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International Journal of Logistics

Research and Applications: A Leading
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Supply chain characteristics and

disruption mitigation capability: an
empirical investigation in China
a
Xiao-Feng Shao
a
Antai School of Management , Shanghai Jiao Tong University ,
Shanghai , People's Republic of China
Published online: 08 Jul 2013.

To cite this article: Xiao-Feng Shao (2013) Supply chain characteristics and disruption
mitigation capability: an empirical investigation in China, International Journal of Logistics
Research and Applications: A Leading Journal of Supply Chain Management, 16:4, 277-295, DOI:
10.1080/13675567.2013.815695

To link to this article: http://dx.doi.org/10.1080/13675567.2013.815695

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 International Journal of Logistics: Research and Applications, 2013
Vol. 16, No. 4, 277–295, http://dx.doi.org/10.1080/13675567.2013.815695

Supply chain characteristics and disruption mitigation

capability: an empirical investigation in China
Downloaded by [University of Southern Queensland] at 00:54 02 October 2014

Xiao-Feng Shao*
Antai School of Management, Shanghai Jiao Tong University, Shanghai, People’s Republic of China

(Received 18 June 2010; final version received 11 June 2013)

This research investigates the impact of supply chain characteristic factors on disruption mitigation capa-
bilities. We intend to derive specific supply chain factors that either contribute to or conversely impact
a firm’s supply chain disruption mitigation capabilities. We find that supply chain geographic dispersion
has a negative impact on a firm’s disruption mitigation capabilities. Supply chain agility has a positive
impact on a firm’s disruption recovery capability. Supply chain integration has direct positive impacts on a
company’s disruption warning capability and recovery capability. And supply chain visibility enhances a
company’s disruption warning capability. In addition, high level of disruption warning capability enhances
a company’s disruption recovery capability. The results offer guidelines for supply chain managers to
enhance disruption mitigation capabilities through understanding the role of supply chain characteristic
factors.

Keywords: supply chain disruption; mitigation capability; geographic dispersion; integration; agility;
visibility

1. Introduction

In today’s international competitive business environment, outsourcing and globalisation have

created longer and more complex supply chains, which are more vulnerable to business disruptions
in a turbulent world. The degree of the vulnerability of a supply chain is determined to a large
extent by the degree of complexity of the supply chain (Rossi, Noe, and Dallari 2005). Over the
last few years, many supply chains have been disrupted by a wide variety of disruptive events
such as transportation delays, port stoppages, terrorist attacks, strikes, computer virus attacks,
economic crises, accidents and natural disasters, poor communication, part shortages, quality
issues and operational issues (Finch 2004).
The cost of supply chain disruptions to a company can be of significance. Disruptions at any
point in the supply chain have the potential to cause the entire supply chain to fail. Riddalls
and Bennett (2002) show that disruptions can be costly in supply chain systems and can cause a
variety of problems such as long lead-times, stock-outs, inability to meet customer demand and
increases in costs. When major disruptions occur, many supply chains tend to break down and take
a long time to recover. The 2002 longshoreman union strike at a US West Coast port interrupted
transshipments and deliveries to many US-based firms, with port operations and schedules not
turning to normal until six months after the strike had ended (Cavinato 2004).

*Email: xfshao@sjtu.edu.cn

© 2013 Taylor & Francis

 278 X.-F. Shao

The importance of effectively managing supply chain disruptions as well as the lack of disrup-
tion mitigation capabilities of most companies has drawn considerable attention in both academia
and industry to supply chain disruption management. A lot of strategies in response to supply chain
disruptions have been identified, such as process-improvement and buffer strategies (Zsidisin,
Panelli, and Upton 2000), increase of capacity and adoption of flexibility and responsiveness
(Chopra and Sodhi 2004), information sharing, supply chain agility and collaborative relation-
ship (Faisal, Banwet, and Shankar 2006; Kleindorfer and Saad 2005). A number of researchers
have focused on supply chain disruption management in different industries, such as retail indus-
try (Oke and Gopalakrishnan 2009), toy industry (Johnson 2001), personal computer industry
(Papadakis 2003), consumer electronics industry (Sodhi and Lee 2007) and aerospace supply
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chain (Sinha, Whitman, and Malzahn 2004).

