Improving performance of supply chains by reducing variability

Concerning supply chain management (SCM), companies nowadays face challenges like shrinking product life cycles, the proliferation of product variants, and increasing uncertainty on both the demand and the supply side. Dealing with that uncertainty is a major issue for supply chain managers. Usually, there are three main possibilities to handle uncertainty: one can either hold safety inventory, or hold safety capacity, or reduce uncertainty (variability) by using enhanced information. These three strategies constitute the so-called Operations management (OM) triangle. This study analyzes whether and how variability can be reduced to improve process performance of supply chains by combining the concepts from SCM with the OM triangle, focusing on the role of information and its capability for reducing variability. As one result 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. Generally, the results may help to organize the broad field of action to properly handle variability within supply chains.