ADMINISTRACIÓN GUBERNAMENTAL DE INGRESOS PÚBLICOS

Supply chains need to have capabilities to create resilience against disruptions (Pettit, Fiksel, and Croxton 2010; Christopher and Peck 2004) as resilience is the capacity of a supply chain to get back to its original state after disruption (Christopher and Peck 2004). The term “capabilities” refers to the role of management to respond to the environmental factors by adapting, integrating and reconfiguring resources, organizational skills and functional competencies (Teece, Pisano, and Shuen 1997). According to Pettit (2008), capabilities are attributes that enable an enterprise to predict and overcome disruptions. Aligned with the spirit of the RBV, to overcome environmental uncertainties, organizations need to develop dynamic capabilities (Wernerfelt 1984). In uncertain conditions, dynamic capabilities are difficult to sustain and resilience is essential in such conditions to achieve sustainability (Eisenhardt and Martin 2000). Studies on the supply chain have emphasised different capabilities such as: flexibility, redundancy, adaptability, collaboration, visibility, market position, financial strength, diversity, efficiency and control to measure resilience (Pettit, Fiksel, and Croxton 2010; Sheffi and Rice 2005; Fiksel 2003; Ponomarov and Holcomb 2009). In addition, Jüttner and Maklan (2011) selected flexibility, velocity or speed of response, visibility and collaboration to characterize supply chain resilience. Table 2.3 shows the summary of the different capabilities mentioned by the previous studies.

Table 2.3: Supply chain capability dimensions

Dimen

sions Variables References

Flexibilit

y

Flexibility in production (different volume of

orders, flexible production schedule) Duclos, Vokurka and Lummus (2005); Braunscheidel and Suresh (2009);

Tomlin (2006). Ability to modify a wide variety of products as

per buyer requirements (mix flexibility) Braunscheidel and Suresh (2009); Handfield and Bechtel (2002).

Flexibility in contract with SC partners

(partial order and payment, partial shipment) Duclos, Vokurka and Lummus (2005).

Efficient and cost‐effective logistics and supply chain functions (e.g. sourcing, producing, distribution)

Duclos, Vokurka and Lummus (2005); Gunasekaran, Lai and Cheng (2008). Ability to respond to additional orders or

sudden demand Jüttner and Maklan (2011).

Ability to supply new and different products

to different customer groups (mix flexibility) Braunscheidel and Suresh (2009).

Redund ancy/

Back‐

Alternative and reserve capacity (logistical

options) Pettit, Croxton and Fiksel (2013); Pettit, Fiksel and Croxton (2010).

Buffer stock Pettit, Fiksel and Croxton (2013). Back‐up energy source Pettit, Fiksel and Croxton (2013). Inte gr ati on

Sharing information with supply chain _partners Braunscheidel and Suresh (2009); Peck _{(2005); Blackhurst et al. (2005).}

Communication and information flow with different departments (e.g. supply chain and other departments)

Braunscheidel and Suresh (2009). Joint or collaborative planning (e.g. product Braunscheidel and Suresh (2009).

development) Communication with supply chain partners Braunscheidel and Suresh (2009). ICT‐supported planning and integration Narasimhan and Kim (2001). Efficiency Waste elimination (efficient use of resources) Pettit, Fiksel and Croxton (2010); Fiksel (2003); Sheffi and Rice (2005). Efficient and hard‐working employees Pettit, Croxton and Fiksel (2013)

Quality control and less defects Pettit, Fiksel and Croxton (2010);

Kleindorfer and Saad (2005).

Financi

al

strength

Funds availability Pettit, Fiksel and Croxton (2010); Tang _(2006).

Profitability Pettit, Fiksel and Croxton (2010).

Insurance Pettit, Fiksel and Croxton (2010); Tomlin

(2006).

As shown on Table 2.3, it is evident that supply chain capability is a multidimensional construct which can be measured by the dimensions: flexibility, redundancy, integration, efficiency and financial strength. Although different scholars suggest different dimensions, some dimensions such as flexibility, responsiveness, redundancy, efficiency and integration are most commonly supported. While studies are available on supply chain capabilities to mitigate supply chain vulnerabilities, the main limitation of these studies can be identified as the dearth of empirical validation of the measures. Therefore, the present study fills this specific gap in the literature.

2.7.1.1.1 Flexibility

With the growth of globalization and increased outsourcing, flexibility in the supply chain has become a critical capability factor (Duclos, Vokurka, and Lummus 2005). Flexibility refers to the capability of an organization to respond to unforeseen changes in the environment that affect the production and distribution system of the organization (Candace, Ngai, and Moon 2011). Sánchez and Pérez (2005) referred to supply chain flexibility as encompassing the dimensions that influence a firm’s customers through the adjustment of two or more supply chain functions either internal (marketing, manufacturing) or external (suppliers, channel members) to the firm. In supply chain management, the term “flexibility” is sometimes used interchangeably with the term “adaptability” as it helps to adapt the supply chain to the uncertain situation and to mitigate disruption (Stevenson and Spring 2009; Sheffi and Rice 2005). Adaptability is the ability to modify operations in response to challenges or opportunities by alternate technology development, lead‐time reduction and learning from experience (Pettit, Croxton, and Fiksel 2013). According to Tang and Tomlin (2008), flexibility is an important attribute of SCR as flexibility in the supply chain helps to mitigate vulnerabilities. For example, the capability of having supply contract flexibility helps to reduce the risk of bottleneck or excess inventory in the supply chain.

