Linking Supply Chain Network Complexity to Interdependence and Risk-Assessment: Scale Development and Empirical Investigation

Abstract

Concepts like supply chain network complexity, interdependence and risk assessment have been prominently discussed directly and indirectly in management literature over past decades and plenty of frameworks and conceptual prescriptive research works have been published contributing towards building the body of knowledge. However previous studies often lacked quantification of the findings. Consequently, the need for suitable scales becomes prominent for measuring those constructs to empirically support the conceptualized relationships. This paper expands the understanding of supply chain network complexity (SCNC) and also highlights its implications on interdependence (ID) between the actors and risk assessment (RAS) in transaction relationships. In doing so, SCNC and RAS are operationalized to understand how SCNC affects interdependence and risk assessment between the actors in the supply chain network. The contribution of this study lies in developing and validating multi-item scales for these constructs and empirically establishing the hypothesized relationships in the Indian context based on firm data collected using survey–based questionnaire. The methodology followed included structural equation modeling. The study findings indicate that SCNC had significant relationship with interdependence, which in turn significantly affected risk assessment. This study carries both academic and managerial implications and provides an empirically supported framework linking network complexity with the two key variables (ID and RAS), playing crucial roles in managerial decision making. This study contributes to the body of knowledge and aims at guiding managers in better understanding transaction relationships.

A framework for understanding managerial responses to supply chain complexity

“…In terms of the socio-political dimension, the literature recognises that both internal and external integration solutions can improve the performance of the supply chain (Chakraborty, 2016;De Leeuw et al, 2013;Flynn et al, 2010;Frohlich and Westbrook, 2001;Masson et al, 2007;Novak and Eppinger, 2001;Sarpong, 2014;Schoenherr and Swink, 2012;Yang et al, 2007). The external integration aspect of supply chain management is a well-developed area of research, therefore, its role in managing complexity is logical and expected.…”

“…Higher levels of interconnectedness in terms of external integration can generate "emergent behaviour that cannot be predicted from the individual system components" (Isik, 2010, p. 3683) leading to behaviour that could appear to be "chaotic or unpredictable" (Wu et al, 2013, p. 657). Chakraborty (2016), however, highlights the positive aspect of increasing complexity as it can give rise to increasing levels of interdependence between supply chain members. Emergent complexity due to changes in internal integration was not discussed in any of the papers except for Bode and Wagner (2015), who suggested that an increase in number of departments could lead to higher degrees of complexity.…”

An integrated approach for supply chain risk management

“…The heightened risks in increasingly complex supply chain networks have brought risk management to the forefront of research and managerial efforts. Supply Chain Risk Management (SCRM) refers to the management of supply chain risks through approaches coordinated among supply chain partners (Tummala & Schoenherr, 2011;Toyfur & Pribadi, 2016;Chakraborty, 2015;Komza, 2017).…”