A trade-off exists between product variety and supply chain (SC) performance. To help mitigate the impact on SC of increased product variety, the purpose of this paper is to examine how variety management activities including variety management strategy (VMS), supplier partnerships and close customer relationships affect SC flexibility and agility at different levels of customisation.
A survey-research methodology is employed using data from 363 manufacturing firms from the UK and South Korea. In particular, cluster analysis and structural equation modelling were used to evaluate the proposed model according to the level of customisation.
The results suggest that internal variety management strategy and external SC integration have a positive influence on SC flexibility and agility. Customer relationships and variety management strategies influence SC flexibility more than partnerships with suppliers whereas variety management strategies and partnerships with suppliers influence SC agility more than customer relationships. In fact, for external integration in particular, customer relationships influence SC flexibility (i.e. reaction capability) rather than agility (i.e. reaction time) whereas partnerships with suppliers influence SC agility rather than flexibility. In a high-customisation context, close customer relationships are the most effective way to increase SC flexibility, whereas partnerships with suppliers are the most effective way to increase SC agility. In a low-customisation context, a VMS and customer relationships are the most effective way to increase both SC flexibility and agility.
This paper suggests key variety management activities to aid managers to better manage product variety ambitions in SC under varying customisation profiles through internal and external approaches.
