Abstract



The relationship between strategic response to supply chain uncertainty, supply chain relationships and firm performance – a conceptual framework

Patcharee Boonyathan

Department of Management

University of Melbourne

Email: P.boonyathan@pgrad.unimelb.edu.au

Damien Power

Department of Management

University of Melbourne

Email: Damien@unimelb.edu.au

ABSTRACT

THIS PAPER PROPOSED A CONCEPTUAL FRAMEWORK WHICH REPRESENTS THE RELATIONSHIPS BETWEEN STRATEGIC RESPONSES TO SUPPLY CHAIN UNCERTAINTY, SUPPLY CHAIN RELATIONSHIPS AND FIRM’S PERFORMANCE. IN CONTRAST TO PREVIOUS RESEARCH EMPHASIZING THE IMPLEMENTATION OF PARTNERSHIPS TO ESTABLISH TIGHT RELATIONSHIPS BETWEEN TRADING PARTNERS, THIS PAPER ADOPTS A MULTIDIMENSIONAL VIEW OF SUPPLY CHAIN RELATIONSHIPS BY STRESSING THAT DIFFERENT PATTERNS OF RELATIONSHIPS SHOULD BE ADOPTED BY FIRMS UNDER DIFFERENT LEVELS OF SUPPLY AND DEMAND UNCERTAINTY.

The conceptual framework use Lee’s (2002) model of strategic responses to different levels of supply and demand uncertainty. The framework seeks to advance the understanding of supply chain relationships in a broader context by covering supplier relationships and customer relationships in the context of Lee’s model. This framework highlights that supply chain strategy-supply chain relationship fit is associated with firm’s performance.

Introduction

RESEARCHERS GENERALLY AGREE THAT UNCERTAINTY IS A MAJOR DRIVING FORCE BEHIND THE EFFECTIVE ESTABLISHMENT OF SUPPLY CHAIN RELATIONSHIPS (BLUEDORN, JOHNSON, CARTWRIGHT, & BARRINGER, 1994; HAUNSCHILD, 1994; WILLIAMSON, 1979). WILLIAMSON (1979) CLEARLY STATED WHEN HE CLASSIFIED TYPES OF ORGANIZATIONAL RELATIONSHIPS THUS:

“the three critical dimensions for characterizing transactions are 1) uncertainty, 2) the frequency with which transactions recur, and 3) the degree to which durable transaction-specific investments are incurred. Of these three, uncertainty is widely conceded to be a critical attribute” (Williamson, 1979 page 239)

Haunschild (1994) added that uncertainty prompts firms to search for information from others. Interorganizational relationships are recognized as a prime source of such information, establishing connections that will allow better information accessibility to facilitate decision making under uncertain conditions. The literature employs the term adaptability or stability to explain relationships that are caused by uncertainty (Oliver, 1990). This is because under uncertainty, firms establish interorganizational relationships to be able to adaptable to the environment and to be able to predict environmental change and promote stability in changing environments (Haunschild, 1994; Ven & Walker, 1984).

While uncertainty is claimed to be a major driving force for the management of supply chain relationships, there has been limited amount of work that investigates the relationship between them particularly in relation to firm’s performance. Recently, Donk and Vaart (2003), in a review of supply chain integration literature, state;

“While these authors contribute to our knowledge of integration and integrative practices, little has been done by them or others to better understand the prevailing business conditions for certain integrative practices.” (Donk & Vaart, 2005 page 97)

There has been some work done exploring the impact of the nature of supply chain relationships on firm’s performance, but outside the context of the strategic response to levels of uncertainty (Carra & Pearson, 1999; Corbett, Blackburn, & Wassenhove, 1999; Dyer, Cho, & Chu, 1998; Groves & Valsamakis, 1998). The results from these studies have been substantially different, and has so far not been sufficient to assist decision making in supply chain management.

Managing supply chain relationships includes both managing upstream (supplier) and downstream (customer) relationships (Tan, Kannan, & Handfield, 1998). Some (Beth, Burt, Copacino, Gopal, & al, 2003) have argued that supply chain management should concentrate on demand management and firms should focus on managing customer relationships. However, many studies based on empirical data have found that firms should equally focus on managing supplier involvement because supplier performance plays its role in shaping firm’s performance (Stuart, Deckert, McCutcheon, & Kunst, 1998; Vonderembse & Tracey, 1999).

