Structural drivers of upstream supply chain complexity and the frequency of supply chain disruptions

• DOI: http://doi.org/10.1016/j.jom.2014.12.004
• Published date: 01 May 2015
• Author: Christoph Bode,Stephan M. Wagner
• Date: 01 May 2015

Journal of Operations Management 36 (2015) 215–228

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

Structural drivers of upstream supply chain complexity and the

frequency of supply chain disruptions

Christoph Bodea,∗, Stephan M. Wagner b,1

aBusiness School, University of Mannheim, Schloss Schneckenhof Ost, 68131 Mannheim, Germany

bDepartment of Management, Technology, and Economics, Swiss Federal Institute of Technology Zurich, Weinbergstrasse 56/58, 8092 Zurich, Switzerland

article info

Article history:

Received 17 December 2012

Received in revised form

29 December 2014

Accepted 31 December 2014

Available online 9 January 2015

Accepted by Thomas Younghoon Choi

Keywords:

Supply chain disruption

Supply chain risk

Supply chain complexity

Count regression

abstract

A great deal of research has focused on supply chain risk management, but the question “Which supply

chain characteristics increase the frequency of supply chain disruptions?” has not received much atten-

tion from empirical research. This is a relevant question, because firms seek stability in their operations,

and therefore managers need to know how the structure of their supply chains affects the occurrence

of disruptions. The present study addresses this issue with a specific focus on upstream supply chain

(supply-side) disruptions. Drawing on the literature on supply chain complexity, we devise and test a

model that predicts the frequency of supply chain disruptions based on a multi-dimensional concep-

tualization of upstream supply chain complexity. Not only do the empirical findings suggest that all of

the three investigated complexity drivers – horizontal, vertical, and spatial complexity – increase the

frequency of disruptions, but also that they interact and amplify each other’s effects in a synergistic

fashion.

© 2015 Elsevier B.V. All rights reserved.

1. Introduction

“If you are in supply chain management today, then complex-

ity is a cancer you have to fight.” This statement from a former vice

president of supply chain operations from Coca-Cola North America

(Gilmore, 2008), expresses the commonly held belief both among

practitionersand scholars that supply chain complexity is one of the

most pressing problems in modern supply chains and a key imped-

iment to performance (Bozarth et al., 2009; Choi and Krause, 2006;

Mariotti, 2008). High levels of complexity in the inter-connected

flows of materials, funds, and information between firms have not

only been blamed for decreasing supply chain efficiency, but also

identified as a key precursor of supply chain disruptions (Chopra

and Sodhi, 2004; Craighead et al., 2007; Narasimhan and Talluri,

2009). For example, Toyota’s recent product recall crisis has been

explained, at least in part, as the result of a surge in supply chain

complexity (Cole, 2010).

Supply chain disruptions have the potential to cause heavy

short- and long-term losses in shareholder value, sales, and rep-

utation; they may also damage relationships between customers

∗Corresponding author. Tel.: +49 621 181 1655; fax: +49 621 181 1653.

E-mail addresses: bode@uni-mannheim.de (C. Bode), stwagner@ethz.ch

(S.M. Wagner).

1Tel.: +41 44 632 3259; fax: +41 44 632 1526.

and suppliers (Hendricks and Singhal, 2003; Sheffi, 2005). Con-

sequently, many scholars have advised firms to tackle the risk of

supply chain disruptions as aggressively as they do financial risks

and to reassess their supply chain designs from a risk perspec-

tive (Sodhi et al., 2012). So far, however, relatively little is known

aboutthe link between the structural characteristics of supply chains

and the risk of disruptions. From an empirical perspective, only a

few studies have examined this relationship. Papadakis (2006), for

example, suggested that when a disruption strikes, make-to-order

(MTO) supply chains are more vulnerable than make-to-forecast

(MTF) supply chains are. Hendricks et al. (2009) found negative

stock market reactions to supply chain disruptions to be more

severe for firms that are more geographically diversified, less ver-

tically related (i.e., high level of outsourcing), and equipped with

little operational slack. Using a similar methodology, Schmidt and

Raman (2012) reported that supply chain disruptions are more

damaging to shareholder value if shareholders attribute the disrup-

tion to factors within the focal buying firm or its supplier network.

All three studies identify several supply chain characteristics that

affect a firm’s losses if a disruption actually occurs. While these

are valuable insights, they address only the magnitude of impact

of disruptions (Holton, 2004). The other important element of risk

remains largely unexplored: How frequent (or likely) are supply

chain disruptions, given a certain supply chain structure? This is an

important question, because firms seek stability in their operations

(Katz and Kahn, 1978; Thompson, 1967), and therefore managers

http://dx.doi.org/10.1016/j.jom.2014.12.004

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