BUS606: Operations and Supply Chain Management

The linkage of uncertainty to supply chain management is not new in the literature and the concept of supply chain uncertainty has been widely defined and operationalized throughout the years. Several studies in the operations management and green supply chain literature have developed models incorporating business or demand uncertainty as a key contextual variable. For example, demand uncertainty was found to attenuate the positive effect of supply chain integration on delivery performance. Lo uncovered a relationship between demand uncertainty, the firm's position in the supply chain, and the environmental practices. Business uncertainty taking the form of industry munificence was also found to be contributing to an increase of the risk propensity to invest in reverse supply chain activities.

The notion of uncertainty has also been used to characterize dimensions of supply chain complexity and supply chain risk. Conceptualizing uncertainty as the 'dynamic' dimension of supply chain complexity, Bozarth et al. found a negatively and significant link between uncertainty and manufacturing performance.

In this paper, uncertainty is defined as the degree of unreliability and unpredictability associated with different activities along the supply chain. Supply chain uncertainty then becomes the unreliability and unpredictability pertaining to suppliers' activities, internal operations, and customers' requirements. For example, upstream uncertainty captures issues related to suppliers' poor delivery reliability or defective rates of incoming lots. The equipment reliability (or lack of) and the extent of production scheduling changes are elements of internal uncertainty. The customer's order changes and demand variability (e.g., quantity demanded) are associated with downstream uncertainty.