Accordingly, this research will examine the relationship between strategic response to supply chain uncertainty, nature of supply chain relationships and firm’s performance. By examining supply chain relationships in relation to supply chain strategy, the study seeks to advance the understanding of supply chain relationships in a broader context by covering both supplier relationship and customer relationship alignment.

The remainder of this paper is structured as follows: In the next section, the paper will review the theoretical background of 1. Uncertainty which is divided into demand uncertainty and supply uncertainty, 2. The strategic responses to supply chain uncertainty, and 3. Supply chain relationship which is divided to pattern of supply relationships and pattern of demand relationships. After that, this paper will outline the research model and propositions. Then, the paper will present the conclusion.

Supply Chain Uncertainty

DEMAND UNCERTAINTY

A common theme in the literature is that internal demand fluctuations are the dominant source of uncertainty in supply chains (Hau L. Lee, V. Padmanabhan, & Seungjin Whang, 1997; Hau L Lee, V Padmanabhan, & Seungjin Whang, 1997; Mason-Jones & Towill, 1998; Taylor, 2000; Towill, Naim, & Wikner, 1992). Forrester developed the notion of amplification of behaviour from his feedback theory study in 1961. Feedback theory explains that information influences decision-making under systemic conditions, while simultaneously generating the actions intended to modify those system conditions (Forrester, 1968).

Internal demand uncertainty occurs when information signals observed by supply chain members vary from the actual consumer demand. The major cause of variation is the overreaction of each decision maker in response to demand information (Hau L. Lee et al., 1997; Sterman, 1989; Towill et al., 1992). For example, upstream members receive an order placed by a downstream member when that order has been continually adjusted and varied from the consumer’s demand based on the amount of safety stock added due to ordering policies. Higher number of decision makers and longer lead-time will result in higher demand fluctuations (Towill et al., 1992).

Demand uncertainty is also partially affected by trade deals that create forward buying, order batching that usually leads to a flood of product at one time in a period, and shortage gaming (e.g. retailer places extra orders based on their anticipation that suppliers will be in short supply (Hau L. Lee et al., 1997; Hau L Lee et al., 1997)).

Supply Uncertainty

On the supply side, Wilding (1997b) demonstrates internal supply uncertainty can be generated from parallel interactions when members at the same tier interact because of supply disruption. Researchers also indicate that supply is uncertain because of the supplier performance. Hau L. Lee et al., 1997; Sterman, 1989; D. R. Towill et al., 1992.

In 1980, Buffa proposed in the review of research in operations management that uncertain supply would be one of the issues for future research due to the scarcity of resource (Buffa, 1980). Many researches since then have been dealing with price, delivery time and quality variability on the supply side (e.g. Chen & Paulraj, 2004; Weng & McClurg, 2003). The use of partnership, trust and alliance has been promoted in several studies (Corbett et al., 1999; Hartley, 2000; Kotzab & Teller, 2003; Maloni & Benton, 1997; McLaren, Head, & Yuan, 2002a; Spekman, Jr, & Ntgr, 1998).

Strategic Response to Supply Chain Uncertainty

SUPPLY CHAIN STRATEGY HAS RECENTLY BEEN PROMOTED AS A STRUCTURAL APPROACH TO DEVELOPING DIFFERENT RESPONSES TO VARYING DEGREES OF UNCERTAINTY BY DIFFERENT GROUPS OF RESEARCHERS. FISHER IN 1997 PROPOSED A MODEL FOR MATCHING SUPPLY CHAIN STRATEGIES BASED ON PRODUCT TYPE. FISHER CLASSIFIED PRODUCTS INTO TWO CATEGORIES, FUNCTIONAL PRODUCTS AND INNOVATIVE PRODUCTS. HE REFERS TO FUNCTIONAL PRODUCTS AS THOSE WITH PREDICTABLE DEMAND. AS SUCH, SUPPLY CHAIN STRATEGY SHOULD BE FOCUSED ON COST MINIMIZATION. ON THE OTHER HAND AN INNOVATIVE PRODUCT IS A PRODUCT THAT RESPONDS QUICKLY TO UNPREDICTABLE DEMAND, AND SUPPLY CHAIN STRATEGY THEREFORE SHOULD BE DESIGNED TO BE RESPONSIVE. SUPPLY CHAINS WITH INNOVATIVE PRODUCTS WOULD BE BETTER SERVED TO APPLY MODULAR DESIGNS, POSTPONEMENT, AND/OR DELAY DIFFERENTIATION APPROACHES TO CREATE THE FLEXIBILITY WITHIN A NETWORK.

