Cost estimation accuracy in supply chain design

Abstract

PurposeThe purpose of this paper is to investigate how management attention and supply chain complexity affect the decision-making process and cost estimation accuracy of supply chain design (SCD) decisions.Design/methodology/approachThe research follows an embedded case study design. Through the lens of the behavioural theory of the firm, the SCD decision process and realised outcomes are investigated through longitudinal data collection across ten embedded cases with varying degrees of supply chain decision-making complexity and management attention.FindingsThe findings suggest that as supply chain decision-making complexity increases, cost estimation accuracy decreases. The extent to which supply chain decision-making complexity is readily recognised influences the selection of strategies for information search and analysis and, thus, impacts resulting cost estimation errors. The paper further shows the importance of management attention for cost estimation accuracy, especially management attention based on conflicting goals induce behaviours that improve estimation ability.Research limitations/implicationsA framework proposing a balance between supply chain decision-making complexity and management attention in SCD decisions is proposed. However, as an embedded case study the research would benefit from replication to externally validate results.Originality/valueThe method used in this study can identify how supply chain complexity is related to cost estimation errors and how management attention is associated with behaviours that improve cost estimation accuracy, indicating the importance of management attention in complex supply chain decision-making.