While there has been a significant amount of research conducted in the area of supply chain
disruption, there has been relatively little reported about the impacts of supply chain character-
istics on disruption mitigation capabilities. Craighead et al. (2007) employ a multiple-method,
multiple-source empirical research design to present propositions that relate the severity of supply
chain disruptions to supply chain design characteristics and supply chain mitigation capabilities.
But they do not explore the relationships between supply chain characteristics and disruption mit-
igation capabilities. The lightning bolt that, in March 2000, struck a Philips semiconductor plant
in Albuquerque, New Mexico, created a 10-minute blaze that contaminated millions of chips and
subsequently delayed deliveries to Nokia and Ericsson (Latour 2001). Nokia quickly realised that
the disrupted supplies would prevent the production of some four million handsets, and quickly
ascertained the availability of alternate sources for the parts. As a result, Nokia’s production suf-
fered little during the crisis (Chopra and Sodhi 2004). But Ericsson lost many months of mobile
phone production with a loss of 400 million Euros, and the accident finally had a great impact
on Ericsson’s decision to withdraw from the mobile phone terminal business (Norrman and Jans-
son 2004). How and why would one firm’s supply chain mitigation capability be stronger than
another? Do supply chain characteristics impact disruption management capabilities? A better
understanding of these questions can help supply chain managers to structure their supply chains
in a way that makes them more robust and resilient.
In this paper, we investigate the relationships between supply chain characteristics and supply
chain disruption mitigation capabilities. We intend to derive specific supply chain factors that
either contribute to or conversely impact a firm’s supply chain disruption mitigation capabilities.
Specifically, our objectives are:

(1) To identify the supply chain characteristic factors that impact a firm’s supply chain disruption
mitigation capabilities.
(2) To propose an empirically test model that represents the relationships between the supply
chain characteristic factors and the disruption mitigation capabilities.
(3) To offer guidelines for practising managers to enhance disruption mitigation capabilities
through understanding the role of supply chain characteristic factors.

We use an empirical survey of companies in China to study the association of supply chain
characteristics and disruption mitigation capabilities. As more and more European and North
American companies outsource their production to China, China has become an increasingly
important player in global supply chains. It is now one of the most popular low-cost outsourcing
destinations in the world. However, the risks associated with supply chain disruption in China
are only partially understood and assessed (Jiang, Frazier, and Heiser 2007). The SARS emerged
in China in November 2002 paralysed just-in-time (JIT) supply chains of electronics makers and
retailers worldwide (Overby, Rayburn, and Hammond 2004), and led many leading US companies
to reconsider their heavy reliance on China as a production base (Engardio and Einhorn 2003).
 International Journal of Logistics: Research and Applications 279

The recall of pet food from China in 2007 and rapid progression of comparable incidents have
exposed the real potential for US food supply chain disruptions (Roth et al. 2008). Multinational
companies began to emphasise supply chain disruption risks in China when they make low-cost
sourcing decisions (Fredriksson and Johnsson 2009; Schoenherr, Tummala, and Harrison 2008).
To our knowledge, there are few papers that focus on empirical research on the impacts of supply
chain characteristics on disruption mitigation capabilities. To address the gap in the current liter-
ature, we investigate four supply chain characteristics factors, including geographic dispersion,
supply chain agility, integration and visibility. We use structural equation modelling to estimate
the overall relationship between supply chain characteristics and disruption mitigation capabili-
ties. This research contributes to the supply chain disruption literature in two ways. First, this is
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the first study to investigate the effect of both supply chain characteristics and disruption warning
capability on disruption recovery capability. A better understanding of this impact can help supply
chain managers to structure their supply chains in a way that makes them more robust and resilient.
This paper fulfils an identified need to study how disruption mitigation capabilities can be enabled.
Second, our research complements the existing supply chain disruption literature, which thus far
has been mostly conceptual and case-based or developed using mathematical models, by offering
empirical evidence with a high degree of generalisation.
The paper is organised as follows. Section 2 introduces the proposed model and hypotheses.
Questionnaire design and data collection are described in Section 3. In Section 4 the structural
model and test of hypotheses are analysed. Discussions and implications are provided in Section 5.

