Supply chain flexibility and firm performance

Purpose

To explore the relationship between the dimensions of supply chain flexibility and firm performance in a sample of automotive suppliers.

Design/methodology/approach

Empirical survey of a representative sample of 126 Spanish automotive suppliers during the months of September and October 2003. Data gathered through a mail survey to purchasing managers by using a structured questionnaire. Spearman correlation coefficients were used to analyse the relationship between the different supply chain flexibility dimensions, between supply chain flexibility dimensions and firm performance dimensions, and between supply chain flexibility dimensions and environmental uncertainty dimensions. A multivariate analysis studied the determinants of supply chain flexibility.

Findings

The research has found a positive relation between a superior performance in flexibility capabilities and firm performance, although flexibility dimensions are not equally important for firm performance. On the other hand, the results show that companies enhance more the basic flexibility capabilities (at the shop floor level) than aggregate flexibility capabilities (at the customer‐supplier level). However, aggregate flexibility capabilities are more positively related to firm performance than basic flexibility capabilities. Thus, companies might miss opportunities to improve competitiveness by underestimating customer‐supplier flexibility capabilities. Finally, the results indicate that flexibility capabilities are enhanced in supply chains with higher environmental uncertainty, technological complexity, and mutual understanding, but with lower interdependence among the agents involved in the supply chain.