Exploring the social mechanisms for variation reduction for direct store delivery (DSD) and vendor managed inventory performance: An integrated network governance and coordination theory perspective

As business systems become more complex with retailers and manufacturers both competing in a dynamic environment, the reduction of operational variation has become crucial for both demand and inventory management. This is why many firms have undertaken lean or six-sigma programs as a means for understanding and addressing this variance. Much of this variation can be mitigated through the integration and coordination between entities in the supply chain through both human and technical systems. Coordination theory posits that there are common mechanisms for activity integration while network governance theory indicates that individuals can be relationally embedded through multiple types of connections. Most notably, individuals can utilize aspects of information sharing, trust, and problem solving to serve as human-oriented coordination mechanisms in order to enhance personal performance. This article models how the occurrence of multiple different layers of connectivity in human operational systems impacts variability in business process outcomes. Results from the social network analysis, utilizing both multi-modal blockmodeling and a multiple regression quadratic assignment procedure, indicate that information sharing, trust, and problem-solving network connectivity reduce sales performance variation, while joint-problem solving connections between individuals reduce the variance in inventory performance variation.