2. Theoretical development

2.1. Disruption mitigation capability

Disruption mitigation capability refers to the ability to create awareness of a pending or realised
disruption and to recover expediently from a manifested disruption (Craighead et al. 2007).
According to Craighead et al. (2007), there are two kinds of supply chain mitigation capabil-
ities, i.e. warning capability and recovery capability. A warning capability can be defined as the
interactions and coordination of supply chain resources to detect a pending or realised disruption
and to subsequently disseminate pertinent information about the disruption to relevant entities
within the supply chain. And the recovery capability refers to the interactions of supply chain enti-
ties and the corresponding coordination of supply chain resources to return the supply chain to a
normal and planned level of product flow. In this research, we adopt the constructs of disruption
mitigation capabilities proposed by Craighead et al. (2007)
Once a supply chain disruption occurs, how a firm can effectively recover from a disruption
depends on its recovery capability. Disruption recovery management involves developing methods
to quickly recover from the disruption and prevent it from impacting the operations. By responding
quickly and decisively, minor disruptions may be prevented from mushrooming into full-blown
major disasters. A supply chain with the capability to quickly and effectively correct the disruptive
event may be less severely affected than a supply chain with little recovery capability (Craighead
et al. 2007).
To successfully recover (i.e. reduce or eliminate the negative impact) from a supply chain
disruption, the firm must have in place an effective means of discovering supply chain disruptions.
Disruption identification is critical to the success of managing supply chain disruption risks
(Wu, Blackhurst, and Chidambaram 2006). Executives should understand the types of disruptions
in global supply chain systems and develop methods for discovering disruptions in a timely
responsive way and detecting when risk events are about to occur, or have occurred. A firm with
the capability to quickly detect and disseminate pertinent information pertaining to the disruption
 280 X.-F. Shao

event can be proactively prepared and take contingency plans to reduce the negative impact of
the disruption. Logically, a warning capability that could detect a supply chain disruption and
communicate information about it before its manifestation would be more desirable than one that
only detect a supply chain disruption and make subsequent communications after its manifestation
(Craighead et al. 2007).
Thus, we hypothesise a positive impact of a firm’s supply chain disruption warning capability
on disruption recovery capability:

H1: Firms whose supply chains exhibit high levels of disruption warning capability will have high levels of disruption
recovery capability.
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2.2. Supply chain characteristics

A supply chain is a network of companies or organisations that manufacture and deliver prod-
ucts or services from the source to the customers. Supply chain management is the integration
of material, information and financial flows in such networks. Integration cannot be complete
without a tight linkage of the organisational relationships between the entities of the supply chain.
We are therefore interested in geographic attributes of the supply chain, information sharing,
organisational linkage, and coordination mechanism across distinct firms or organisational units.
We characterise a firm’s supply chain along with four fundamental characteristic factors: (1)
geographic dispersion, (2) flexibility, (3) integration and (4) visibility. We discuss each of these
constructs below.

2.2.1. Geographic dispersion

A supply chain comprises different entities that are connected by the physical flow of materials.
Sourcing materials or components from a wide range of geographic locations, placement of
production facilities across a wide range of geographic locations, and serving customers over a
wide range of geographic locations can be viewed as an element of supply chain structure (Stock,
Greis, and Kasarda 2000).
Geographic dispersion refers to the extent to which suppliers, production facilities, distributors
and customers in a firm’s supply chain are located across a wide range of geographic regions. A
firm with a low level of geographic dispersion would exhibit a high proportion of supply chain
units within one region and low proportions in other regions; conversely, a high level of geographic
dispersion would exhibit a low proportion of supply chain units within any individual geographic
region. Kotha and Orne (1989) use a similar concept as ‘geographic manufacturing scope’ and
‘geographic market focus’ in their model of generic manufacturing strategy. Randall and Ulrich
(2001) refer to the distance of production facilities from a target market as a fundamental dimension
to characterise supply chain structure. Craighead et al. (2007) use the term ‘supply chain density’
to connote the geographical spacing of nodes within a supply chain, with supply chain density
being inversely related to geographical dispersion. When nodes within a supply chain are clustered
closely together, the particular supply chain can be described as being dense. Conversely, when
nodes within a supply chain are loosely clustered together, the particular supply chain can be
described as being less dense.
China’s low-cost manufacturing ability is having a dramatic impact on the global economy.
Many large multinational manufacturing firms, including consumer personal care companies such
as Johnson & Johnson and Unilever, auto manufacturers such as General Motors and Volkswagen
and high-technology manufacturers such as Intel and Dell, have developed production and export
bases in China (Jiang, Frazier, and Heiser 2007). With the development of globalisation and
 International Journal of Logistics: Research and Applications 281

outsourcing, geographical diversification becomes one of the main characteristics of Chinese