Mason-Jones et al., (2000) move along the same line as Fisher by focusing on demand amplification (“bullwhip effect”) modelled by Forrester (1961) and Lee (1997). They divide the market using different product types and propose that supply chain strategy should ultimately be determined by market place requirements.

“..understanding the particular characteristics of the product type, marketplace requirements and management challenges can the correct supply chain strategy be designed to ensure optimal performance and to establish competitive advantage” (Mason-Jones, Naylor, & Towill, 2000 page 4063).

Under different market requirements, they propose that firms’ strategy should be lean, agile or leagile.

Based on Fisher and Mason-Jones et al., Christopher and Towill (2002) extend this concept based on case data drawn from literature in examining the elements influencing supply chain strategy. They suggest three simple dimensions to shape the strategy which are product, demand and lead time.

Figure 1: Fisher’s and Lee’s model of supply chain strategy

Source Fisher, 1997 and Lee, 2002

A recent work by Lee (2002) suggests that;

“A simple but powerful way to characterize a product when seeking to devise the right supply chain strategy is the uncertainty framework” (Lee, 2002 page 106).

The models presented by Fisher, Mason-Jones et al., and Christopher and Towill implied that supply chain strategy should be formulated based on levels of demand uncertainty. Lee has expanded on Fisher works by incorporate level of supply uncertainty. Lee’s model emphasized four strategic choices of efficient supply chain, responsive supply chain, risk-hedging supply chain and agile supply chain as shown in figure 3.

In Lee’s model, the level of demand uncertainty is indicated by the difficulty to forecast, level of demand variability, period of time product can be in market (short-long season), inventory cost, profit margins, product variety, volumes per stockkeeping unit, stock out cost and the obsolescence. Level of supply uncertainty is justified by supply characteristics. Low supply uncertainty less breakdowns, stable and higher yields, less quality problems, more supply sources, reliable supplier, less process changes, less capacity constraint, easier to change over, flexible and dependable lead time.

According to Lee (2002), under low level of demand and supply uncertainty, supply chain benefits the most from creating the highest cost efficiencies through the use of efficient strategy. Facing with low level of demand but high supply uncertainty, supply chain benefits from dealing with supply variation. Supply chain under this environment should share resources to reduce the risk of supply disruption through the use of risk hedging strategy. Firms with high level of demand but low supply uncertainty should aim at being flexible to the customer needs on product variety and speed of delivery through the use of responsive strategy. Firms that face both demand and supply uncertainty benefits from simultaneously manage themselves to be able to response to customers need and be able to manage risk on the variation on supply side through agile supply chain strategy.

Supply Chain Relationship

PATTERNS OF SUPPLY RELATIONSHIP

To explain the characteristics of different supply relationship patterns, the literature has defined the supply chain as a network of suppliers, manufacturers, distributors and customers. Thorelli (1986) noted that a supply chain network is formed when

“two or more organizations are involved in a long term relationship” (page 37).

According to Batt (2004), a supply chain network structure can be a complex set of systems, subsystems, operations, activities and interrelationships belonging to its various members. These could include suppliers, carriers, manufacturing plants, distribution centres, retailers, and consumers. The networks of supply chain form inter-functional and inter-organizational relationships referred to as “Supply Chain Partnerships” (Dyer et al., 1998; Neuman & Samuels, 1996; Stewart, 1997; Stuart et al., 1998) “Supply Chain Value Networks” (Burgess, Gules, & Tekin, 1997) “Strategic Alliances” (Chandra & Kumar, 2000), and “Value-added partnerships” (Kotzab & Teller, 2003; McLaren, Head, & Yuan, 2002b).

