Production Planning & Control,

Vol. 16, No. 1, January 2005, 2131

Operations planning and exibility
in a supply chain
DOMENICO APRILE*, A. CLAUDIO GARAVELLI
and ILARIA GIANNOCCARO
Dimeg Politecnico di Bari, Viale Japigia 182, 70126 Bari, Italy
In dynamic competitive markets, the exibility of manufacturing system networks such as
supply chains (SCs) is particularly interesting. The SC exibility considered in this paper takes
into account two main aspects: the process exibility of each SC rm and the logistics
exibility concerning the possible connections between suppliers, assemblers and markets.
Dierent congurations of an SC are proposed, in correspondence to dierent degrees of
the process and logistics exibility. The eects of SC exibility are then investigated on the
operations planning performance of an SC subject to production capacity uncertainty and
coping with demand volume and mix variability. In particular, an optimization model
is dened to analyse the SC performance in every SC conguration. Managerial guidelines,
supporting the management of selecting the appropriate degrees of exibility and the
corresponding SC conguration to be adopted, are nally obtained.
Keywords: Supply chain; Process and logistics exibility; Operations planning; Performance
1. Introduction
A supply chain (SC) is a network of organizations
involved in dierent processes and activities producing
value in the form of products and services in the hands
of the ultimate customer (Christopher 1992). Supply-
chain management (SCM) concerns the integrated and
process-oriented approach to the design, management
and control of the SC, with the aim of producing
value for the end customer, by both improving customer
service and lowering cost (Bowersox and Closs 1996,
Giannoccaro and Pontrandolfo 2002).
SCM mainly involves two classes of managerial
problems at dierent levels: conguration, dealing with
the design of the SC at a strategic level, and coordina-
tion, concerning the management of the SC network
prevalently under tactical and operative levels
(Giannoccaro and Pontrandolfo 2001).
Within SCM, a critical role is played by exibility,
which is considered a crucial weapon to increase
competitiveness in a turbulent marketplace (Upton
1994). In fact, SCs have to deal with many sources of
uncertainty, such as customer demand, supply quality
and lead-time, and information delay (Giannoccaro
et al. 2002).
In the literature, there are many studies on exibility
of manufacturing systems, but most of them are limited
to the single-rm perspective, and focused on the main
factors inuencing the manufacturing exibility, in
particular pointing out the dependence of exibility
on the nature of the rms internal operations and exter-
nal environment. On the contrary, as pointed out by
Duclos et al. (2001), there are not many specic works
that investigate exibility in the SC. SC exibility
extends the concept of exibility of manufacturing
systems to the entire SC. It encompasses not only
the manufacturing exibility, but also the exibility of
the dierent SC functions and processes, e.g. market-
ing, supply, distribution and transportation (Vickery
et al. 1999). *Corresponding author. Emails: daprile@poliba.it
Production Planning & Control
ISSN 09537287 print/ISSN 13665871 online # 2005 Taylor & Francis Ltd
http://www.tandf.co.uk/journals
DOI: 10.1080/09537280412331313348
Given the critical role played by exibility in SCM
and due to the limited literature on the topic, more
studies are needed to investigate the eects of the dier-
ent types and degrees of SC exibility required to cope
with several sources of SC uncertainty. This paper
intends to oer a contribution in this research direction.
In particular, two dierent types of SC exibility
(process and logistics) are considered here. Generally,
in the literature such dimensions have been either sepa-
rately analysed, or studied with respect to a single rm
more than to the SC as a whole. Our aim is to analyse
the benets on SC performance due to dierent degrees
of process and logistics exibility and to study the syner-
gic eects coming from the simultaneous design of two
logistics networks, namely supply and distribution.
While this latter aspect has been studied by many
scholars with respect to coordination problems
(Bhatnagar et al. 1993, Whang 1995, Thomas and
Grin 1996, Sarmiento and Nagi 1999, Ballou et al.
2000), it has been seldom emphasized in SC congura-
tion problems.
To pursue this aim, a model is proposed for the
evaluation of the eects of dierent degrees of SC ex-
ibility on the operations planning performance of a
multi-product SC, subject to variable market demand
and production uncertainty, and made up of several
customers, assembly facilities and suppliers sites.
