Assessing the current state of supply chain volatility: development of a benchmarking instrument

Nitsche, Benjamin; Straube, Frank; Verhoeven, Peter

doi:10.1590/0103-6513.20190022

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Thematic Section - Operations Management & Social Good • Prod. 29 • 2019 • https://doi.org/10.1590/0103-6513.20190022 copy

Assessing the current state of supply chain volatility: development of a benchmarking instrument

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

Paper aims

The study proposes a benchmarking instrument that enables managers to critically assess the volatility management performance of a product’s supply chain to identify areas on which to focus when managing supply chain volatility (SCV).

Originality

To the best of the authors’ knowledge, the paper is the first to develop an instrument to assess the current state of SCV management of a product’s supply chain.

Research method

The benchmarking instrument is based on volatility performance data from 87 manufacturing firms. Additionally, a confirmatory case study in the automotive industry is performed to demonstrate the applicability of the instrument.

Main findings

An industry benchmark is conducted that provides valuable information for practitioners about the current state of volatility management performance in the manufacturing sector. This is of high importance since performance data generated by the focal firm itself are more valuable if they can be put into context with the performance data of competitors.

Implications for theory and practice

Since SCV can originate from multiple sources, a case-based evaluation of of SCV of a product’s supply chain is necessary. By applying the instrument, managers will be enables to initiate purposeful strategies that focus on the most pressing sources of SCV.

Keywords
Supply chain volatility; Benchmarking; Performance assessment; Automotive industry

	Variable name	Type of variable	Description
Intra-organizational misalignment	OA₁	ℤ [1;7]	level of planning process formality 1: no formalized planning process 4: moderately formalized planning process 7: internally completely formalized planning process
	OA₂	ℤ [1;7]	level of promotions planning integration 1: no promotions and price changes planned 4: issues like promotions and price changes are planned and considered but insufficiently performed 7: issues like promotions and price changes are planned and considered sufficiently throughout the whole organization
	OA₃	ℤ [1;7]	efficiency of information availability and exchange 1: Information is only partially available including many redundancies 4: partially centralized information storage; moderate friction losses in information flows 7: people receive only information they actually need; no friction losses in cross-departmental information flows
	OA₄	ℤ [1;7]	level of planning efficiency 1: no alignment of plans throughout the company 4: due to rudimentary alignment of plans, frequent re-planning is required 7: due to sufficient alignment of plans, re-planning becomes very rare
	OA₅	ℤ [1;7]	level of assignment of roles and responsibilities 1: no concrete assignment of roles and responsibilities with regards to planning tasks and activities 4: roles and responsibilities are clearly defined but not yet successfully implemented; no dedicated planning process owner; people partially held accountable for their plans and performance 7: dedicated planning organization responsible for planning process owner and role descriptions; planning organization entirely aligned with the business
	OA₆	ℤ [1;7]	level of integration of planning systems of different business functions 1: heterogeneous spreadsheets existent and in use 4: information from other systems need to be manually entered or uploaded (no interfaces) 7: one integrated system with one single version of truth
Inaccurate forecasting	MAPE1f	ℝ [0;1]	1-month-ahead MAPE (family level)
	MAPE3f	ℝ [0;1]	3-month-ahead MAPE (family level)
	MAPE6f	ℝ [0;1]	6-month-ahead MAPE (family level)
	MAPE1v	ℝ [0;1]	1-month-ahead MAPE (product variant level)
	MAPE3v	ℝ [0;1]	3-month-ahead MAPE (product variant level)
	MAPE6_V	ℝ [0;1]	6-month-ahead MAPE (product variant level)

	Variable name	Type of variable	Description
Long lead times	LTS_i	ℝ [0;∞[	supplier lead time of supplier i in days
	LTT_i	ℝ [0;∞[	transportation lead time from supplier i in days
	LTP	ℝ [0;∞[	production lead time in days
	LTC_j	ℝ [0;∞[	delivery lead time to customer j in days
Variable lead times	OTDS_i	ℝ [0;1]	on-time delivery rare of supplier i
	OTDC_j	ℝ [0;1]	on-time delivery rate to customer j
	SP_i	ℝ [0;∞[	time window of arrival of majority of goods (95%) of supplier i (longest time span − shortest time span between ordering and receiving a good)