Lockamy & Smith (2000) claim that these supply chain relationships are often described in terms of the level of integration, interconnectedness, or interdependence among the trading partners within the chain. In recent years, many researchers (Corbett et al., 1999; Helper, 1991; Magretta, 1998; Stuart et al., 1998) have concentrated on the partnership level in a supply chain. For example, the issues of supply chain co-ordination and collaboration. Dyer et al (1998), Williams et al., (2002) and Tyndall (1998) identify characteristics in supply chain relationships by focusing on the nature of alliances between supply chain members. At the lowest level of a partnership, the trading partners rely on what Tyndall (Tyndall, 1998) calls open-market negotiations. Under open-market negotiations, market structure and competitive imperatives, not management initiatives, determine the nature of the relationships within the supply chain. Management's primary role is to ensure that the firm has the capacity to meet the transactional requirements of its trading partners. Williams (Williams, Esper, & Ozment, 2002) advocated that at this level, firms benefit from efficiency creation and cost saving.

In the second level of partnership, trading partners formalize their cooperation (Spekman et al., 1998; Tyndall, 1998). Within the requirements of the new competition, a shift in the level of intensity among trading partners emerges. Organizations depart from open-market transactional patterns and construct specialized transactional processes that better serve their needs. Spekman, et al. (1998) claim that co-operation is the starting point for supply chain management.

The next level of partnership is co-ordination. In this third level of partnership, the trading partners create closer relationships to simplify supply chain operations (Lockamy & Smith, 2000). The primary requirements are to manage supply chain complexity and process interdependency (Li, Kumar, & Lim, 2002). However, trading partners can co-operate and co-ordinate certain activities but still not behave as true partners. Again, this evolution is a necessary, but not sufficient condition for total supply chain management.

Collaboration level is the stage where total supply chain management efforts are focused on information sharing between businesses. Collaborative behaviour engages partners in joint planning and a large measure of integration processes (Spekman et al., 1998). Management devotes considerable energy to building trusting supply chain relationships and to negotiating equitable arrangements for sharing the burdens and rewards of supply chain improvements (Lockamy & Smith, 2000).

Others (Corbett et al., 1999; Spekman et al., 1998) claim that while most business organizations operate at the co-operation and co-ordination level with key suppliers and customers, there are only a few businesses capable of joining forces to seek network savings at the collaboration stage. This is because moving from an adversarial to collaborative supply chain relationship is very difficult. The transition to higher levels of relationship requires changes in the way business is conducted, the technology that can facilitate flows of information, mindset, culture and strategic orientation. These changes can be overwhelming. However, without these changes, the alliance is nothing more than a conventional independent operation.

Pattern of Demand Relationship

Recent studies consider push and pull as a strategic option to managing demand relationships. The term push and pull were originally recognized as a strategy in manufacturing production systems (Spearman & Zazanis, 1989; Stevenson, 2002). In a push system, production planning is managed by an MRP system. The production line makes to a number of pre-determined goals, and production drives sales efforts (Hull, 2001). Finished parts or unsold goods will be placed in inventory. Early idea on pull production began from “kanban” and “just in time” concepts. Production starts just when customer needs are identified (de Treville, Shapiro, & Hameri, 2004). Kanban cards and bin systems are used to communicate the demand of upstream operations. Just in time seeks to eliminate waste in a production process such as excess inventory, lead time and set-up time reduction (de Treville et al., 2004).

The scope of push and pull has been broadening from being detailed as a production strategy to customer relationship strategy as individual organizations extend the concept to the supply chain. Push and pull represent the pattern of customer relationships by the explanation of how customer and demand in the supply chain are managed (de Treville et al., 2004). The concept is now widely studied covering both physical goods production industry and service industries (see for example (Hull, 2001; Metters & Vargas, 2000). In push, customer demand is anticipated by building to a forecast. Stock buffers are used to response to variability of demand. Accurate forward planning is needed to make the strategy fully effective. Metters (2000) has added that a push strategy is best suited when firms focus on being cost leaders in their competitive markets.

Unlike push, pull systems refer to customer relationship structures that are driven by customer demand and market changes. In a pull strategy, the supply chain is configured to respond promptly and directly to customer requirements. Firms using pull strategies seek agility, adaptability and alignment (Beth et al., 2003). Reliable performance of suppliers is needed for a pull strategy to be successful (de Treville et al., 2004). Hull (2001) advocated that firms using pull orientation focus on providing superior customer service at what would be expected to be a higher cost.

