Supply Chain Flexibility, Uncertainty and Firm Performance: An Empirical Analysis of German Manufacturing Firms

Supply chain flexibility is widely seen as one major response to the increasing uncertainty and competition in the marketplace. Researchers and practitioners acknowledge the competitive advantage of supply chain flexibility. However, flexibility is costly. Thus, a match between flexibility and environmental uncertainty seems to be an appropriate option. Empirical research on the relationship between environmental uncertainty and supply chain flexibility is sparse. This paper contributes to the emerging body of research by addressing the relationship between environmental uncertainty, supply chain flexibility, and firm performance through a survey of German manufacturing companies. We use structural equation modeling to analyze one of the key questions of operations management: Does a match between environmental uncertainty and supply chain flexibility lead to competitive advantages? More precisely, we present evidence that in uncertain environments companies with highly flexible supply chains perform better than companies with less flexible supply chains while in certain environments the opposite holds.