Sánchez and Pérez Pérez (2005); Stevenson and Spring (2007); Hopp et al. (2010) Stevenson and Spring (2007)

Swafford et al. (2000); Nair (2005); Soon and Udin (2011) Based on Stevenson and Spring (2007) Vokurka and O’Leary-Kelly (2000); Stevenson and Spring (2007) Koste and Malhotra (1999); Stevenson and Spring (2007) Based on Lummus et al. (2003); Zhang et al. (2005); Singh et al. (2011) Based on Stevenson and Spring (2007); Skintzi (2007) Based on Schütz and Tomasgard 2011; Sánchez and Pérez Pérez (2005)

The ability to adapt to changes in the market environment and/or in customer needs by customization and build close relationships with customers The ability to rapidly introduce new products and/or product varieties to the market The ability to respond to target market needs

Based on Vokurka and O’Leary-Kelly (2000); Lummus et al. 2003; Stevenson and Spring (2007) Vickery et al. (1999); Sánchez and Pérez Pérez (2005) Lummus et al. (2003)

The ability to respond to changing circumstances by managing the organizations relationships, structures and controlling its capacity The ability to align the organization management and labor force to meet customer demand/service requirements The ability to change the number of workers The ability of a worker to perform a number of different tasks with different responsibilities The ability to build and maintain collaborative relationships up and/ or downstream to adapt to changing circumstances

Based on Yi et al. (2011)

The ability to align the information system architectures and systems with the changing information needs of the organization as it responds to changing customer demand The ability of the organizations to collect, store and disseminate information in horizontal information connections across the supply chain to increase value to customers

Lummus et al. (2005) Based on Gong (2008) Based on Stevenson and Spring (2007) Based on Stevenson and Spring (2007)

Lummus et al. (2005)

Zhang et al. (2006); Nair (2005)

In the literature, flexibility dimensions found in the fields of procurement, sourcing, supply and purchasing overlap. Based on the procurement literature, purchasing flexibility is defined as flexibility focused on the ordering, delivery and receipt of goods. Procurement flexibility is defined to incorporate the whole procurement process including supply, sourcing and purchasing flexibility.

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members strive for supply chain flexibility? Why do supply chain members prioritize certain flexibility dimensions?

This research makes three contributions. First, as far as can be ascertained, this is the first study to take into account several subsequent members in a supply chain; namely, the focal firm plus its suppliers, the logistic service provider (LSP), and its retailers. Second, this investigation adds to studies that investigate supply chain flexibility. The present study explores the experiences of supply chain organizations regarding flexibility in general, and supply chain flexibility in particular. The focus is on the importance of mutuality and integration activities, such as a continuous information flow. Findings suggest that each chain member implements flexibility to fulfill the direct needs of the next-tier chain member. An overall focus on supply chain flexibility is lacking. Third, existing studies have identified a number of flexibility dimensions (e.g., Wadhwa and Rao, 2004; Stevenson and Spring, 2007), but have not provided insights into how these flexibility dimensions are experienced by organizations in a supply chain, and the reasons why certain flexibility dimensions are prioritized. The present study shows how supply chain goals, processes, activities, and relationships of supply chain organizations are linked to the priority given to certain flexibility dimensions in the short, medium and long term. The remainder of this article is organized as follows. Section 2 defines supply chain flexibility and briefly identifies the concept of supply chain flexibility dimensions from literature. That section also explains why stakeholder and network theory is used to analyze the experiences of the supply chain members regarding flexibility in the supply chain. Section 3 describes the research methodology, followed by the research findings in Section 4. The article ends with conclusions and a discussion of academic contributions and managerial implications, followed by limitations and suggestions for future research.

2. Theoretical background 2.1. Supply chain flexibility Gunasekaran et al. (2001) and Yi et al. (2011) defined supply chain flexibility as the flexibility to meet particular customer needs in the supply chain. This definition is extended to reflect the supply chain by proposing that supply chain flexibility is the ability of all members within the supply chain to adopt a chain perspective and change or react to environmental uncertainty and meet the increasing variety of customer expectations without excessive costs, time, and organizational disruptions or performance losses (based on Upton (1994), (1995); Zhang et al. (2002a)). (Supply chain) flexibility is a multidimensional concept. We identified 95 flexibility dimensions in supply chain flexibility literature (Appendix 1) (Manders et al., 2014). Based on insights from the resource-based view and the knowledge-based view, these 95 dimensions were categorized into seven business areas: product development, procurement, manufacturing, logistics, marketing, (financial) information, and organization. For each business area, the flexibility definitions are mapped on the functions and characteristics of the supply chain (Pujawan, 2004; Fantazy et al., 2009). In this way, overlapping flexibility dimensions were identified. Furthermore, definitions and dimensions that have been adopted in the literature were discerned. Based on this compilation of seven mappings, the 30 most used dimensions were identified that cover the topic of flexibility within the supply chain (see Table 1).

