An Investigation of Visibility and Flexibility as Complements to Supply Chain Analytics: An Organizational Information Processing Theory Perspective

TLDR

Many businesses are seeking to develop and exploit analytics capabilities today. Using OIPT, we study demand visibility and supply visibility as foundational resources for analytics capability, and organizational flexibility as a complementary capability. We further examine relationships among these factors under varying conditions of market volatility, a type of environmental uncertainty. Our analysis of 191 global firms shows that demand and supply visibility foster analytics capability, which in turn drives operational performance when coupled with organizational flexibility, especially in volatile markets, extending OIPT and offering managerial guidance.

Abstract

Many businesses are seeking to develop and exploit analytics capabilities today. Using organizational information processing theory (OIPT), we study demand visibility and supply visibility as foundational resources for analytics capability, and organizational flexibility as a complementary capability. We further examine relationships among these factors under varying conditions of market volatility, a type of environmental uncertainty. The results from our analysis of data from 191 global firms indicate that both demand and supply visibility are associated with the development of analytics capability. In turn, analytics capability is shown to be more strongly associated with operational performance when supply chain organizations also possess organizational flexibility needed to act upon analytics‐generated insights quickly and efficiently. Furthermore, the empirical results indicate that analytics capability and organizational flexibility are more valuable as complementary capabilities for firms who operate in volatile markets, rather than in stable ones. These findings extend OIPT to create a better understanding of contemporary applications of information processing technologies, while also providing theoretically grounded guidance to managers in the development of analytics capabilities within their firms.