A substantial number of research studies have been conducted on manufacturing flexibility and supply chain flexibility (Tang and Tomlin 2008; Chan and Chan 2009; Wadhwa, Saxena, and Chan 2008; Duclos, Vokurka, and Lummus 2005; Stevenson and Spring 2009). Slack (1983) describes five components of flexibility: new product; product mix; quality; volume; and delivery, while Vickery, Dröge and Germain (1999) mention five elements for supply chain flexibility, namely, product flexibility, volume flexibility, new product flexibility, distribution flexibility and responsiveness flexibility. Similarly, Duclos, Vokurka and Lummus (2005) identify six broader categories of supply chain flexibility: operations system flexibility, market flexibility, logistics flexibility, supply flexibility, organizational flexibility and information system flexibility. Table 2.3 mentions some of the important and widely used dimensions of supply chain flexibility. 2.7.1.1.2 Redundancy Redundancy can be conceptualized as having the back‐up capacity in the supply chain to cope with uncertain events. Reserve capacity or back‐up capacity is a critical success factor during the time of disruption although it does incur costs (Pettit, Croxton, and Fiksel 2013; Tang and Tomlin 2008). Firms buy or produce a certain quantity of output on the basis of regular demands and maintain some extra capacity to meet variations in demand or to meet uncertainties in the supply process (Stock and Lambert 2001). Additional capacity of raw materials, components, tools, equipment, finished goods inventory and labour can be held as buffers (Croxton and Zinn 2005; Pettit, Croxton, and Fiksel 2013; Duclos, Vokurka, and Lummus 2005); however, reducing costs arising from an undesirable situation through maintaining buffer capacity is costly (Giunipero and Eltantawy 2004; Tang and Tomlin 2008). Such back‐up capacity or buffers also increase responsiveness by providing timely and adequate response to short‐term variations in demand and supply (Klibi, Martel, and Guitouni 2010). Furthermore, back‐up capacity of utilities, and especially utilities such as electricity, water and communication, is crucial otherwise disruptions of utility factors affect operations (Rose 2007). Back‐up capacity of utilities is even more important if the facility is located where crises occur in utility supply, for example, facility locations in underdeveloped countries.

2.7.1.1.3 Integration

The importance of integration itself lies in the definition of supply chain management (SCM) which, as defined by Cooper, Lambert and Pagh (1997), is the integration of

products, services and information flow from the original suppliers to the end‐ customers. According to Chen, Daugherty and Landry (2009), integration is the deliberate attempts of a supply chain to achieve its objectives through collaboration, commitment and coordination with another firm’s functional areas and activities. Vickery et al. (2003) focus on closer customer relationships, supplier relationships and cross‐functional teams as the different dimensions of supply chain integration. Similarly, Braunscheidel and Suresh (2009) place emphasis on internal integration among different departments of the organization as well as external integration with the key customers and suppliers as being the dimensions of supply chain integration. To enhance the strength of integration, the exchange of information both inside and outside the organization is important (Braunscheidel and Suresh 2009). Exchange of real‐time information among supply chain members helps to forecast and manage inventory efficiently and to reduce the risk of disruption from demand volatility and stock‐outs (Lau and Lee 2000; Chan and Chan 2009). However, for information exchange among the supply chain partners, collaboration and cooperation are essential. Collaboration enhances cooperation in the supply chain as it is the ability of the organization to work effectively with others in the network for the benefit of all (MacCormack and Forbath 2008). The exchange of information and adoption of technology also increase visibility in the supply chain which helps to reduce disruption (Pettit, Croxton, and Fiksel 2013) and, therefore, improves the resilience of the supply chain (Blackhurst et al. 2005).

2.7.1.1.4 Efficiency

Efficiency refers to the capability of a firm to produce more output by using less input. In the world of competition, efficiency plays a pivotal role in reducing the cost structure. Failure to achieve and maintain efficiency may lead to the threat of elimination from the market in the long run. Therefore, efficiency is essential for the supply chain to overcome the vulnerability arising from intensive competition (Pettit, Fiksel, and Croxton 2010; Pettit, Croxton, and Fiksel 2013). Efficiency can be obtained by improving the skill of labour, learning, production techniques, asset utilization, waste elimination, production variability reduction and failure prevention (Pettit, Croxton, and Fiksel 2013). Fiksel (2003) also asserted the necessity of efficiency for SCR. Companies can improve efficiency by reducing material and energy intensity and converting wastes into valuable secondary products. These attempts help to reduce cost as well as create value for shareholders and for society at large (Fiksel 2003). Though there is controversy between efficiency and redundancy, back‐up capacity

should not be confused with efficiency. Efficiency should be achieved by cost‐efficient means for the satisfaction of human needs (Fiksel 2003) while the capacity to cope with emergencies should not be compromised.

2.7.1.1.5 Financial strength

Financial strength is crucial for disaster recovery. Once a system is disrupted by uncertain events, financial back‐up is needed to get the system back to the usual condition (Webb, Tierney, and Dahlhamer 2002). In a sociological network, it has also been proved that the financial health of an individual is a salient factor for disaster recovery by rebuilding housing, utilities and other essentials (Abramson et al. 2010). Moreover, financial support is needed when undertaking preparation against disruption as companies and their supply chains need to invest in capacity building. According to Pettit, Croxton and Fiksel (2013), financial strength refers to the capacity to absorb fluctuations in cash flow. Therefore, financial strength can be considered as a relevant dimension of supply chain resilience. Pettit, Croxton and Fiksel (2013) use the variables: insurance, portfolio diversification, financial reserves and price margin to measure financial strength. This means that if financial strength in terms of insurance protection, portfolio diversification, financial reserves and price margin, is high, resilience will be high and vice versa. In this research, financial strength reflects the ability of a supply chain to provide financial back‐up for recovery from disruptions.