Dierently from other simulation studies aimed at
assessing SC performance such as lead-time and work-
in-process (e.g. Garavelli 2003), a demand assignment
problem is investigated in order to maximize the produc-
tion planning performance of the SC. This is consistent
with other studies focused on the exibility of a single-
stage manufacturing system (e.g. Albino and Garavelli
1999). By this model we intend to derive some guidelines
for the design and, in particular, for the selection
of exibility degrees of SCs which t our model
hypotheses.
The paper is organized as follows. In section 2, the SC
exibility is pointed out. In section 3, dierent SC ex-
ibility congurations are described. In section 4, a linear
programming model is developed for a multi-product SC
facing a stochastic market demand. In section 5, the
performance analysis of a sample case of SC is carried
out. Final considerations are reported in section 6.
2. Supply-chain exibility
Flexibility is a complex and multi-dimensional concept,
dicult to summarize (De Groote 1994, Sarker et al.
1994, Upton 1994, Gupta and Buzacott 1996).
According to a common denition, exibility reects
the capacity of a manufacturing system to adapt
successfully to changing conditions, coming from inside
the system as well as from the environment.
From an operational perspective, one of the most
interesting aspects of the exibility concerns the content
of change, i.e. exibility of product, mix, volume, etc.
(e.g. Browne et al. 1984, Sethi and Sethi 1990, Hyun
and Ahn 1992, Gerwin 1993, DSouza and Williams
2000, Vokurka and OLeary-Kelly 2000).
Although the studies available on the specic subject
of SC exibility are not very numerous yet, it is possible
to nd a few denitions of SC exibility, which usually
include the dierent types of manufacturing exibility,
the exibility of the SC functions and the SC processes.
For instance, Vickery et al. (1999) propose the
following types of SC exibility: product, volume,
launch, access and target market. Viswanadham and
Raghavan (1997) consider volume, mix, routeing, deliv-
ery time and new product exibility. Duclos et al. (2001)
identify six components, i.e. product system, market,
logistics, supply, organizational and information system
exibility.
The SC exibility addressed in this paper takes into
account two main dimensions: (i) the process exibility
of each SC rm, concerning the number of product
types that can be manufactured in each production site
(supplier or assembler), and (ii) the logistics exibility,
related to the dierent logistics strategies, which can
be adopted either to release a product to a market
(downstream or distribution exibility) or to procure
a component from a supplier (upstream or procurement
exibility).
While the process exibility is a well-known type of
manufacturing system exibility (Jordan and Graves
1995, Garavelli 2001), the logistics exibility can be
properly referred to the routeing exibility at the shop-
oor level, that is the ability of using alternative routes
to move the work-in-process through dierent resources
oering the same processes (Ho and Moodie 1996, Das
and Nagendra 1997). Logistics exibility is then here
intended as the possibility of shifting the production
assignment of an item (component or nal product) to
dierent sites of a given stage of the SC, allowing the
negative impact of demand and process variability on
the SC performance to be reduced.
As far as the process exibility is concerned, the costs
associated with the plant capability of producing dier-
ent items usually grow with the number of items. In most
cases then, due to the high exibility investments and
management costs required, it is not economic to
produce all the items required by the global market in
all the plants of a company (total exibility), which
would be the case of the multi-domestic conguration,
where local plants have to deal with a certain product
dierentiation from one local market to another.
22 D. Aprile et al.
From the opposite side, the focused factory congura-
tion of a company, i.e. the specialization of each plant in
a given production phase or in a few products (such as a
product family) not released by other plants (no exibi-
lity conguration), can also prove neither ecient nor
eective, due for instance to the higher logistics costs
and lower system exibility, respectively.
An intermediate level of process exibility has been
introduced by Jordan and Graves (1995). In fact, refer-
ring to the production planning problem of a multi-
plant company, they have shown the advantages of
limited exibility, i.e. a conguration of plants and
products that, chained together in forming the longest
close loop, provides most of the benets of the total
exibility conguration without requiring the corre-
sponding investments and management costs. The
concept of limited exibility is here considered in order
to analyse three dierent situations for any production
site (supplier or assembler): each site produces (a) one,
(b) a limited number and (c) all the product or compo-
nent types, corresponding to the degrees of no, limited
and total exibility, respectively. In the model, the
process exibility is split between two variables, namely
the assembler and supplier exibility.
