Analysing and managing upstream manufacturing supply complexity

Contemporary businesses operate in complex supply chains consisting of multiple entities dispersed across geographical locations with complicated cross-functional interactions. Complexity arises from the large number of elements within the system and the degree to which these elements are differentiated. In the manufacturing sector, the upstream side of the supply chain consists of suppliers of components/raw materials and managing suppliers can account for up to 80% of actual costs. While numerous researchers have investigated the issue of supply chain complexity, there is paucity of empirical research on this issue in Saudi Arabia and the ensuring benefits from maintaining the network of suppliers (i.e., supply network) and utilizing firm competencies has not been seen.<br><br>To respond to this issue, this research develops a conceptual framework that can be used as a diagnostic tool to understand the factors that create complexity on the upstream side of the supply chain as well as the firm competencies that can help to reduce complexity. The interaction of upstream complexities and purchasing competences on supply chain performance is measured with appropriate metric scale measuring reliability, responsiveness, agility, cost and asset management.<br><br>The research was conducted using a mixed methods approach. In the first phase, a focus group and case study method were adopted to investigate the context of each firm. This was followed by a questionnaire sent to 1600 companies from different manufacturing sectors. The analysis of survey data with structural equation modelling validated the study hypotheses of significant causal relationships between purchasing competences, upstream supply complexity and supply chain performance. The findings further highlight a set of relationships between the upstream supply chain configuration elements and purchasing competences. The study shows how firms can continually seek integration across both inter-firm and intra-firm level elements and promote specific purchasing competences in reducing upstream complexity to achieve improved supply chain performance.