IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v56y2010i3p495-502.html
   My bibliography  Save this article

Vertical Flexibility in Supply Chains

Author

Listed:
  • Wallace J. Hopp

    (Stephen M. Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • Seyed M. R. Iravani

    (Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208)

  • Wendy Lu Xu

    (Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208)

Abstract

Jordan and Graves (Jordan, W. C., S. C. Graves. 1995. Principles on the benefits of manufacturing process flexibility. Management Sci. 41(4) 577-594) initiated a stream of research on supply chain flexibility, which was furthered by Graves and Tomlin (Graves, S. C., B. T. Tomlin. 2003. Process flexibility in supply chains. Management Sci. 49(7) 907-919), that examined various structures for achieving horizontal flexibility within a single level of a supply chain. In this paper, we extend the theory of supply chain flexibility by considering placement of vertical flexibility across multiple stages in a supply chain. Specifically, we consider two types of flexibility--logistics flexibility and process flexibility--and examine how demand, production, and supply variability at a single stage impacts the best stage in the supply chain for each type of flexibility. Under the assumptions that margins are the same regardless of flexibility location, capacity investment costs are the same within and across stages, and flexibility is limited to a single stage of logistics (process) flexibility accompanied with necessary process (logistics) flexibility, we show that both types of flexibility are most effective when positioned directly at the source of variability. However, although expected profit increases as logistics flexibility is positioned closer to the source of variability (i.e., downstream for demand variability and upstream for supply variability), locating process flexibility anywhere except at the stage with variability leads to the same decrease in expected profit.