	Variable name	Type of variable	Description (self-assessment, indicate to what extend you agree to the following statement, 1(totally disagree) to 7 (totally agree)
Erratic behavior of customers	EBC₁	ℤ [1;7]	In general, our customer demand is very hard to predict.
	EBC₂	ℤ [1;7]	Market trends are difficult to monitor because customer preferences change constantly.
	EBC₃	ℤ [1;7]	Our customers often adjust already placed orders.
	EBC₄	ℤ [1;7]	Customer loyalty to our brand is relatively low and the customer changes its preferences constantly.
	EBC₅	ℤ [1;7]	Our customers often adjust orders (quantities or other specifications) in a short time window before planned delivery.
Erratic behavior of decision makers in the SC	EBD₁	ℤ [1;7]	At the end of the year we order more than we actually need to get a cash-back from our supplier.
	EBD₂	ℤ [1;7]	Sometimes we order more than actually needed in order “to be safe”.
	EBD₃	ℤ [1;7]	Sometimes we order less than actually needed in order to reduce our safety stock level.
	EBD₄	ℤ [1;7]	Due to lack of confidence in our IT system we adjust order quantities that are generated by the system based on personal experience.
	EBD₅	ℤ [1;7]	Due to lack of confidence in our IT system we adjust forecasts that are generated by the system based on personal feelings.
	EBD₆	ℤ [1;7]	When we expect a shortage of a component (not clear yet), we order more than actually needed.
	EBD₇	ℤ [1;7]	Sales people place customer orders early in advance before an actual customer order exists.
	EBD₈	ℤ [1;7]	If the actual demand in one month is higher or lower than planned demand, we immediately adjust our future plans.
	EBD₉	ℤ [1;7]	If we expect a price increase in the near future, we order more than we actually need to benefit from the current price.

	Variable name	Type of variable	Description (self-assessment, indicate to what extend you agree to the following statement, 1(totally disagree) to 7 (totally agree)
High level of competition	HC₁	ℤ [1;7]	We often lose customers to our direct competitors.
	HC₂	ℤ [1;7]	We are forced to an intense price competition with our competitors.
	HC₃	ℤ [1;7]	We often have to rely on the same suppliers as our direct competitors.
	HC₄	ℤ [1;7]	In our market, it is difficult for us to differentiate ourselves from our competitors.
	HC₅	ℤ [1;7]	We offer a high number of product variants of our representative product.
	HC₆	ℤ [1;7]	There is a high number of substitutes for our representative product at the market.

Weighting factor	Independent from production strategy	Make to order production strategy	Make to stock production strategy
α_OV	0.341	0.451	0.277
α_VV	0.276	0.296	0.234
α_BV	0.203	0.168	0.187
α_MV	0.179	0.085	0.301

Company-related								Product-related
Manufacturing industry		SC position ^{^} multiple answers possible;		Total annual turnover		number of employees		Production strategy ^{^} one participant refused to answer;		Turnover with the product ^{^*} ***** three participants refused to answer.		Location of main production site
Consumer goods	15	OEM	54	up to 50m €	6	up to 50	0	Make to order/ assemble to order	44	1-10 m €	9	Western Europe	65
Chemicals/ pharmaceuticals	13	Module/ system supplier (1st tier)	29	51-250m €	11	51-250	6	Make to stock	33	11-100 m €	24	Eastern Europe	4
Automotive	20	Component supplier (2nd tier)	12	251-500m €	11	251-500	7	Engineer to order	9	101-250 m €	14	China	10
Electronics	8	Standardized parts supplier (3rd tier)	2	501-1000m €	12	501-1000	7			251-500 m €	10	South East Asia	3
Machinery/ equipment	23	Raw material supplier (n-th tier)	6	1-2.5bn €	11	1001-2500	10			501-1000 m €	7	USA/Canada	1
Others	8		more than 10bn €	2.5-5bn €	6	2501-5000	11			>1 bn €	20	Others	4
				5-10bn €	10	5001-10000	10
				20	more than 10000	36
				20	more than 10000	36