As far as the logistics exibility is concerned, it
involves dierent SC logistics strategies, which can be
adopted in the procurement and distribution processes.
The selection of a certain type of supplier can depend,
for instance, on either the critical role of the component
or the complexity of the logistics. Dierent procurement
policies are then considered in the model, namely the
single, the double and the multiple sourcing. This
means that each assembler can purchase the needed
components from (according to an increasing value of
exibility): one (no), more than one (limited), all the
available suppliers (total), respectively. Similarly,
dierent distribution policies can be considered. In
particular, each assembler can deliver its products
to the local market (no), to more than one market
(limited) and/or to all the markets (total).
3. SC exibility congurations
Referring to the SC exibility considered in the
previous section, we dene an SC conguration as a
set of customers (nal markets), manufacturing sites
(suppliers and assemblers), each releasing a certain
number of components or product types (process
exibility), and logistics links between suppliers and
assemblers as well as between assemblers and markets
(logistics exibility). Therefore, an SC conguration
is based on four exibility variables, as reported
in table 1.
It is worth noting that, under some working hypo-
thesis (demand market mean is equal to assembler/
supplier capacity, all the products have the same prot
margin, distribution and/or supply channels have the
same cost, assembler/supplier set-up and idle time
are not considered), not all the combinations of the
values of the SC exibility variables generate feasible
SC congurations.
First of all, referring to the intermediate degree of
exibility, according to the denition of limited exi-
bility provided by Jordan and Graves (1995) and
considering a generic system made by N plants and N
markets (each market demanding the same N products),
N2 limited exibility congurations can be considered.
Each of them is characterized by Q products manufac-
tured by each plant, with 2 Q<N. When a higher Q is
considered, the exibility of each plant increases.
However, for the sake of brevity, we consider just the
limited exibility conguration with Q2, since it
provides the best costbenet tradeo, at least for a
single stage of the SC (i.e. supplierassembler or
assemblermarket). This implies that, referring to the
process exibility, every supplier (assembler) produces
two components (products), while referring to the
logistics exibility, every supplier (assembler) can deliver
its components (products) to two dierent assemblers
(markets).
Referring to the distribution part of the SC, made up
of assemblers and markets (in gures 1 and 2, an
example is reported with N5), in correspondence of
the no exibility option, every assembler produces just
one product (from A to E). In this case, every assembly
plant provides every market with its own product. This
involves distribution links between every assembler and
market (total option) (gure 1a). In the case of the
limited exibility option, given that every assembler
produces a limited number of products, it is necessary
to connect every assembler with all the markets, in order
to serve all of them (gure 1b). In correspondence with
the total exibility, every plant assembles all the pro-
ducts. In this case it can adopt dierent distribution
strategies, namely choosing among no, limited and
total options (gure 2).
Referring to the procurement part of the SC, made up
of suppliers and assemblers, it is possible to extend the
above considerations. In particular, in correspondence
with the no exibility conguration every supplier plant
produces just one component, while in the total exibil-
ity conguration every supplier manufactures all the
components. In between, there is the limited exibility
conguration, where every supplier produces two com-
ponents. In this part of the SC, since the assembler
plants demand dierent products according to their
planned exibility, the logistics links between suppliers
Operations planning and exibility in a supply chain 23
and assemblers do not depend only on the supplier
exibility, but also on the assembler one. Therefore, in
this situation it is necessary rst to consider all
the combinations resulting from the supplier and the
assembler exibility, and then it is possible to infer the
logistics options that are available.
Nine combinations are then obtainable by amalga-
mating the supplier and the assembler exibility
(gure 3). In correspondence with the combination 1, 2,
3, 4, 6, 7 and 8, only one option of links between
the suppliers and the assemblers is possible, namely no,
limited, total, limited, total, total and total, respectively.
In correspondence with combination 5, suppliers can
choose to deliver only to the local assemblers (no), or to
all the assemblers that require the components (limited).
Table 1. The SC exibility variables.
