Investigating the role of demand planning as a higher-order construct in mitigating disruptions in the European supply chains

Abstract

PurposeThe goal of the paper is twofold. First, it aims to empirically conceptualize whether a wide array of fragmented demand planning activities, performed in supply chains, can be logically categorized into actionable sets of practices, which then form a broader conceptualization of the demand planning process. Second, regarding certain contextual factors, our research seeks to investigate the contribution of demand planning, as a higher-order construct, to mitigating disruptions induced by operational risks in supply chains.Design/methodology/approachIn this study, PLS-SEM was used to estimate the reflective-formative nature of the model. The results of PLS-SEM were additionally complemented by the assessment of the predictive power of our model. Finally, to reveal possible contingency effects, the multigroup analysis (MGA) was conducted.FindingsThe study suggests that demand planning process (DPP) is a second-order construct that is composed of four sets of practices, including goal setting, data gathering, demand forecasting, communicating the demand predictions and synchronizing supply with demand. The study also reveals that the demand planning practices, only when considered together, as a higher-order factor, significantly contribute to mitigating disruptions driven by operational risks. Finally, the research shows that the strength of the impact of demand planning on disruptions is contextually dependent.Research limitations/implicationsWhile the study makes some important contributions, the obtained findings ought to be considered within the context of limitations. First, the study only investigates disruptions driven by operational risks, ignoring the negative consequences of environmental risks (terrorist attacks, natural disasters, etc.), which may have a far more negative impact on supply chains. Second, the sample is mostly composed of medium and large companies, not necessarily representative of demand planning performed by the entire spectrum of companies operating in the market.Practical implicationsThe study shows that to effectively mitigate disruptions induced by operational risks, the demand planning practices should be integrated into a higher-order construct. Likewise, our research demonstrates that the intensity of demand planning process is contingent upon a number of contextual factors, including firm size, demand variability and demand volume.Social implicationsThe study indicates that to mitigate disruptions of operational risk, demand planning as a higher-order dynamic capability can be referred to the concept of organizational learning, which contributes to forming a critical common ground, ensuring the balance between formal and informal dynamic routines.Originality/valueThe paper depicts that to fully deal with disruptions, the demand planning practices need to be integrated and categorized into the dedicated higher-order. This may lead to forming demand planning as a higher-order dynamic capability that provides a more rapid and efficient rebuttal to any disruptions triggered by operational risks.