Suggested Citation

  • Wallace J. Hopp & Seyed M. R. Iravani & Wendy Lu Xu, 2010. "Vertical Flexibility in Supply Chains," Management Science, INFORMS, vol. 56(3), pages 495-502, March.
    • Handle: RePEc:inm:ormnsc:v:56:y:2010:i:3:p:495-502
    DOI: 10.1287/mnsc.1090.1127
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.1090.1127
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.1090.1127?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. William C. Jordan & Stephen C. Graves, 1995. "Principles on the Benefits of Manufacturing Process Flexibility," Management Science, INFORMS, vol. 41(4), pages 577-594, April.
    2. Stephen C. Graves & Brian T. Tomlin, 2003. "Process Flexibility in Supply Chains," Management Science, INFORMS, vol. 49(7), pages 907-919, July.
    3. Seyed M. Iravani & Mark P. Van Oyen & Katharine T. Sims, 2005. "Structural Flexibility: A New Perspective on the Design of Manufacturing and Service Operations," Management Science, INFORMS, vol. 51(2), pages 151-166, February.
    4. Gupta, Diwakar & Gerchak, Yigal & Buzacott, John A., 1992. "The optimal mix of flexible and dedicated manufacturing capacities: Hedging against demand uncertainty," International Journal of Production Economics, Elsevier, vol. 28(3), pages 309-319, December.
    5. Jan A. Van Mieghem, 1998. "Investment Strategies for Flexible Resources," Management Science, INFORMS, vol. 44(8), pages 1071-1078, August.
    6. Charles H. Fine & Robert M. Freund, 1990. "Optimal Investment in Product-Flexible Manufacturing Capacity," Management Science, INFORMS, vol. 36(4), pages 449-466, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Timothy C. Y. Chan & Douglas Fearing, 2019. "Process Flexibility in Baseball: The Value of Positional Flexibility," Management Science, INFORMS, vol. 65(4), pages 1642-1666, April.
    2. Guihua Wang & Ronghuo Zheng & Tinglong Dai, 2022. "Does Transportation Mean Transplantation? Impact of New Airline Routes on Sharing of Cadaveric Kidneys," Management Science, INFORMS, vol. 68(5), pages 3660-3679, May.
    3. Eser Kırkızlar & Sigrún Andradóttir & Hayriye Ayhan, 2012. "Flexible Servers in Understaffed Tandem Lines," Production and Operations Management, Production and Operations Management Society, vol. 21(4), pages 761-777, July.
    4. Tianhu Deng & Zuo-Jun Max Shen, 2013. "Process Flexibility Design in Unbalanced Networks," Manufacturing & Service Operations Management, INFORMS, vol. 15(1), pages 24-32, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Achal Bassamboo & Ramandeep S. Randhawa & Jan A. Van Mieghem, 2010. "Optimal Flexibility Configurations in Newsvendor Networks: Going Beyond Chaining and Pairing," Management Science, INFORMS, vol. 56(8), pages 1285-1303, August.
    2. Dipankar Bose & A. K. Chatterjee & Samir Barman, 2016. "Towards dominant flexibility configurations in strategic capacity planning under demand uncertainty," OPSEARCH, Springer;Operational Research Society of India, vol. 53(3), pages 604-619, September.
    3. Brian Tomlin & Yimin Wang, 2005. "On the Value of Mix Flexibility and Dual Sourcing in Unreliable Newsvendor Networks," Manufacturing & Service Operations Management, INFORMS, vol. 7(1), pages 37-57, June.
    4. Bo Liao & Candace Arai Yano & Shiva Esturi, 2017. "Optimizing Site Qualification Across the Supply Network at Western Digital," Interfaces, INFORMS, vol. 47(4), pages 305-319, August.
    5. Brian Tomlin & Yimin Wang, 2008. "Pricing and Operational Recourse in Coproduction Systems," Management Science, INFORMS, vol. 54(3), pages 522-537, March.
    6. Mabel C. Chou & Geoffrey A. Chua & Chung-Piaw Teo & Huan Zheng, 2010. "Design for Process Flexibility: Efficiency of the Long Chain and Sparse Structure," Operations Research, INFORMS, vol. 58(1), pages 43-58, February.
    7. Francas, David & Kremer, Mirko & Minner, Stefan & Friese, Markus, 2009. "Strategic process flexibility under lifecycle demand," International Journal of Production Economics, Elsevier, vol. 121(2), pages 427-440, October.
    8. Ebru K. Bish & Ana Muriel & Stephan Biller, 2005. "Managing Flexible Capacity in a Make-to-Order Environment," Management Science, INFORMS, vol. 51(2), pages 167-180, February.
    9. Yangyang Peng & Xiaolin Xu & Xue Liang & Weili Xue, 2020. "Mismatch risk allocation in a coproduct supply chain," Annals of Operations Research, Springer, vol. 291(1), pages 707-730, August.
    10. Chou, Mabel C. & Chua, Geoffrey A. & Teo, Chung-Piaw, 2010. "On range and response: Dimensions of process flexibility," European Journal of Operational Research, Elsevier, vol. 207(2), pages 711-724, December.
    11. Achal Bassamboo & Ramandeep S. Randhawa & Jan A. Van Mieghem, 2012. "A Little Flexibility Is All You Need: On the Asymptotic Value of Flexible Capacity in Parallel Queuing Systems," Operations Research, INFORMS, vol. 60(6), pages 1423-1435, December.
    12. Manu Goyal & Serguei Netessine, 2007. "Strategic Technology Choice and Capacity Investment Under Demand Uncertainty," Management Science, INFORMS, vol. 53(2), pages 192-207, February.
    13. Elena Katok & William Tarantino & Terry P. Harrison, 2003. "Investment in production resource flexibility: An empirical investigation of methods for planning under uncertainty," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(2), pages 105-129, March.
    14. Jörn Grahl & Michael Schneider & David Francas, 2010. "A Problem-Specific and Effective Metaheuristic for Flexibility Design," Working Papers 1001, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 28 Jan 2010.
    15. Soroush Saghafian & Mark P. Van Oyen, 2016. "Compensating for Dynamic Supply Disruptions: Backup Flexibility Design," Operations Research, INFORMS, vol. 64(2), pages 390-405, April.
    16. Manu Goyal & Serguei Netessine, 2011. "Volume Flexibility, Product Flexibility, or Both: The Role of Demand Correlation and Product Substitution," Manufacturing & Service Operations Management, INFORMS, vol. 13(2), pages 180-193, March.
    17. Stephen C. Graves & Brian T. Tomlin, 2003. "Process Flexibility in Supply Chains," Management Science, INFORMS, vol. 49(7), pages 907-919, July.
    18. Schneider, Michael & Grahl, Jörn & Francas, David & Vigo, Daniele, 2013. "A problem-adjusted genetic algorithm for flexibility design," International Journal of Production Economics, Elsevier, vol. 141(1), pages 56-65.
    19. Chandra, Charu & Everson, Mark & Grabis, Janis, 2005. "Evaluation of enterprise-level benefits of manufacturing flexibility," Omega, Elsevier, vol. 33(1), pages 17-31, February.
    20. Jiajia Cong & Wen Zhou, 2020. "Inflexible Repositioning: Commitment in Competition and Uncertainty," Management Science, INFORMS, vol. 66(9), pages 4207-4225, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:56:y:2010:i:3:p:495-502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.