The Impact of supply base complexity on firm performance

Memiş, Huriye
Supply chain complexity has become a significant concern of the companies especially in the past decade. As a response to this, there have been several studies examining supply chain complexity and performance implications. However, studies focusing on upstream supply chain complexity is rather scant. Sources of supply base complexity and their impacts on firm performance is still under-investigated. The aim of this research is to investigate the impact of supply base complexity on firm performance. Supply base complexity is conceptualized as detail (structural) and dynamic (operational) complexity. Supply base size, differentiation between suppliers, and interaction between suppliers represent detail complexity dimensions whereas long/unreliable supplier lead time and instability of suppliers represent dynamic complexity dimensions. Due to its multi-dimensional nature, supply base complexity is predicted to have varying effects on performance and firm performance is conceptualized as cost, quality, delivery, flexibility, innovation and sustainability performance. Based on survey data from 161 large companies operating in the manufacturing and service industries in Turkey, the hypotheses were empirically tested. First, this thesis empirically proves that not all sources of supply base complexity have negative effects on firm performance. It was found that some of the supply base complexity drivers enhance firm performance. Moreover, this study also supports that the dynamic drivers of supply base complexity have a greater impact than detail complexity drivers. Additionally, the significance of each supply base complexity driver was found for six operational aspects of performance, which helps managers to determine the priorities of each driver over another in managing supply base complexity. Finally, this thesis improves the understanding of supply base complexity by distinguishing between sub-dimensions of both supply base complexity and firm performance.