On Theory in Supply Chain Uncertainty and its Implications for Supply Chain Integration

Abstract

This article develops a theoretical conceptualization of supply chain uncertainty, based on the foundation provided by contingency theory, classical organization theory, and information processing theory. We develop a theoretical analogy between a supply chain and an organization, then highlight key differences, which leads us to hypothesize that there are three key types of supply chain uncertainty. Micro-level uncertainty is based on the variability of inputs to the technical core of a supply chain, corresponding to the traditional operationalization of uncertainty in the supply chain and operations management literature. Meso-level uncertainty is the lack of information needed by a supply chain member, corresponding to the information processing theory perspective. This is often due to the conflicting pressures of differentiation and interdependence in a supply chain, where members may withhold information that they feel could compromise their interests. Macro-level uncertainty, based on the equivocality construct, is related to unclear and ambiguous situations faced by supply chain members in rapidly changing external environments. We propose that all three types of uncertainty coexist in a supply chain and may interact with each other. Based on contingency theory's focus on alignment of process and structure with the environment, we test the relationship among supply chain integration (process), centralization, formalization and flatness (organization structure) and the dimensions of uncertainty (environment). Hypotheses are tested using hierarchical regression on data collected from 339 globally distributed manufacturing plants. It reveals that, as hypothesized, micro-level and meso-level uncertainty are positively related to SCI and that macro-level uncertainty is inversely related to it. The organization structure variables of centralization and formalization had a moderating effect, strengthening or reducing the main effects of uncertainty. The results are discussed in terms of their consistency with the theoretical foundation, implications for decision makers facing supply chain uncertainty and future research opportunities.