SCV dimension	SCV source	Input Variable	Average	Median	Volatility Score
					Best in class		Advanced		Typical		Catch up		Latecomer
					1	2	3	4	5	6	7	8	9	10
Organizational Volatility	Intra-org. misalignment	OAavrg	4.64	4.67	>=6.17	>5.5	>5.2	>5	>4.67	>4.5	>4	>3.83	>3.27	<=3.27
	Inaccurate forecasting	MAPE1f	9.27	6.00	<=2	<4.8	<5		<6	<10		<11.8	<20	>=20
		MAPE3f	15.67	15.00	<=5	<6.6	<10		<15	<18	<20	<22	<30	>=30
		MAPE6f	22.58	20.00	<=5	<10	<11.2	<15	<20	<25	<30	<33	<40	>=40
		MAPE1v	10.86	10.00	<=2.3	<3.6	<5	<6.4	<10		<10.1	<15	<20	>=20
		MAPE3v	17.98	15.00	<=5	<8	<10		<15	<20	<21.2	<30	<34.2	>=34.2
		MAPE6v	24.92	23.00	<=8	<10	<12.9	<15.4	<23	<28	<34.1	<40	<50	>=50
Vertical Volatility	Long lead times	LTS	50.48	30.00	<=5	<12.8	<20	<28.8	<30	<46.8	<60	<78.4	<110.8	>=110.8
		LTT	11.04	5.00	<=1	<2	<3	<4	<5		<7.2	<13.4	<32.4	>=32.4
		LTP	25.06	7.00	<=0.6	<1	<3	<5	<7	<10	<17	<30	<73.6	>=73.6
		LTC	8.72	4.00	<=1	<2		<3	<4	<5	<7.3	<10	<20.7	>=20.7
	Variable lead times	OTDS	81.18	90.00	>=97	>95	>90.8	>90		>84.86	>80	>75	>52	<=52
		OTDC	87.28	92.00	>98.9	>98	>95	>94.6	>92	>90		>81	>70.5	<=70.5
		SP	39.04	25.00	<=4	<6.8	<11	<16.2	<25	<30	<40	<48.4	<94	<=94
Behavioral Volatility	Erratic behavior of customers	EBCavrg	3.62	3.60	<=2	<2.6	<3	<3.28	<3.6	<3.8	<4.2	<4.6	<5.2	>=5.2
Behavioral Volatility	Erratic behavior of DM	EBDavrg	3.73	3.89	<=2.44	<2.78	<3.31	<3.6	<3.89	<4.07	<4.33	<4.44	<4.93	>=4.93
Market-related Volatility	High level of competition	HCavrg	4.22	4.17	<=2.87	<3.33	<3.83	<4	<4.17	<4.5	<4.67	<5	<5.5	>=5.5

