The role of the consistency between objective and perceived environmental uncertainty in supply chain risk management
| Date | 13 August 2018 |
| DOI | https://doi.org/10.1108/IMDS-09-2017-0410 |
| Published date | 13 August 2018 |
| Pages | 1365-1387 |
| Author | Kangkang Yu,Jack Cadeaux,Nanfeng Luo,Cheng Qian,Zhenghao Chen |
| 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 |
The role of the consistency
between objective and perceived
environmental uncertainty in
supply chain risk management
Kangkang Yu
School of Agricultural Economics and Rural Development,
Renmin University of China, Beijing, China
Jack Cadeaux
School of Marketing, University of New South Wales, Sydney, Australia
Nanfeng Luo
School of Labour and Human Resources, Renmin University of China,
Beijing, China
Cheng Qian
Central University of Finance and Economics, Beijing, China, and
Zhenghao Chen
School of Agricultural Economics and Rural Development,
Renmin University of China, Beijing, China
Abstract
Purpose –The purpose of this paper is to understand how the consistency between objective and perceived
environmental uncertainty might affect supply chain flexibilities that cope with supply chain risk.
Design/methodology/approach –This studyadopted a case studyof comparative four companies in order
to obtain an in-depth knowledge of the environmental conditions under which the companies implement different
types of supply chain risk management (SCRM) strategies: logistics flexibility and relationship flexibility.
Findings –The case analysis not only distinguished the different effects of objective and perceived
environmental uncertainty on supply chain flexibility, but also established the propositions about the effects
of the consistency between objective and perceived environmental uncertainty on logistics flexibility and
relationship flexibility in SCRM.
Originality/value –In principle, supply chain flexibility aims to cope with complex and turbulent
environments. Yet, empirical findings about the effects of environmental uncertainty on supply chain
flexibility are inconclusive. This study addressed this question by differentiating between objective and
perceived environmental uncertainty as well as between logistics and relationship supply chain flexibilities.
Keywords Supply chain risk management, Consistency, Relationship flexibility,
Perceived environmental uncertainty, Logistics flexibility, Objective environmental uncertainty
Paper type Research paper
1. Introduction
Factors including rapid technological development, shorter product life cycles, more
diversified customer demands and fierce market competition make today’s business world
increasingly unpredictable and risky. Some firms develop effective supply chain risk
management (SCRM) strategies in response to the uncertain environments, such as dynamic
pricing, product assortments, multi-sourcing strategies, and vendor managed inventory Industrial Management & Data
Systems
Vol. 118 No. 7, 2018
pp. 1365-1387
© Emerald PublishingLimited
0263-5577
DOI 10.1108/IMDS-09-2017-0410
Received 16 September 2017
Revised 10 December 2017
31 January 2018
30 March 2018
Accepted 2 April 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0263-5577.htm
The research underlying this paper was supported by the National Natural Science Foundation
of China (Nos 71672189, 71774182), and the Natural Science Foundation of Beijing Municipality
(No. 9162015).
1365
Supply
chain risk
management
(see Tang, 2006 for a comprehensive review), while others fail to do so. To the extent that
flexibility constitutes an adaptive response to environmental uncertainty and operational
risks (Sreedevi and Saranga, 2017), it is important to understand when and how such a
response actually arises.
To address the question of how firms implement their flexibility strategies in response to
environmental uncertainty in their SCRM, this paper distinguishes between objective and
perceived environmental uncertainty, and explores the effect of (in)consistency between
objective and perceived environmental uncertainty on firms’supply chain flexibility
strategies. Consistent with previous research which has classified competitive environments
into three factors (i.e. objects, attributes and perceived uncertainty) (Bourgeois, 1980;
Vokurka and O’Leary-Kelly, 2000), we define perceived uncertainty as management’s
perceived inability/ability to accurately predict future events in their environment.
According to previous studies of drivers of supply chain flexibility (Tachizawa and
Thomsen, 2007; Vickery et al., 1999), perceived environmental uncertainty in the primary
task environment is a critical driver of supply chain flexibility. However, the results in these
empirical studies are inconclusive, some showing a positive effect (Patel et al., 2012;
Swamidass and Newell, 1987) or negative effect (Han et al., 2014; Prater et al., 2001), others
revealing mixed effects (Sánchez and Pérez, 2005; Vickery, et al., 1999), or even no effect
(Pagell and Krause, 1999, 2004). While the centrality of environmental uncertainty as a
concept dates back to pioneering contingency studies, these studies variously propose
measuring environmental uncertainty either objectively (Dess and Beard, 1984; Miller and
Friesen, 1983; Snyder, 1987), perceptually (Duncan, 1972; Lawrence and Lorsch, 1969;
Lorenzi et al., 1981), or as a combination of both (Milliken, 1987). To address the
inconsistency in the empirical findings, the present study distinguishes between objective
and perceived environmental uncertainty as distinct concepts, rather than as distinct
measurement modes.
Moreover, while the existing literature often treats supply chain flexibility as a
unidimensional concept, this paper explores the distinctiveness of two dimensions of supply
chain flexibility: intra-firm logistics flexibility and inter-firm relationship flexibility, which
helps clarify how different types of supply chain flexibility arise as a response to
environmentaluncertainty and how they contributeto the supply chain risk mitigation. As an
early example, in a sample of automotive suppliers, Sánchez and Pérez (2005) found that
volume flexibility is a response to perceived demand uncertainty whilst launchflexibility is a
response to perceived uncertainty about competitors. Such previous studies focus on how
environmentaluncertainty leads to different dimensions of intra-firm flexibility; however, the
effects of objective or perceived environmental uncertainty on intra-firm logistics flexibility
could be different.Logistics flexibility is unilateral and refers to the abilityof the organization
to respond quickly to customer needs in delivery, support and service (Zhang et al., 2002).
In contrast, relationship flexibility defines a bilateral expectation of willingness in a trading
relationshipto adapt, change or adjust to new knowledge withoutresorting to a series of new
contracts and renegotiations (Richey et al., 2012; Young et al., 2003).
Through a case study of four companies from two industries in China, this paper obtains
an in-depth knowledge of the environment and risk conditions, under which firms within
supply chains implement different types of flexibility strategies. The observations form the
basis for developing propositions regarding the two types of supply chain flexibility and
how they might arise as responses or adaptations to objective environmental uncertainty,
perceived environmental uncertainty and the (in)consistency between these two kinds of
uncertainty. Specifically, it is proposed that the consistency between objective and perceived
environmental uncertainty, as an indicator of a firm’s ability of risk prediction, has a
negative effect on its relationship flexibility (P1); as to the effect of the consistency between
two types of environmental uncertainty on the logistics flexibility, a moderating effect of
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