companies’ supply chains.
We relate geographic dispersion of a firm’s supply chain with supply chain disruption mitiga-
tion capabilities. Long and complex global supply chains are usually slow to respond to changes,
and hence, they are more vulnerable to business disruptions. The extent to which the supply
chain is either concentrated or dispersed geographically most likely has a significant effect on
coordination within the supply chain. Geographical diversification increases supply chain com-
plexity, which could make it harder for a firm to react to supply chain disruptions. Hendricks,
Singhal, and Zhang (2009) find that firms that are more geographically diversified experience
a more negative stock market reaction to supply chain disruptions. Ellegaard (2008) shows that
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sourcing locally and maintaining dependable and responsive suppliers can create flexibility and
allow companies to actively solve problems with suppliers when the disruption has occurred.
Greater distances and a wider range of locations separating the components of the supply chain
would therefore greatly challenge the disruption management capability of the supply chain. For
example, using a global sourcing model increases the potential for disruptions to occur (Radjou
2002). In comparison to sourcing from local markets, global sourcing is usually associated with
increased uncertainty as well as poorer transparency and visibility (Wagner and Bode 2006). In
general, global sourcing contributes to the structural complexity of the supply chain (Hendricks
and Singhal 2005). In addition, disparate geographic markets increase the delivery distance, and
hence replenishment lead times, making the firm more vulnerable to higher demand uncertainty
(Stevenson 1996).
Thus, we hypothesise a negative effect of geographic dispersion of a firm’s supply chain on
both disruption warning capability and disruption recovery capability:

H2a: Firms whose supply chains exhibit high levels of geographic dispersion will have low levels of disruption
warning capability.
H2b: Firms whose supply chains exhibit high levels of geographic dispersion will have low levels of disruption
recovery capability.

2.2.2. Supply chain agility

To be competitive in the global market, companies must align with suppliers and customers to
streamline operations and work together to achieve a level of agility. Agility as a property is less
formally developed and a consensus of agility factors has not emerged yet.
According to Braunscheidel and Suresh (2009), a firm’s supply chain agility refers to the
capability of the firm, internally, and in conjunction with its key partners, to adapt or respond
in a speedy manner to marketplace changes as well as to potential and actual disruptions. It is a
business-wide capability that embraces organisational structures, information systems, logistics
processes and in particular, mindsets (Christopher and Towill 2001). Agile supply chain concerns
change, uncertainty and unpredictability within its business environment and makes appropriate
responses to changes. Therefore, an agile supply chain includes four main elements (Baramichai,
Zimmers, and Marangos 2007; Christopher 2000; Giachetti et al. 2003; Sharp, Irani, and Desai
1999): (1) responsiveness, which is the ability to identify changes and respond to them quickly,
reactively or proactively and also to recover from them; (2) competency, which is the ability to
efficiently and effectively realise enterprise objectives; (3) flexibility/adaptability, which is the
ability to implement different processes and apply different facilities to achieve the same goals;
and (4) quickness/speed, which is the ability to complete an activity as quickly as possible.
In Swafford, Ghosh, and Murthy (2006), procurement flexibility, manufacturing flexibility and
distribution flexibility have been shown to contribute to supply chain agility.
 282 X.-F. Shao

Flexibility/agility has been considered as an important supply chain factor in Chinese industry
and academic research. As the change rate of technology and customer expectations acceler-
ates, Chinese manufacturers are facing increasingly uncertain external environment. To remain
the status of factory of the world, Chinese companies have to compete on cost, quality and
flexibility.
In the emerging literature on management of disruption risks in supply chains, the attributes
of agility, flexibility, responsiveness, etc. have been recognised as key elements for dealing with
potential and actual disruption (Braunscheidel and Suresh 2009). Enterprises benefit from agility
by anticipating uncertainties and enabling rapid changes to achieve greater responsiveness to the
variability in their business (Jackson and Johansson 2003). According to Faisal, Banwet, and
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Shankar (2006), supply chain agility is a key enabler of disruption mitigation. Companies can
minimise inventory risks by working with a highly responsive supplier, and can lower capacity
risks by making existing capacity more flexible, for example, Toyota decreases capacity risks by
ensuring that each plant is flexible enough to supply more than one market (Chopra and Sodhi
2004). Tang and Brian (2008) discuss five types of flexible strategies, and encourage firm to use
various flexibility strategies as ‘defensive’ mechanisms and ‘proactive’ mechanisms for mitigating
supply chain disruptions.
According to the above researches, supply chain agility is a key enabler of disruption mitigation.
Thus, we hypothesise a positive effect of supply chain agility on both disruption warning capability
and disruption recovery capability:

H3a: Firms whose supply chains exhibit high levels of agility will have high levels of disruption warning
capability.
H3b: Firms whose supply chains exhibit high levels of agility will have high levels of disruption recovery
capability.

