Improving performance of supply chain processes by reducing variability

Supply chain management (SCM) has become one of the most popular and fastest growing areas in management. One major issue of SCM is the proper design of supply chains to serve customers effectively (high customer service) and efficiently (at low costs). This is particularly difficult as companies nowadays face a series of challenges like shrinking product life cycles, the proliferation of product variants (mass customization), and increasing uncertainty on both the demand and the supply side. Dealing efficiently with uncertainty is one of the most crucial points in supply chain design. According to Lovejoy (1998) a company has three generic possibilities to address uncertainty: it can either hold safety inventory, hold safety capacity, or reduce variability by using enhanced information. These three strategies constitute the so-called Operations management (OM) triangle. This study will analyze whether and how variability can be reduced in supply chains and thereby improve process performance of supply chains. This means that the concept of OM triangle is extended and linked to concepts from SCM, with a special focus on the analysis of the role of information and its capability for reducing variability. As one result of this study a new variability framework is presented, organizing the different types of variability in supply chains. Second, the extended OM triangle is developed, linking concepts from SCM to the OM triangle. Finally, it can be stated that handling variability within the supply chain is major challenge for every supply chain manager, as there is always some kind of uncertainty or variability. This study may help to organize this broad field of action within supply chains.