Do not expect others do what you should! Supply chain complexity and mitigation of the ripple effect of disruptions

• DOI: https://doi.org/10.1108/IJLM-10-2018-0273
• Pages: 123-144
• Published date: 06 April 2020
• Date: 06 April 2020
• Author: Seyoum Eshetu Birkie,Paolo Trucco
• Subject Matter: Logistics,Management science & operations

Do not expect others do what you

should! Supply chain complexity

and mitigation of the ripple effect

of disruptions

Seyoum Eshetu Birkie

Department of Sustainable Production Development,

KTH Royal Institute of Technology Industrial Engineering and Management,

Stockholm, Sweden, and

Paolo Trucco

School of Management, Politecnico di Milano, Milan, Italy

Abstract

Purpose –Recent studies have argued that companies may actively implement practices to mitigate

disruptions in their supply chain and reduce the extent of damage on performance. Other studies have shown

that disruptions may propagate in supply chains, leading to consequences that are more negative and raising

doubts on the effectiveness of mitigation strategies implemented downstream. This study investigates the

influence of supply chain complexity on the two phenomena and their interplay, taking a focal company’s

perspective.

Design/methodology/approach –A systematic procedure for data collection, encoding and aggregation

based on incident data mainly from secondary sources was used. Multiple regression models were run to

analyse direct and moderation effects involving resilience, distance of impact location from trigger point, and

supply chain complexity on weighted performance change.

Findings –Supply chain complexity is found to have positive moderation on the ripple effect of disruption.

Resilience capability remains to have dominating direct positive effect in mitigating disruptions when supply

chain complexity is taken into account.

Research limitations/implications –This study extends the research discourse on supply chain resilience

and disruption management with focus on the supply side. It demonstrates that, along with the severity of the

disruption scenario, the ripple effect must also be considered when analyzing the benefits of resilience practices

implemented by the focal company.

Practical implications –Complexity in the supply chain can only help to smooth-out the rippling effects of a

disruption, which go largely beyond supply-demand unbalances and lead time fluctuations. To mitigate it

better, the focal company has to act proactively with adequate resilience practices, which also connects to the

importance of better visibility across multiple supply chain tiers.

Originality/value –To the best of the authors’knowledge, this is the first study that empirically tests the

benefits of resilience practices and the ripple effect of disruptions under the moderation role of supply chain

complexity.

Keywords Supply chain complexity, Disruption, Ripple effect, Resilience, Resource-based view

Paper type Research paper

1. Introduction

Recent supply chain reports have indicated that there is a growing trend of disruptions

happening in different supply chains. A large number of disruptions are triggered multiple

layers upstream supply chains. For example, in 2013 some 58% of disruptions were triggered

at tier 1, in 2017 this percentage reduced down to 44%, implying that up to 56% took place at

tier 2 or higher (BCI, 2013,2017). Several studies agree that swift actions and better visibility

along the extended supply chain are needed to mitigate such disruptions, although how this

can be done effectively is a concern with ongoing investigation.

Supply chain

complexity and

ripple effect of

disruptions

123

The current issue and full text archive of this journal is available on Emerald Insight at:

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Received 31 October 2018

Revised 15 May 2019

2 November 2019

25 December 2019

Accepted 31 December 2019

International Journal of Logistics

Management

Vol. 31 No. 1, 2020

pp. 123-144

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-10-2018-0273

Supply chains are getting more and more complex from time to time that could lead to both

positive and negative consequences. Aitken et al. (2016) suggest that complexity in supply

chains could have strategic benefits to competitiveness. High product customisation and

customer diversity prescribed in business strategy are examples of strategically relevant

complexities for driving superior advantages over competitors. Such complexity drivers need

to be absorbed rather than reduced or avoided (Aitken et al., 2016). Supply chain complexity

could also contribute to increased severity of disruptions (Brandon-Jones et al., 2014;

Craighead et al., 2007). Other studies indicate that complex supply chains (e.g. with multiple

nodes) could be more resilient to disruptions such as those triggered by climate change

(Lim-Camacho et al., 2017). However, the potential moderation influence of complexity on

disruption dynamics and management is still under-researched and the mechanisms of its

influence on performance recovery are largely unknown. Increasing frequency and unwanted

consequence of disruptions occurring in supply chains demand a better understanding of the

values and possible drawbacks of supply chain complexity in disruption management.

However, only a few studies have touched upon this issue in relation to developing

capabilities for mitigating disruptions triggered upstream tiers and rippling out in a supply

chain network.

Resilience can be thought of as the capability of a business firm to prepare for, respond to

and recover from unexpected upstream supply chain disruptions by returning to, or

maintaining continuity of, operations at the desired level (Ponomarov and Holcomb, 2009). On

one side, studies have argued that the level of resilience capabilities required to bring about

an upward change on performance after disruption must be proportional to the severity of the

disruption (Birkie et al., 2017); on the other, different studies argued that having high

resilience capabilities is not enough for effectively coping with disruptions (e.g. Li et al., 2017).

However, none of these studies accounted for the influence of ripple effect. According to

Ivanov et al. (2014) , ripple effect in the supply chain occurs when “disruption propagates from

the initial disruption point to the supply, production and distribution networks”.

Birkie et al. (2017) investigated the direct influence of supply chain complexity on the

effectiveness of resilience practices in recovering from disruption only. On the side of ripple

effect, recent studies include Ivanov et al. (2017) who have made investigations on the

phenomenon. Our current study builds on these two papers as well as related research in

the domain with an aim to investigate the interplay between supply chain complexity and the

focal company’s resilience capabilities on mitigating the ripple effect of disruptions, towards

reduction of performance degradation.

The remainder of the paper is organised as follows. The next section establishes the

theoretical underpinning of the study. It presents brief literature review and introduces

hypotheses. The third section describes the methodological details followed in conducting the

study. Findings of the research are presented subsequent to that. Based on the detailed

discussion held in the fifth section, conclusions are drawn in the last section.

2. Theoretical background and hypotheses

2.1 Ripple effect of disruptions

Supply chain disruption is a phenomenon in which unexpected events happening at a point in

a supply chain affect performance of a firm, or have a potential to do so (Craighead et al.,

2007). If disruptions cannot be timely recovered where they emanated, they may propagate in

different directions affecting performance of multiple entities in the extended network

(Swierczek, 2014). Indeed, supply chain costs tremendously increase in consequence of higher

severity and longer duration of disruption (e.g. Ivanov, 2017).

It can be inferred from the definition of ripple effect that the distance from initial strike

point to where consequences are measured (e.g. Kim et al., 2015) can be used as a proxy to

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