Complexity and performance measurement for retail supply chains
| Pages | 719-742 |
| Published date | 13 May 2019 |
| DOI | https://doi.org/10.1108/IMDS-08-2018-0342 |
| Date | 13 May 2019 |
| Author | Esra Ekinci,Adil Baykasoğlu |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
Complexity and performance
measurement for retail
supply chains
Esra Ekinci
Department of International Logistics Management,
Yasar University, Izmir, Turkey, and
Adil Baykasoğlu
Department of Industrial Engineering, Dokuz Eylul Universitesi, Izmir, Turkey
Abstract
Purpose –The purposeof this paper is to present how complexityon retail supply chains shouldbe recognized
and its relationship with the performance. Different supplychain structures and planning horizons have been
analyzed to supportpractitioners taking actionon the short, mid and long terms.Confronted complexity in the
supply chainhas been categorized as system,perceived and value adding.This would also help practitionersto
understand the sources of the complexityand if the complexity is useful for the systemor not.
Design/methodology/approach –Three different retail supply chain scenarios –each concentrating on
different planning horizons –have been simulated on system dynamics software STELLA. Using the new
classification scheme for complexity and suggested performance metrics, a multi-perspective analysis has
been performed on the STELLA output.
Findings –The results and the methodology can be easily applicable in practice to support decision-making
process and to answer “what-if”type scenario analysis on systems design and configuration. Using the
selected complexity metrics, complexity of the system considering time factor –static and dynamic –and
different information levels –system, perceived and value adding –has been evaluated. Used complexity
metrics indicate the problematic areas in the systems to be distinguished.
Originality/value –This paper uses system dyna mics modeling in retail supply chains to deriv e insight
about dynamic behavio r and to represent the co mplex interactions and a new classification sc heme for
system complexity.
Keywords Performance measures, System dynamics, Complexity analysis, Retail supply chain
Paper type Research paper
1. Introduction
Being the starting point of “bullwhip”effect,retailers can influence the performance of whole
supply chain;therefore, analyzing the complexity of them cangive an idea to the practitioners
on their decision-making process. With the recent trends, such as global sourcing,
multichannel routes and supplier collaboration for innovation, supply chain dynamics gets
complicatedeveryday and members of the chain have to considerretailer ways of working so
as to maintain the financial stability of the overall chain (Ganesan et al., 2009).
Even though, there exists a considerable amount of research on the complexity of supply
chains from manufacturer perspective; retail supply chains have started to be a focus for
researchers lately on inventory management literature. But, so far complexity theory is still
undiscovered area from the retailer point of view. In Agrawal and Smith (2009) and Ekinci
and Baykasoğlu (2016), the factors, which belong to retailers, creating complexity in the
business have been summarized. Some of them are:
•Multichannel retailing: operating both with physical stores and on internet should be
considered in inventory management strategy, outbound logistics.
•Large number of stores, number of stock keeping units (SKUs) and number of
vendors: inbound and outbound logistics of retailer get considerable complicated as
these numbers increase.
Industrial Management & Data
Systems
Vol. 119 No. 4, 2019
pp. 719-742
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-08-2018-0342
Received 7 August 2018
Revised 13 November 2018
14 January 2019
Accepted 28 January 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
719
Complexity
and
performance
measurement
•Selling private label products: its impact on inventory management will be discussed
in one of our scenarios.
•Sourcing through warehouse or directly to store: deliveries from various suppliers directly
to store create inconvenience in store operations and affect inventory management.
•Special characteristics of items: being perishable, seasonal, too heavy or having long
lead times may change the dynamics of the retail business.
The struggle with special problems in retail business requires different organizational
structure, management strategy and specialized perspective.
In recent years, there is a growing interest in the science of complex systems. Still there is
no agreed definition of the term complexity; but based on agreed characteristics in various
articles, complex systems compose of closely connected components, which cannot be
decomposed without damaging the nature of the system (Kinsner, 2010; Sussman, 2002),
they perform nonlinear behavior that cannot be explained by investigating the component
separately (Patel and Nagl, 2010).
Supply chains present the characteristics of complex systems due to connectedness and
uncertainty they contain. Some researchers explain the complexity level by the information
system carries (Mitleton, 2002; Gottfredson and Aspinall, 2005). For example, if the number
of suppliers decreases in a retail supply chain, the information flow between echelons would
decrease leading to low complexity. On the other hand, in case of demand variations, retailer
can seek for new suppliers or keep safety stock in warehouse. Both approaches can lead to
performance improvement; however, it would not be easy to answer the following questions
only considering performance targets:
•How people in the business would experience the changes in ways of working
(perceived complexity).
•How much decrease can be achieved on non-value-adding activities, which are
performed in out-of-control situations? (value-adding complexity).
•Does this change increase the information flow on the overall system dramatically, so
that there could be a need for information systems? (system complexity).
In this research, the aim is to provide a starting point in literature to analyze retail supply
chains using complexity theory and to apply performance measures to understand the effect
of the complexity whether “good”or “bad”for the system. Also, making decisions only
based on performance improvement can lead to a chaotic environment for the business
which can be discovered by employing complexity analysis.
As explained earlier, one of the most important characteristics of complexity is its
nonlinear behavior which causes a small input to end up with large implications.
Its components are decomposable; therefore, seeing the big picture would be important in
case of planning any change in the running policies –systems thinking. However, in most of
the cases, our mental capability would not be sufficient to understand all interactions and
the consequences. There could be many obstacles for researchers/decision makers to
understand the big picture fully:
•unclear cause and effect relations;
•cost of experimenting on real systems; and
•feedback taken from practitioners can be inadequate or biased.
System dynamics modeling is a practical way to overcome the above-mentioned barriers.
It is a method to induce learning in a complex system. It is a multidisciplinary tool which is
based on nonlineardynamics and feedback control of mathematics, physicsand engineering.
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