Type Variable Options
Process exibility Assembler exibility No, limited, total
Process exibility Supplier exibility No, limited, total
Logistics exibility Procurement exibility No, limited, total
Logistics exibility Distribution exibility No, limited, total
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B
B/C
C/D
D/E
E/A
Assemblers Markets
Products Products (a)
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A
B
C
D
E
Assemblers Markets
Products Products
(b)
Figure 1. Constrained logistics options for no and limited assembler exibility.
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
Assemblers Markets
Products Products
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
Assemblers Markets
Products Products
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
Assemblers
Products Products
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
Markets
Figure 2. Dierent logistics exibility options for total assembler exibility.
Total
7
PF: total
8
PF: total
9
PF: no,
limited,
total
Limited
4
PF: limited
5
PF: no,
limited
6
PF: total
No
1
PF: no
2
PF: limited
3
PF: total
Supplier
flexibility
No Limited Total
Assembler flexibility
Figure 3. Feasible combinations of the procurement exibility
(PF) with the supplier and assembler exibility.
24 D. Aprile et al.
In the case of combination 9, all three logistics options are
available.
Based on the above considerations about, on the one
side, feasible combinations of assembler and distribu-
tion exibility (gures 1 and 2) and, on the other side,
feasible combinations of supplier, assembler and
procurement exibility (gure 3), it is possible to dene
22 SC exibility congurations. In fact, given that when
the assembler is characterized by total exibility, three
dierent distribution options are available, combina-
tions 3 and 6 generate three dierent congurations
each (3.1, 3.2, 3.3; 6.1, 6.2, 6.3), and the combina-
tion 9 generates nine SC congurations (9.1 to 9.9).
In gure 4, conguration 1 and conguration 9.1 are
depicted as an example.
4. The operations planning model
Let us consider a two-stage SC (i.e. suppliers,
assemblers and nal markets), which produces P
products and serves N customer markets located in
dierent geographic areas. Each stage involves several
production units (K suppliers and M assemblers), which
are localized in dierent geographic places. Each
market i demands D
pi
product units for each product
family p. Demand D
pi
is a stochastic variable (gure 5).
For the sake of simplicity, we assume that the
assembler for each product p needs to purchase a single
component from the supplier. Therefore, the supply
stage totally produces P components.
Let AC
j
be the (total) production capacity of the
jth assembler and x
p
ij
(with x
p
ij
0 if j do not make p)
the demand share expressed by the ith market, referred
to the pth product, assigned to the jth assembler.
The production system of the assembler is considered
as a exible ow line, that can manufacture any
production mix required, so that the quota of AC
j
(namely AC
p
j
) allocated from the jth assembler to the
pth product depends on the demand volume and
mix required.
Let SC
k
be the supply capacity of the kth supplier and
x
p
jk
(x
p
jk
0 if k do not make p) the supply capacity share
of the pth product supplied by the kth supplier to
the jth assembler. AC
j
and SC
k
are stochastic variables.
According to assembly stage, the quota of SC
j
(namely
SC
p
j
) allocated from the kth supplier to the pth product
depends on the demand volume and mix required.
The SC operations planning problem consists in
dening the assignment of the market demand and of
the supply production capacity to the assemblers, so as
to optimize the SC performance in a given planning
horizon.
The performance analysed is the expected lost sales
in the planning horizon. Therefore, the problem can
be formulated in order to maximize the total produced
quantity in the planning horizon, which is equivalent
to minimize the lost sales.
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A
B
C
D
E
a
b
c
e
d
Suppliers Assemblers Markets
Components Products Products
Configuration 1
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
A/B/C/D/E
a/b/c/d/e
a/b/c/d/e
a/b/c/d/e
a/b/c/d/e
a/b/c/d/e
Suppliers Assemblers Markets
Components Products Products
Configuration 9.1
Figure 4. Two examples of SC congurations.
AC
j
SC
k
D
pi

x
ik
x
ij

Supply stage Assembly stage Markets
Figure 5. The SC model.