Hybrid strategies refer to the integration of push and pull using the concept of a decoupling point. Decoupling points separate the boundary of push and pull, where the boundary is claimed to be positioned based on the longest time possible that customers can wait for their demand to be fulfilled. Hull (2001) noted that a decoupling point is where strategic inventory is placed. Supply chain strategy can be adjusted to suit the type of business by varying the position of the decoupling point (Ben Naylor, Naim, & Berry, 1999).

A Conceptual Model

THIS RESEARCH WILL STUDY THE FOLLOWING RESEARCH QUESTIONS

• Is Lee’s model a valid representation of the relationship between strategic responses to supply chain uncertainty?

• What is the relationship between different strategic responses to supply chain uncertainty and the nature of supply chain relationships?

• Does the nature of supply chain relationships impact firm performance?

• Do particular supply chain strategies (as represented by Lee) impact firm performance?

• Does fit between supply chain strategy and particular supply chain relationships impact performance?

The above set of research questions leads to the development of the five following research focuses. Figure 4 presents the overall research model and propositions.

Research focus 1: Validation of Lee’s Model

Research focus 2: Relationship between supply chain strategies and the nature of supply chain relationships

Research focus 3: Relationship between the type of supply chain relationship and firm performance

Research focus 4: Nature of the effect of particular supply chain strategies on firm performance

Research focus 5: Effect of fit between supply chain relationship type with supply chain strategy and firm’s performance

Figure 2: Research model with propositions

Research Focus 1: Validation of Lee’s Model

Researchers suggest that supply chain strategies should be dynamically matched to the level of uncertainty to maximize levels of competitiveness (Aitken, Childerhouse, & Towill, 2003; Christopher & Towill, 2002; Fisher, 1997; Mason-Jones et al., 2000). Fisher (1997) originally proposed a conceptual model for matching supply chain strategies and demand uncertainty. Fisher classified products into two categories, functional products and innovative products. He identified different aspects of demand uncertainty including product life cycle, product variety, average stock out rate, average forced end of season markdown price, lead time, contribution margin and average margin of error in the forecast. Firms with low demand uncertainty (functional products) should focus on creating efficient supply chains through cost reduction. However, firms with high demand uncertainty (innovative products) should make investments in a way that will make their supply chain responsive. Fisher’s model influences many following studies. A number of conceptual models on strategic response to demand uncertainty have been introduced. For example, Mason-Jones et al., (2000) divide the market using different product types and propose that supply chain strategy should ultimately be determined by market place requirements. Christopher and Towill (2002) suggest three simple dimensions to shape the strategy which are product, demand and lead time.

Lee (2002) expanded Fisher’s work to include not only demand uncertainty but also supply uncertainty. Lee’s model identified four types of supply chain strategies called efficient supply chain, responsive supply chain, risk hedging supply chain and agile supply chain. Fisher’s model made a significant contribution by specifying the need to tailor supply chain strategy according to demand uncertainty and identifying aspects of demand uncertainty, however Lee made the model more comprehensive by incorporating aspects of supply uncertainty. Unfortunately, very little work has attempted to validate the content of either of the models. Aitken et al., (2003) attempted to verify Fisher’s model using a case study however only focused on product life cycle aspects. They found that product life cycle has a significant impact on supply chain strategy. Li and Brien (2001) developed a simulation model to analyse the relationship between product types and supply chain strategies. The result partially supported Fisher’s model. Empirical work to examine issues of strategic response to supply chain uncertainty therefore seems to be absent from the literature. Thus, the first focus of this research is the testing and validation of Lee’s model.

Q1 Does Lee’s model represent adequately the relationship between supply chain strategic responses to supply chain uncertainty?

Figure 3: Validation of Lee’s Model

Proposition 1a: Firms with low levels of demand and supply uncertainty emphasise efficient supply chain strategies

Proposition 1b: Firms with high levels of demand uncertainty and low supply uncertainty emphasise responsive supply chain strategies

Proposition 1c: Firms with low levels of demand uncertainty and high supply uncertainty emphasise risk hedging supply chain strategies

Proposition 1d: Firms with high levels of demand and supply uncertainty emphasise agile supply chain strategies

Research Focus 2: Relationship between supply chain strategies and the nature of supply chain relationships.