2.2.3. Supply chain integration

Integration is a major factor affecting a supply chain’s performance. Frohlich and Westbrook
(2001) have empirically demonstrated a strong association between the performance and the level
of integration. Supply chain integration comprises internal and external integrations. Internal
integration is a necessary step in supply chain integration process. Stevens (1989) identified four
stages that a firm goes through to achieve supply chain integration. The first stage refers to a firm
that is characterised by separate departments, with little synchronisation. Stage two is functional
integration with an emphasis on inbound flow of goods. Stage three integration is called internal
integration where an organisation recognises that it must effectively and efficiently manage the
flow of goods into and out of the organisation. The fourth stage is external integration with
suppliers and customers.
In this research, supply chain integration includes both internal integration and external inte-
gration. Internal integration (inter-functional and inter-departmental integrations) may lead to a
connected and more coordinated response to marketplace changes and disruption (Braunscheidel
and Suresh 2009). According to Faisal, Banwet, and Shankar (2006), external integration (col-
laborative relationships among supply chain partners) is a key enabler of disruption mitigation.
Giunipero and Eltantawy (2004) find that in order to manage disruption risks effectively in a sup-
ply chain, organisations are moving to adopt closer relationships with key suppliers. The principal
benefit of good supplier relations is the synergy resulting from two organisations working together
and resolving common problems in order to achieve mutual goals (Wahner, Macbeth, and Boddy
2002). Supply Chain integration ensures that the design of the supply chain is made more robust
to reduce the probability of disruption events occurring again. The partners can meet in an open
 International Journal of Logistics: Research and Applications 283

environment to identify the leverage points that represent risk and work collaboratively to plan in
advance for potential problems.
According to the above researches, supply chain integration is an important strategy to miti-
gate supply chain disruptions. Thus, we hypothesise a positive impact of a firm’s supply chain
integration on both disruption warning capability and disruption recovery capability:
H4a: Firms whose supply chains exhibit high levels of integration will have high levels of disruption warning
capability.
H4b: Firms whose supply chains exhibit high levels of integration will have high levels of disruption recovery
capability.
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2.2.4. Supply chain visibility

Supply chain visibility has been discussed and studied widely in recent years. Supply chain
visibility refers to the extent to which players within a supply chain have access to or share
information which they consider as key or useful to their operations and which they consider will
be of mutual benefit (Barratt and Oke 2007). Francis (2008) defines supply chain visibility as the
identity, location and status of entities transiting the supply chain, captured in timely messages
about events, along with the planned and actual dates/times for these events. Lamming et al.
(2001) suggest that there are varying degrees of supply chain visibility or sharing of information
between partners in a supply chain. High visibility is achievable through extensive sharing of
useful and meaningful information among different players within the supply chain.
Supply chain visibility has been identified as a core element of disruption management. The
real-time sharing of correct information from every node in the supply chain is a key component
in mitigating disruptions (Blackhurst et al. 2005). Improved information visibility can reduce
the time between the disruption and its discovery. According to Faisal, Banwet, and Shankar
(2006), a supply chain can counter the disruption risks in an effective manner when all the
partners in that chain trust each other and frequently share information which is facilitated by

Supply chain characteristics

Geographic Disruption mitigation capability

dispersion

Warning
capability
Agility

Integration

Recovery
capability

Visibility

Figure 1. Proposed model.

 284 X.-F. Shao

collaborative relationships among the supply chain members. Chopra and Sodhi (2004) also
suggest that increasing the visibility of information across supply chain reduces the risks. By
timely sharing of supply information, firms at downstream stages can alert a disruption at an
upstream stage, derive the correct early warning time, and make proper decisions to offset the
impact of the disruption (Li et al. 2006). Supply chain visibility has also attracted much attention
in recent years in China due to some quality disruptions and product recalls. Lyle (2008) points
out that the lack of supply chain visibility has inevitably led to quality control issues in China.
According to Roth et al. (2008), when US organisations source via multilayered Chinese supply
chains with poor visibility, they are particularly vulnerable.
The above researches indicate that supply chain visibility increases disruption mitigation capa-
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bilities. Thus, we hypothesise a positive impact of a firm’s supply chain visibility on both disruption
warning capability and disruption recovery capability:
H5a: Firms whose supply chains exhibit high levels of visibility will have high levels of disruption warning
capability.
H5b: Firms whose supply chains exhibit high levels of visibility will have high levels of disruption recovery
capability.

An overview of the proposed hypotheses and their inter-relationships are provided in Figure 1.