Operations planning and exibility in a supply chain 25
The following linear programming model is dened:
max z
X
M
i
X
N
j
X
P
p
x
p
ij
~
DD
pi
1
subject to
X
P
p
X
M
i
x
p
ij
~
DD
pi
A
~
CC
j
, 8j 2
X
M
i
x
p
ij
~
DD
pi

X
K
k
x
p
kj
S
~
CC
k
0, 8j and 8p 3
X
M
i
x
p
ij
1 8i and 8p 4
X
P
p
X
N
j
x
p
kj
1 8k 5
x
p
ij
, x
p
kj
0 8i, 8j, 8k and 8p 6
Constraint (2) involves that the sum of the demand
allocated to each assembler does not exceed the
assembler production capacity.
Constraint (3) balances the supply with the demand.
In fact, it assures that the total quantity provided by the
suppliers (i.e. the supply) is equal to the actual total
quantity produced by the assemblers (i.e. the demand).
Constraints (4), (5) and (6) are necessary to achieve
a feasible solution.
5. Performance analysis
A performance analysis is carried out to compare dier-
ent SC exibility congurations subject to demand and
capacity variability, assuming NMP5. This com-
parison is based on the consideration that the proper
choice among dierent degrees of exibility depends
on a costbenet analysis, which takes into account,
on the one hand, higher investments and
management costs required by the exibility increase
and, on the other hand, related better operations
planning performance. This tradeo is just qualitatively
addressed in this model, which is aimed at assessing and
comparing the performance of limited exibility SC
congurations that implement approximately 25% of
the exibility totally achievable (i.e. one additional
product or component over four per plant).
The expected lost sales in each SC conguration are
obtained by solving T times (T10,000) the stochastic
linear programming model proposed in section 4.
The SC is subject to two dierent sources of
uncertainty, namely demand and capacity variability.
In particular, two dierent patterns of demand vari-
ability are taken into account: volume and mix
variability. When demand variability is limited to
product volume, the demand mix is equal to 20% for
each product in each market. When mix variability is
considered, the product volume is equal to 1,000, and
each product share is determined by the normalization
of each random product share value. Moreover, two
dierent degrees of demand uncertainty are considered
(i.e. high and low variability). In table 2, the dierent
demand uncertainty patterns are shown.
Two dierent patterns of uncertainty for the assem-
bler and supplier capacity are also considered. They are
modelled by adopting a uniform distribution as shown
in table 3. Combining the uncertainty degrees of
demand and capacity, four dierent settings are
dened for every demand variability pattern (i.e. volume
and mix).
The analysis of results is carried out in two steps. First
(subsection 5.1) we focus on the congurations
characterized by higher logistics exibility in both
procurement and distribution. In this way, it is possible
to analyse the eect of process exibility, regardless
of the inuence of logistics exibility. The analysed
SC congurations are reported in table 4.
Subsequently (subsection 5.2), to investigate the eect
of the logistics exibility, we compare the performance
achieved by the SC congurations characterized by the
Table 2. Demand variability and uncertainty patterns.
Demand variability pattern Variable Probability distribution function
Volume
Low variability (LV_D) Total market demand: Uniform [900, 1,100]
High variability (HV_D) Total market demand: Exponential [1,000]
Mix
Low variability (LV_D) Product share: Uniform [18, 22]
High variability (HV_D) Product share: Exponential [20]
26 D. Aprile et al.
two extreme degrees of logistics exibility for each
possible combination of supplier and assembler exibi-
lity (table 5). In this case, only the two extreme settings
are considered, characterized by low demand and
capacity uncertainty and high demand and capacity
uncertainty, respectively.
5.1 Eects of the process exibility
For each demand variability pattern, and for all the
uncertainty settings, the SC performance improves as
the process exibility increases (tables 6 and 7).
However, limited exibility congurations perform
quite similarly to the total exibility ones, so that the
former ones have to be preferred to the latter ones
regardless of the exibility costs. Below we discuss in
detail the results for each pattern of demand variability
in each setting.
5.1.1 Demand volume variability. The congurations
characterized by limited degrees of exibility (C5.2,
C6.3 and C8) achieve the same performance as the
most exible conguration (C9.9) in all the uncertainty
settings (table 6). Then, it is not benecial for a limited
exible SC (C5.2) to increase the exibility of either the
supply or the assembly stage (C6.3, C.8 and C9.9).