The supply chain management literature presents two opposing views on how firms should manage their supply chain relationships. The first view claims that firms should focus on building tight relationships. Researchers in this group (e.g. Corbett et al., 1999; Helper, 1991; Hoyt & Huq, 2000) believe that firms should seek to manage their suppliers by creating long term and close relationships known as “partnerships” or “alliances”. This is often justified on the basis that it will allow them to be able to respond to dynamic environmental conditions. For example, Helper (1991) explored the transformation of supplier relations in U.S. automakers from the 1980s to 1990s. Using an empirical survey, her study suggests that firms should abandon the conventional idea of short term cost reduction and promote long term competitiveness by building long-term contracts, sharing information, cooperatively designing products and jointly solving problems.

The second view argues that firms should align their supply chain relationships with supply chain strategy. Researchers like Spekman et al., (1998) and Dyer et al. (1998) believe that firms benefit from strategically segmenting their suppliers and customers and manage the different groups using different relationship models. By using supplier segmentation, firms can enjoy the benefits of cost saving and flexibility at the same time. Wisner (2000) added that key suppliers are referred to as groups of suppliers that provide more strategic value to firm’s competitive position than general suppliers. A conceptual framework developed by Watts et al., (1992) claimed that buyer-seller relationships need to be consistent with competitive strategy. The second research focus proposes that under different supply chain environments taking into account supply and demand uncertainty, firms emphasize different types of supply chain relationship.

Q2: Do the different supply chain strategies employed impact on the nature of supply chain relationships.

Figure 4: Relationship between supply chain strategies and the nature of supply chain relationships

Q2.1 Do the different supply chain strategies employed lead to different types of supplier relationship?

Proposition 2.1a: The degree that firms emphasise efficient supply chain strategies is related to the extent to which firms utilise particular supplier relationships

Proposition 2.1b: The degree that firms emphasise responsive supply chain strategies is related to the extent to which firms utilise particular supplier relationships

Proposition 2.1c: The degree that firms emphasise risk hedging supply chain strategies is related to the extent to which firms utilise particular supplier relationships

Proposition 2.1d: The degree that firms emphasise agile supply chain strategies is related to the extent to which firms utilise particular supplier relationships

Q2.2 Doe the different supply chain strategies employed lead to different types of customer relationship?

Proposition 2.2a: The degree that firms emphasise efficient supply chain strategies is related to the extent to which firms utilise particular customer relationships

Proposition 2.2b: The degree that firms emphasise responsive supply chain strategies is related to the extent to which firms utilise particular customer relationships

Proposition 2.2c: The degree that firms emphasise risk hedging supply chain strategies is related to the extent to which firms utilise particular customer relationships

Proposition 2.2d: The degree that firms emphasise agile supply chain strategies is related to the extent to which firms utilise particular customer relationships

Research focus 3: Relationship between the type of supply chain relationship and firm performance

Although many researchers propose that partnership based relationships are superior to arm’s length (Helper, 1991; Hoyt & Huq, 2000), an empirical study by Groves and Valsamakis (1998) on the performance comparison between different types of supply chain relationship (partnership, semi-adversarial, adversarial) found no link between tightened relationships and increased performance. That is, the study provides no evidence that partnerships ensure better performance than semi-adversarial and adversarial arrangements. The third research focus will examine whether the type of supply chain relationship is indeed associated with firm’s performance. In fact it will extend the focus of this earlier study by looking at both supplier and customer relationships.

Q3: Do particular types of supply chain relationship lead to superior firm performance

Figure 5: Relationship between the type of supply chain relationship and firm performance

Q3.1: How do different types of supplier relationship impact firm performance?

Proposition 3.1: Particular types of supplier relationship will affect firm performance

Q3.2: How do different types of customer relationship impact firm performance?

Proposition 3.2: Particular types of customer relationship will affect firm performance

Research focus 4: Nature of the effect of particular supply chain strategies on firm performance.

The concept of fit is grounded in contingency theory thus;

“organizations must align their internal aspects of their organization with their environment” (Bluedorn et al., 1994 page 241).

Fit in strategic management refers to an alignment of organization strategy and related organizational components (Bluedorn et al., 1994; Venkatraman & Camillus, 1984). Venkatraman and Camilus (1984) identify three domains of fit: external, internal and integrated. External fit concerns a firm’s strategic response to the environment through strategy formulation. Internal fit relates to fit between a firm’s strategy and its structure through strategy implementation. Integrated fit concerns both external fit and internal fit. Researchers argue that fit is needed to ensure a firm’s higher performance (Bluedorn et al., 1994; Bruce, 1998; Venkatraman & Camillus, 1984). The fourth research focus will examine the impact of external fit between supply chain uncertainty and supply chain strategy on firm’s performance as displayed in figure 8.