SCV dimension	SCV source	Input Variable	Production Strategy	Average	Median	Volatility Score
						Best in class		Advanced		Typical		Catch up		Latecomer
						1	2	3	4	5	6	7	8	9	10
Organizational Volatility	Intra-org. misalignment	OAavrg	MTO	4.77	5.00	>=6.33	>5.67	>5.35	>5	>5	>4.5	>4.33	>4	>3.55	<=3.55
	Intra-org. misalignment	OAavrg	MTS	4.45	4.67	>=5.67	>5.33	>5	>4.83	>4.67	>4.33	>4	>3.47	>3.03	<=3.03
	Inaccurate forecasting	MAPE1f	MTO	9.71	8.00	<=2	<5			<8	<10			<22	>=22
		MAPE1f	MTS	9.32	5.00	<=3.4	<4	<5			<10		<17.6	<20	>=20
		MAPE3f	MTO	15.81	15.00	<=6.2	<10		<12	<15	<16.8	<20		<30	>=30
		MAPE3f	MTS	16.38	16.50	<=5	<6	<7.8	<10	<16.5	<20	<22	<25	<28.5	>=28.5
		MAPE6f	MTO	23.65	20.00	<=6	<10	<12.5	<18	<20	<25	<30	<40	<45	>=45
		MAPE6f	MTS	22.63	23.00	<=5	<7.2	<11.8	<15	<23	<26.6	<30	<30	<38.5	>=38.5
		MAPE1v	MTO	10.57	10.00	<=2.5	<5		<8	<10			<14.7	<15	>=15
		MAPE1v	MTS	11.88	10.00	<=3	<3	<5	<6	<10	<10.4	<14.8	<20	<23	>=23
		MAPE3v	MTO	17.04	15.00	<=7	<10		<15			<20		<30	>=30
		MAPE3v	MTS	20.29	19.00	<=5	<7.2	<9.8	<10.4	<19	<24.6	<30	<30.4	<38.5	>=38.5
		MAPE6v	MTO	24.96	20.00	<=7	<10	<15	<18	<20	<25	<37	<40	<50	>=50
		MAPE6v	MTS	26.38	30.00	<=8	<10	<12	<21.8	<30	<30	<35.5	<40	<48.5	>=48.5
Vertical Volatility	Long lead times	LTS	MTO	49.05	40.00	<=4.65	<14	<20	<26	<40	<49.6	<60	<79.2	<104	>=104
		LTS	MTS	45.17	30.00	<=10	<13.5	<20	<27.4	<30	<31	<47	<60	<100	>=100
		LTT	MTO	7.43	5.00	<=1	<2	<2.9	<3	<5			<7.4	<13.1	>=13.1
		LTT	MTS	14.36	5.00	<=1.2	<2	<3	<4	<5	<7.6	<12	<26	<44	>=44
		LTP	MTO	22.71	5.00	<=0.29	<1	<1.9	<5		<7.12	<14	<20.4	<60	>=60
		LTP	MTS	18.66	5.00	<=1	<2	<3	<5		<7	<16	<28.8	<64	>=64
		LTC	MTO	7.39	3.00	<=1	<1.64	<2	<2.8	<3	<5	<5.72	<10	<18.8	>=18.8
		LTC	MTS	8.18	4.00	<=2	<2		<3	<4	<5	<10		<25	>=25
	Variable lead times	OTDS	MTO	81.84	85.00	>=95	>92.6	>90	>90	>85	>84.04	>80	>75	>60	<=60
		OTDS	MTS	84.15	90.00	>=98	>97	>95	>90.8	>90	>88	>80	>79	>63.5	<=63.5
		OTDC	MTO	89.30	90.00	>=99	>98	>95	>92.2	>90			>85	>76	<=76
		OTDC	MTS	88.58	94.00	>=98	>98	>97	>95	>94	>93	>90	>85	>75	<=75
		SP	MTO	38.33	25.50	<=3	<6	<9.5	<15	<25.5	<30	<42.5	<50	<80.5	<=80.5
		SP	MTS	34.29	25.00	<=7	<10.6	<15	<17.6	<25		<31.2	<40	<67	<=67
Behavioral Volatility	Erratic behavior of customers	EBCavrg	MTO	3.73	3.40	<=2.4	<2.72	<2.8	<3.2	<3.4	<3.8	<4.22	<4.88	<5.6	>=5.6
	Erratic behavior of customers	EBCavrg	MTS	3.37	3.40	<=1.8	<2.36	<2.92	<3.4	<3.4	<3.6	<3.88	<4.12	<4.72	>=4.72
	Erratic behavior of DM	EBDavrg	MTO	3.78	3.89	<=2.56	<2.78	<3.21	<3.6	<3.89	<4	<4.33	<4.56	<4.97	>=4.97
	Erratic behavior of DM	EBDavrg	MTS	3.93	4.00	<=2.93	<3.38	<3.62	<3.67	<4	<4.13	<4.33	<4.51	<4.98	>=4.98
Market-related Volatility	High level of competition	HCavrg	MTO	4.21	4.17	<=2.5	<3.33	<4	<4.03	<4.17	<4.47	<4.68	<5.17	<5.5	>=5.5
Market-related Volatility	High level of competition	HCavrg	MTS	4.19	4.17	<=3	<3.33	<3.5	<3.97	<4.17	<4.53	<4.67	<4.93	<5.5	>=5.5

Associação Brasileira de Engenharia de Produção CNPJ: 30.115.422/0001-73, Avenida Cassiano Ricardo, Nº 601, Residencial Aquarius, CEP: 12.246-870, http://portal.abepro.org.br/ - São José dos Campos - SP - Brazil
E-mail: production@editoracubo.com.br

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[1] * nitsche@logistik.tu-berlin.de