It is also possible to group the SC congurations
in four classes, each of them characterized by similar
performances, namely C1; C2 and C3.3; C4 and C7;
C5.2, C6.3, C8 and C9.9.
In setting (1), lost sales are quite low and the
dierence between the best and the worst performance
is limited to 2.15%.
In setting (2), due to the increase of demand
variability, the performance considerably decreases,
but the dierence between the best and the worst
value is still quite low (4.86%). Notice that a high degree
of process exibility at the supplier sites is more
benecial than at the assembler sites. In fact, C2 and
C3.3, characterized by no supplier exibility, achieve
a worse performance than C4 and C7, which are
characterized by no assembler exibility.
In setting (3), when the demand variability is low
and the production capacity variability is high, the lost
sales increase, but less than in setting (2). However,
the dierence between the best and the worst perfor-
mance is higher (7.88%). Opposite to setting (2),
in this case C2 and C3.3 perform much better than
C4 and C7, which perform very close to the total
exible conguration. Therefore, to cope with high
capacity uncertainty, high degrees of process exibility
are more appropriate at the assembler sites.
In setting (4), there is a general decrease of perfor-
mance, since lost sales are high as well as the
dierence between the best and the worst performance
(7.11%).
Table 4. SC congurations and process exibility.
SC congurations Supplier
exibility
Assembler
exibility
Procurement
exibility
Distribution
exibility
C1 No No No Total
C2 No Limited Limited Total
C3.3 No Total Total Total
C4 Limited No Limited Total
C5.2 Limited Limited Limited Total
C6.3 Limited Total Total Total
C7 Total No Total Total
C8 Total Limited Total Total
C9.9 Total Total Total Total
Table 5. SC congurations and logistics exibility.
SC
congurations
Procurement
exibility
Distribution
exibility
C3.1 Total No
C3.3 Total Total
C5.1 No Total
C5.2 Limited Total
C6.1 Total No
C6.3 Total Total
C9.1 No No
C9.5 Limited Limited
C9.9 Total Total
Table 3. Capacity uncertainty patterns.
Capacity Probability distribution function
Low variability (LV_C) Uniform [900, 1,100]
High variability (HV_C) Uniform [500, 1,500]
Operations planning and exibility in a supply chain 27
5.1.2 Demand mix variability. When the demand mix
varies, the congurations C5.2, C6.3, C8 and C9.9
achieve an equivalent performance only in the case of
low demand variability. The same result holds for
the couples of congurations C2 and C3, C4 and C7
(table 7). However, the dierences among these
groups of congurations remain negligible as the
demand variability increases.
In setting (1), lost sales are low. As the SC exibility
increases, the performance improvement is quite low. In
fact, the dierence between the best and worst result
is 2.43%.
Compared to setting (1), in setting (2) the SC per-
formance signicantly decreases in all the congura-
tions, but the eect of process exibility is very
considerable, since it improves the SC performance
as the SC exibility degree increases. Moreover, as
observed in the case of demand volume variability, the
increase of the process exibility at the supplier sites
is more benecial than on the assembler ones.
In setting (3), the eect of production capacity
variability can be observed. In this setting, SC perfor-
mance is similar to the case of demand volume vari-
ability. However, here the dierence between the best
and the worst performance (8.05%), even if higher
than in setting (1), is lower than in setting (2)
(17.11%). As for the demand volume variability, the
results show that it is better to increase the process
exibility at the assembler sites rather than at the
supplier ones.
In setting (4), a general decrease of the SC perfor-
mance is measured. Here the performance dierence
between the less and most exible conguration rises
to 17.88%, emphasizing the benecial impact of exi-
bility on the SC, at least as the limited degree of
exibility is reached.
5.2 Eects of the logistics exibility
To evaluate the eects of the logistics exibility,
we compare the performance achieved by the SC
congurations C3.1 and C3.3; C5.1 and C5.2; C6.1
and C6.3; C9.1, C9.5 and C9.9 (see table 5). The results
are shown in table 8.
As the logistics exibility increases, lost sales decrease
for all SC congurations in all the settings and for both
demand variability patterns.
For both SC congurations C3 and C6, character-
ized by total process exibility at the assembler stage,
the increase of the distribution exibility from no
(3.1 and C6.1) to total (3.3 and C6.3) yields its main
Table 6. Lost sales performance under volume variability.