3. Research methodology

3.1. Measures

The questions in the questionnaire were designed based on a review of the literature. For constructs
which had not been well documented and tested in the literature, we developed new items based on
our understanding of the constructs. The initial survey instrument was revised based on feedback by
a panel of academic and industrial experts in supply chain management areas for content, clarity
and understanding. The questionnaire was pilot tested in a sample of five companies, where
we conducted face-to-face discussions with executives after they completed the questionnaire.
Based on their feedback, we modified, added or deleted some questions, making them more
understandable and relevant to practices in China. The final survey items and related literature
are shown in the appendix.
All the scales used in the study employed a five-point Likert scale. The end points were labelled
‘Strongly disagree’ (1) to ‘Strongly agree’ (5). The mid-point (3) was labelled ‘Neither agree nor
disagree’.

3.2. Data collection

To obtain a representative sample, we randomly selected companies from Yangtze River Delta.
A total of 600 questionnaires were distributed. We sent the questionnaire to the key informants,
who were CEOs/presidents, vice presidents in charge of operations and supply chain managers,
along with a cover letter highlighting the study’s objectives. Self-addressed, stamped envelopes
were included and some follow-up emails or calls were made to improve the response rate. After
the follow-up calls or emails, 63 usable questionnaires were received. The response rate, based
on the number of companies contacted, was 10.5%.
In order to collect enough samples for analysis, another 380 questionnaires were delivered
to part-time MBA students, who helped to take the questionnaires to the relevant people in their
companies and collect the questionnaires. One hundred and fifty-eight usable questionnaires were
collected with a response rate of 41.6%.
 International Journal of Logistics: Research and Applications 285

Table 1. Profile of survey respondents.

Sector and industry %

Automotive 9.5
Electronics 16.3
Machinery 17.2
Petro and Chemicals 8.1
Pharmaceutical 9.5
Apparel and textile 12.7
Food 9.5
Furniture and fixture 10.0
Others 7.2
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Annual sales (100 million RMB)

<1 4.7
1–10 21.4
10–20 22.0
20–50 28.8
50–100 17.7
>100 5.4
Respondent’s position
General manager 8.4
Vice general manager 23.1
Supply chain manager 31.8
Operations manager 26.6
Other 10.1
Number of employees
<200 4.9
200–500 6.4
500–1000 22.8
1000–3000 42.5
>3000 25.4

Table 2. Variance explained.

Rotation sums of squared loadings

Component % of variance Cumulative %

1 22.521 22.521
2 22.095 44.616
3 18.366 62.981
4 17.101 80.082

Note: Extraction method: principal component analysis.

Combined together, 221 useful samples were obtained yielding a 22.6% response rate. To
check for differences between the first survey respondents and the second survey respondents, a
χ 2 test was performed on demographic variables and no significant differences were found. Thus,
it is believed that no bias existed between the first survey respondents and the second survey
respondents. Table 1 presents the profile of the sample.
To test for common method bias, we applied Harmon’s single-factor test (Podsakoff and Organ
1986). The rationale for this test is that if common method variance poses a problem to the data,
a single-latent factor will account for all or most of the manifest variables. Four factors with
eigenvalues greater than one are extracted and account for a total of 80.08% of the variance (see
Table 2). The first factor accounts for 22.52% of the variance. Therefore, a single factor does not
emerge and one factor could not account for most of the variance, indicating that common method
bias is not a serious problem.
 286 X.-F. Shao

4. Analysis of the model

4.1. Reliability and validity analysis

When reliability is examined, a common first step is to run a factor analysis to assess unidimen-
sionality (Armor 1974). Three measures of reliability or internal consistency are examined in this
research: composite reliability, average variance and Cronbach’s alpha. A lower bound of .7 is
recommended for composite reliability (Hair et al. 2006). It is recommended that the average
variance extracted (AVE) be at least .50, as this indicates that 50% or more of the variance is
explained by the indicators of the latent variable (Chin 1998). For Cronbach’s alpha, a minimum
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value of .70 is considered acceptable (Nunnally 1978). Table 3 provides a summary of reliability
analysis for all the constructs. The minimum acceptable values for each construct on each of the
measures are met. Therefore, the reliability of the measurement model is adequate.
Convergent validity, the ability of items in a scale to converge or load together as a single
construct, is measured by examining individual loadings for each indicator. The items with the
lowest loadings are generally candidates for removal from the scale. Most of the loadings should

Table 3. Reliability analysis (n = 221).