Q4: How do particular supply chain strategies matched to environmental conditions impact firm performance?

Figure 6: Nature of the effect of particular supply chain strategies on firm performance

Proposition 4a: Fit between an efficient supply chain strategy and particular environmental conditions positively impacts firm performance

Proposition 4b: Fit between a responsive supply chain strategy and particular environmental conditions positively impacts firm performance

Proposition 4c: Fit between a risk hedging supply chain strategy and particular environmental conditions positively impacts firm performance

Proposition 4d: Fit between an agile supply chain strategy and particular environmental conditions positively impacts firm performance

Research focus 5: Effect of fit between supply chain relationship type with supply chain strategy and firm’s performance

The fifth research focus will investigate the impact of internal fit between supply chain strategy and the nature of supply chain relationships on firm’s performance. The supply chain literature theoretically proposes that firm benefit from aligning their supply chain relationships with supply chain strategy (Dyer et al., 1998; Fisher, 1997). Fisher (1997) suggests that different supply chain strategy requires firms to interact differently. A tight relationship is not an optimum approach for firms with price based strategies that engage in cost competition, however it is critical for long term success in firms with non price based strategies that compete through speed and flexibility (Fisher, 1997; Watts, Kim, & Hahn, 1992). While fit between supply chain relationship types with supply chain strategy can be expected to benefit organizations, there have been a limited number of research studies of the effect of such fit on firm performance. The fifth research focus will investigate the effect of fit between supply chain relationship type with supply chain strategy and firm’s performance as shown in figure 9.

Q5: How does the fit between types of supply chain relationship and supply chain strategy impact firm performance?

Figure 7: Effect of fit between supply chain relationship type with supply chain strategy and firm’s performance

Q5.1: Does fit between particular types of supplier relationship and supply chain strategy impact firm performance?

Proposition 5.1: Fit between supply chain strategy and particular types of supplier relationship will positively impact firm performance

Q5.2: Does fit between particular types of customer relationship and supply chain strategy impact firm performance?

Proposition 5.2: Fit between supply chain strategy and particular types of customer relationship will positively impact firm performance

Conclusion

THIS PAPER PROPOSES A CONCEPTUAL FRAMEWORK WHICH REPRESENTS THE RELATIONSHIP BETWEEN STRATEGIC RESPONSE TO SUPPLY CHAIN UNCERTAINTY, SUPPLY CHAIN RELATIONSHIPS AND FIRM PERFORMANCE. THE FOCUSES OF THE MODEL ARE FIRST THE VALIDATION OF LEE’S MODEL TO EXAMINE WHETHER LEE’S MODEL REPRESENT ADEQUATELY THE RELATIONSHIP BETWEEN SUPPLY CHAIN STRATEGIC RESPONSES TO SUPPLY CHAIN UNCERTAINTY. SECOND, THE RELATIONSHIP BETWEEN SUPPLY CHAIN STRATEGIES AND THE NATURE OF SUPPLY CHAIN RELATIONSHIPS. THIRD, THE RELATIONSHIP BETWEEN THE TYPE OF SUPPLY CHAIN RELATIONSHIP AND FIRM PERFORMANCE. FORTH, THE NATURE OF THE EFFECT OF PARTICULAR SUPPLY CHAIN STRATEGIES ON FIRM PERFORMANCE. AND FIFTH, THE EFFECT OF FIT BETWEEN SUPPLY CHAIN RELATIONSHIP TYPE WITH SUPPLY CHAIN STRATEGY AND FIRM’S PERFORMANCE. BY EXAMINING SUPPLY CHAIN RELATIONSHIPS IN RELATION TO SUPPLY CHAIN STRATEGY THE FRAMEWORK HIGHLIGHTS THAT SUPPLY CHAIN RELATIONSHIPS NEED TO BE ADDRESSED IN BROADER CONTEXT BY COVERING BOTH SUPPLIER RELATIONSHIP AND CUSTOMER RELATIONSHIP ALIGNMENT.

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