(1) (2) (3) (4)
SC congurations LV_D & LV_C HV_D & LV_C LV_D & HV_C HV_D & HV_C
C1 4.35% 25.28% 13.91% 28.84%
C2 3.06% 22.68% 6.70% 23.77%
C3.3 3.10% 22.68% 6.70% 23.75%
C4 3.05% 20.49% 12.60% 23.76%
C5.2 2.20% 20.42% 6.03% 21.69%
C6.3 2.20% 20.42% 6.03% 21.69%
C7 3.05% 20.48% 12.60% 23.73%
C8 2.20% 20.42% 6.03% 21.69%
C9.9 2.20% 20.42% 6.03% 21.69%
Table 7. Lost sales performance under mix variability.
(1) (2) (3) (4)
SC congurations LV_D & LV_C HV_D & LV_C LV_D & HV_C HV_D & HV_C
C1 4.19% 22.82% 13.81% 26.70%
C2 2.84% 18.65% 6.59% 19.56%
C3.3 2.84% 18.65% 6.59% 19.48%
C4 2.85% 16.90% 12.54% 19.64%
C5.2 1.76% 6.32% 5.76% 9.51%
C6.3 1.76% 6.21% 5.76% 9.20%
C7 2.85% 16.87% 12.54% 19.55%
C8 1.76% 5.90% 5.76% 9.20%
C9.9 1.76% 5.71% 5.76% 8.82%
28 D. Aprile et al.
benets in the demand volume variability pattern, while
the impact is far lower in the demand mix one.
The performance of SC congurations C5.1 and C5.2
is quite good for both variability settings, so that the
increase of the procurement exibility from no (5.1) to
limited (5.2) provides considerable benets also in the
demand mix variability pattern.
As expected, the best performance is achieved by
the SC conguration C9.9, characterized by total process
and logistics exibility. However, the performance of
SC conguration C9.5, characterized by limited logistics
exibility (in both procurement and distribution), is
similar to C9.9. Therefore, C9.5 qualitatively appears as
a conguration with a better tradeo between logistics
exibility costs and SC performance.
Comparisons between SC congurations character-
ized by similar performance but dierent degrees of
process, procurement and/or distribution exibility are
possible, but they require considerations about the
costs of the dierent types of exibility. However, it
can be qualitatively observed that the SC congura-
tion C5.2, with a limited degree of procurement exi-
bility (and limited process exibility at both supplier
and assembler stages), provides SC performance very
close to more exible SC congurations, showing
again the advantages of limited exibility.
5.3 Discussion of the results
From the performance data analysis, it is possible to
infer the following guidelines about the selection of a
proper exibility degree for SC congurations which
t the model hypotheses:
(a) The limited process exibility (at either supplier or
assembler stages) yields tangible benets to the SC
performance. In fact, an increase of the process
exibility degree from limited to total does not
improve the SC performance in the case of
demand volume variability, while the improve-
ment is not relevant in the case of demand mix
variability. The SC conguration with limited
process exibility at both supplier and assembler
stages then provides a good tradeo between SC
performance and cost.
(b) Higher process exibility in the supply stage
allows high demand variability to be faced,
producing better SC performance. On the cont-
rary, in the case of high capacity uncertainty,
higher process exibility in the assembler stage
is more benecial. These interesting behaviours,
in particular, can be observed in correspondence
of any demand variability pattern (mix or
volume).
(c) An increase of the logistics exibility degree,
within the feasible congurations, improves the
SC performance in every situation, even though
the improvement can be insignicant in some
cases. The limited logistics exibility results are
very eective, in both cases of limited and total
process exibility.
6. Conclusions
This paper has addressed the topic of SC exibility
by focusing on two types of exibility playing a critical
role in SC management, namely process and logistics
exibility. Two main aspects have emerged from the
study.
The rst aspect concerns the design of SC congura-
tions, based on several options of exibility. The SC
conguration feasibility, resulting from the combina-
tion of dierent degrees of process and logistics
exibility, has been investigated. The study has pointed
out that when the SC is taken into account, the process
Table 8. Lost sales performance.