Composite
Construct reliability AVE Cronbach’s alpha

Geographic dispersion .9367 .8316 .8988

Supply chain agility .8644 .6159 .8137
Supply chain integration .9414 .8008 .9158
Supply chain visibility .9502 .8269 .9293
Warning capability .9443 .8497 .9116
Recovery capability .9351 .7830 .9070

Table 4. Convergent validity.

Construct Indicator Mean SD Loading

Geographic dispersion G01 3.7511 .8071 .9712

G02 3.7013 .8951 .9313
G03 3.7647 .8305 .9487
I01 3.0995 .9239 .8737
Supply chain integration I02 3.4162 .7968 .8800
I03 3.1674 .8602 .9108
I04 3.2579 .8320 .9144
V01 3.3574 .9600 .9139
Supply chain visibility V02 3.4751 .9979 .8901
V03 3.4615 .8865 .9074
V04 3.4389 .9592 .9256
Supply chain agility A01 3.1674 .7223 .8597
A02 3.2443 .7710 .7040
A03 3.6968 .7156 .7522
A04 3.6968 .7588 .8145
Disruption warning capability WC01 3.7285 .8082 .9413
WC02 3.6877 .7904 .9107
WC03 3.7466 .7914 .9132
RC01 2.9140 .8016 .8833
Disruption recovery capability RC02 2.9140 .8403 .8309
RC03 3.0452 .8674 .9215
RC04 3.1538 .8758 .9014
 International Journal of Logistics: Research and Applications 287

Table 5. Correlation of latent variables.

Geographic Warning Recovery

dispersion Integration Visibility Agility capability capability

Geographic dispersion 1.000

Integration −0.499 1.000
Visibility −0.367 0.398 1.000
Agility −0.331 0.442 0.267 1.000
Warning capability −0.542 0.642 0.567 0.403 1.000
Recovery capability −0.528 0.679 0.447 0.617 0.698 1.000
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Table 6. Discriminant (AVE on diagonal in boldface).

Geographic Warning Recovery

dispersion Integration Visibility Agility capability capability

Geographic dispersion 0.8316

Integration 0.2490 0.8008
Visibility 0.1347 0.1584 0.8269
Agility 0.1096 0.1954 0.0713 0.6159
Warning capability 0.2938 0.4122 0.3215 0.1624 0.8497
Recovery capability 0.2788 0.4610 0.1998 0.3807 0.4872 0.7830

be at least .60 and ideally at .70 or above indicating that each measure is accounting for 50%
or more of the variance of the underlying latent variable (Chin 1998). Table 4 provides a list of
standardised loadings for each construct, and it is shown that they are all above the acceptable
minimum values.
Discriminant validity addresses the extent to which individual items intended to measure one
latent construct do not at the same time measure a different latent construct. Inter-factor correla-
tions are computed for all factors and are shown in Table 5. Very high inter-factor correlations, say
approaching 1.00, indicate that the items are measuring the same construct, although significant
inter-factor correlations may be observed between theoretically related constructs. An analysis
of Table 5 revealed the inter-factor correlations to be quite low. Another measure of discriminant
validity is to compare the AVE to the square of the correlations between the constructs. If AVE is
greater than the square of the correlations, then discriminant validity is said to exist (Fornell and
Larcker 1981). Table 6 indicates the square of the correlations between the constructs. The AVE
is indicated on the diagonal. It is seen that the AVE is greater than the square of the correlations
among the latent variable scores, with respect to its corresponding row and column values. This
indicates that none of the constructs share more variance with another construct than with its own
indicators, thus providing sufficient levels of discriminant validity.

4.2. Structural model and test of hypotheses

The structural equation modelling technique (LISREL8.7) is used in this research. The results
from evaluation of the structural model are reported in Figure 2 and Table 7. Table 7 reports
the results of the goodness-of-fit statistics of the final estimated structural model. The fit indices,
including the ratio of the χ 2 value to degrees of freedom (2.98 < 3.00), comparative fit index (CFI)
(.95 > .90), goodness of fit index (GFI) (.91 > .90) and root mean square error of approximation
(RMSEA) (.076 < .08), indicate that the estimated model has a reasonable explanation of the
observed covariance among the constructs of interest.
As shown in Figure 2, supply chain warning capability has a significantly positive impact on
disruption recovery capability (0.43; t − stat > 1.96). Thus, H1 is supported. The standardised
 288 X.-F. Shao

G01

Geographic
G02 dispersion
H2a
G03 -0.26 WC01
H2b
t-stat: -4.41
-0.14
A01 t-stat: -2.41 Warning WC02
Capability
H3a
A02 0.055 WC03
Agility t-stat: 1.03
H1
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A03 H3b 0.43

0.29 t-stat: 5.06
A04 t-stat: 5.40

H4a
I01 RC01
0.39
t-stat: 6.13
I02
H4b RC02
Integration 0.15 Recovery
I03 t-stat: 2.19 Capability RC03

I04 H5a
0.33 RC04
t-stat: 5.84
V01
H5b
0.046
V02
t-stat: 0.77
Visibility
V03

V04

Figure 2. Estimates of structural model.