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2.2. Network theory, stakeholder theory, and supply chain flexibility Supply chains are, in essence, a form of a network: “a network of actors that transform raw materials into distributed products” (Handfield and Nichols (2002) cited in Ketchen and Guinepro, (2004:52)). Some of the activities may occur within one firm, while other activities may cross firm boundaries and involve various stakeholders. Network theory focuses on the relationships that an organization has with other organizations and how these relationships influence the organization's behavior and outcomes (Thorelli, 1986). Networks can amplify the resources of individual organizations through integration (Mentzer et al., 2001). Integration can occur in terms of material flows and information sharing (Frohlich and Westbrook, 2001; Chen and Paulraj, 2004). The need for flexibility is influenced by the way information is shared, as well as how the material flows are coordinated and stocks are kept (Bowersox et al., 2002; Prajogo and Olhager, 2012). Organizations are influenced, either directly or indirectly, by the activities and choices of other stakeholders in the supply chain (Handfield and Nichols, 2002; Cantor et al., 2014; Zsidisin et al., 2015). Stakeholders are any group of individuals that can affect or is affected by the achievement of an organization's objective (Freeman, 1984:46). Stakeholders along the supply chain are entities that influence a firm's supply chain policies and practices. They include the customers, retail outlets, financial institutions, governmental organizations, third-party logistics providers, authorized representatives and distributors, manufacturers and contract manufacturers, and suppliers and vendors (Co and Barro, 2009). Internal stakeholders are stakeholders within the (focal) firm, such as managers and employees, while those outside of the organization – such as suppliers, third-party logistics service providers, and governmental organizations – are defined as external stakeholders (Sarkis et al., 2010; Cantor et al., 2014). Clarkson (1995) made a further distinction between primary stakeholders and secondary stakeholders. Primary stakeholders are those who contribute to the survival of the organization. Without the participation and support of these stakeholders, which can include customers, suppliers and manufacturers, an organization cannot survive. Secondary stakeholders make a more limited contribution. These stakeholders (which include the media, governmental and non-governmental organizations) affect and are affected by the organization, but are not engaged in its economic transactions. The underlying study focuses on flexibility experiences within the supply chain. Stakeholder theory is followed by investigating the goals and activities of several primary, internal and external stakeholders in the chain, namely the suppliers, the manufacturer (focal firm), the LSP and the retailers. Following network theory, the relationships between these stakeholders in the chain are explored. The specific area of interest was how supply chain flexibility is experienced by the organizations that operate as a supply chain. By adopting stakeholder and network theory, the experiences of the organizations are covered, as well as the link among the organizations regarding the adoption of flexibility in the supply chain.

3. Methodology Much remains unknown about how supply chain members decide which flexibilities are important for their own organization, for their relationship with supply chain members, and for the entire supply chain as a whole. The need for in-depth knowledge about (supply chain) flexibility and its dimensions warrants an exploratory, case study approach (Eisenhardt, 1989; Voss et al., 2002; Yin, 2009). In order to study supply chain flexibility from a

Please cite this article as: Manders, J.H.M., et al., Exploring supply chain flexibility in a FMCG food supply chain. Journal of Purchasing and Supply Management (2016), http://dx.doi.org/10.1016/j.pursup.2016.06.001i

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J.H.M. Manders et al. / Journal of Purchasing & Supply Management ∎ (∎∎∎∎) ∎∎∎–∎∎∎

supply chain perspective and develop a more complete understanding of supply chain flexibility, it is important to assess the

3.2. Data collection and analyses

impact on the wider supply chain, across groups of inter-related organizations (Stevenson and Spring, 2007). Hence, one supply

The FMCG food supply chain in this study consists of eight companies (excluding the consumers): three suppliers, one manufacturer (the focal company), one LSP and three retailers. Names of the organizations have been kept confidential at the participants' request. Data about the supply chain framework were collected, including archival records of docum...