Volume Mix
(1) (4) (1) (4)
SC congurations LV_D & LV_C HV_D & HV_C LV_D & LV_C HV_D & HV_C
C3.1 3.92% 39.04% 3.33% 21.36%
C3.3 3.06% 23.75% 2.84% 19.48%
C5.1 3.63% 26.83% 3.37% 17.13%
C5.2 2.20% 21.69% 1.76% 9.51%
C6.1 3.62% 38.93% 2.82% 14.25%
C6.3 2.20% 21.69% 1.76% 9.20%
C9.1 5.02% 44.83% 4.15% 20.76%
C9.5 2.20% 25.40% 1.76% 8.89%
C9.9 2.20% 21.69% 1.76% 8.82%
Operations planning and exibility in a supply chain 29
exibility limits the choices of the SC logistics strategies
that can be adopted in supply and distribution stages.
The second aspect concerns the evaluation of the SC
performance in correspondence with dierent degrees
of exibility. A model for the optimization of the lost
sales of a multi-product SC, made up of several
customers, assembling facilities and suppliers sites, has
then been dened. It has been used to compare dierent
SC congurations under demand variability and
production capacity uncertainty. The analysis of the
results has stressed that SC congurations characterized
by limited degrees of both process and logistics exibi-
lity are often more convenient than the corresponding
total exibility ones, given that they achieve similar SC
performance but involve lower nancial eorts and
complexity. A further interesting result is that the higher
the demand uncertainty, the more benecial the exibi-
lity at the supply level, while the higher the capacity
uncertainty, the more benecial the exibility at the
assembler stage. In particular, the impact of the
demand variability on the upstream SC stages recalls
the well-known bullwhip eect, which stresses the
increase of variability moving upstream along the SC
(Lee et al. 1997).
Further developments of this study seem to be
promising. For instance, it can be interesting to consider
more SC stages or to introduce levels of asymmetry in
the SC congurations, in order to extend the analysis to
more kinds of SC congurations and to explore further
result generalizations. The relationship between the
degrees of SC exibility and the bullwhip eect could
be a further aspect to be investigated. Dierent SC
exibility dimensions could also be included in the
study, and dierent SC performances could be measured
(e.g. back orders, service level, inventory stocks).
In particular, the quantication of the tradeo between
exibility benets and costs could also be addressed
in order to provide management with a more precise
evaluation tool. This quantication seems especially
useful in those cases where SC congurations character-
ized by dierent degrees of process, procurement and/or
distribution exibility provide similar SC performance,
thus requiring the cost evaluation of the dierent types
of exibility.
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Domenico Aprile Born in Lecce on August 29th 1972, in 2001 he graduated in Computer Science
Engineering at the University of Lecce, Italy. In 2002 he got a MS in Supply Chain Management
at the University of Brescia, Italy. After that, for a short period he stayed at the Signal Lux
Company S.p.A., Milan (Italy), working on Advanced Planning/Production System/Scheduling
(APS). Since 2003 he has been attending the Ph.D. program in Advanced Production Systems at
the Politechnic University of Bari, Italy, where he is doing research on two main streams: supply
chain exibility, and bullwhip eect.
Achille Claudio Garavelli Ph.D. in Engineering Management, he has been Assistant Professor at
the University of Basilicata, Italy, since 1994. Visiting scholar in 1996 at the University of South
Florida (Tampa, USA), he was formerly Associate Professor at the University of Lecce, Italy, and
now at the Polytechnic University of Bari, Italy. His main teaching and research areas concern
operations management, knowledge management, organisation networks. He is involved in many
national and international research projects and he is author of more than 70 papers published on
national and international journals and conference proceedings.
Ilaria Giannoccaro Born on October 9th, 1974, in 1998 she got her laurea degree in Mechanical
Engineering and in 2001 her Ph.D. in Business Engineering at the Tor Vergata University of
Rome (Italy). She is now Assistant Professor at the Polytechnic University of Bari, Italy. She is
author of more than 30 papers published on international journals and conference proceedings.
Her main research interests include supply chain management, inventory management, and
supply chain contracts. She is currently studying the application of multi-agent systems to the
analysis of industrial clusters.
Operations planning and exibility in a supply chain 31