Managing product variety in multinational corporation supply chains: A simulation study

Purpose - For manufacturing enterprises, today's business environment is characterised by globally dispersed supply and manufacturing networks. In addition, the level of variety in products continues to increase in almost all sectors. Greater understanding of the management of product variety in international operations is required. Aims to discuss this issue. Design/methodology/approach - A generic simulation model representing a multinational corporation (MNC) supply chain is used to investigate the impact on supply chain performance of increasing product variety in combination with supply lead-time and demand uncertainty in an international setting. The simulation focuses on the upstream activities of production planning, inbound supply and manufacturing. The structure and logic of the simulation model are based on insights obtained from an empirical study of real MNC supply networks. Findings - The study shows that increasing the level of product variety has a detrimental impact on supply chain performance. In the presence of supply lead-time and demand uncertainty, high levels of variety result in much longer flow times and much higher system inventory relative to more stable conditions. The impact is greatest when variety involves critical materials which are required early in the production process and that entail long set-up times. Research limitations/implications - The study could be extended to incorporate more advanced inventory control models, the inclusion of downstream activities, multiple manufacturing sites and multiple potential supply routes. Practical implications - Implications for the selection of suppliers and for inventory control policies are discussed in the context of international operations. The potential value of postponement strategies and the need in some cases for fundamental product and process redesign to mitigate the negative impacts of variety are highlighted. Originality/value - Managing product variety in the context of international operations has received very little attention to date in the research literature. This study quantifies the potential impact of increasing product variety on supply chain performance in an international setting.