Table 7. Fit statistics.

N df χ2 P χ 2 /df CFI GFI RMSEA

221 194 578.28 .001 2.98 .95 .91 .076

path coefficient from geographic dispersion to disruption warning capability is significant (−0.26;
t-stat< −1.96). Thus, supply chains with high level of geographic dispersion are found to exhibit
a low level of disruption warning capability. Likewise, the path coefficient from geographic
dispersion to disruption recovery capability is significant (−0.14; t-stat< −1.96), indicating that
geographic dispersion has a negative impact on the level of a firm’s disruption recovery capability.
Hence, hypotheses H2a and H2b are supported.
The standardised path coefficient from supply chain agility to disruption warning capability is
not significant (0.055; t-stat<1.96). The standardised path coefficient from supply chain agility to
disruption recovery capability is found to be strongly significant (0.29; t-stat>1.96). Thus, supply
chains with high level of agility are found to exhibit a high level of disruption recovery capability.
Hence, H3b is supported and H3a is rejected.
Supply chain integration has significantly positive impacts on both disruption warning capabil-
ity (0.39; t-stat>1.96) and disruption recovery capability (0.15; t-stat>1.96). Thus, supply chains
 International Journal of Logistics: Research and Applications 289

Table 8. Summary of hypotheses.

Hypotheses Hypothesised paths Test

H1 Disruption warning capability → Disruption recovery capability Supported

H2a Geographic dispersion → Disruption warning capability Supported
H2b Geographic dispersion → Disruption recovery capability Supported
H3a Supply chain agility → Disruption warning capability Rejected
H3b Supply chain agility → Disruption recovery capability Supported
H4a Supply chain integration → Disruption warning capability Supported
H4b Supply chain integration → Disruption recovery capability Supported
H5a Supply chain visibility → Disruption warning capability Supported
H5b Supply chain visibility → Disruption recovery capability Rejected
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with high integration are found to exhibit high level of supply chain disruption warning capability
and recovery capability. Hence, both H4a and H4b are supported.
Supply chain visibility has a significantly positive impact on disruption warning capability
(0.33; t-stat>1.96). Thus, supply chains with high visibility are found to exhibit high level of
supply chain disruption warning capability, which supports H5a. However, the standardised
path coefficient from supply chain visibility to recovery capability is not significant (0.046;
t-stat<1.96). Thus, H5b is not supported.
The test results of hypotheses are summarised in Table 8.

5. Discussions and implications

The research results show that supply chain characteristic factors have significant impacts on
supply chain disruption mitigation capabilities. We find that supply chain geographic dispersion
has a negative impact on a firm’s disruption mitigation capabilities. Supply chain agility has a
positive impact on a firm’s disruption recovery capability. Internal integration among different
functions and external integration with key suppliers and customers have direct positive impacts
on a company’s disruption warning capability and recovery capability. And well-defined com-
munication and information-sharing mechanisms among supply chain members will enhance a
company’s disruption warning capability. In addition, high level of disruption warning capability
enhances a company’s disruption recovery capability.
The relationship between agility and warning capability is not empirically validated. This may
be due to the reason that agility is rather a capability to respond to changes and uncertainty in
a reactive way. In addition, the direct relationship between visibility and recovery capability is
not empirically supported. This may be due to the reason that visibility is rather a capability to
identify and capture changes and abnormal events in a proactive way. But visibility still has an
indirect positive impact on recovery capability through warning capability.
These results extend the work of Craighead et al. (2007), which examines the effects of supply
chain design characteristics like density and complexity on severity of disruptions, with mitigation
capabilities as moderators. Thus, this study adds to the emerging body of literature on supply chain
disruption management by examining and validating the effects of supply chain geographic dis-
persion, agility, integration and visibility. From the standpoint of enhancing disruption mitigation
capabilities, all four supply chain characteristic factors contribute significantly.
This research could provide critical values for helping supply chain managers to structure their
supply chains in a way that makes them more robust and resilient to disruptions. According to the
above research results, managers should take supply chain characteristic factors into consideration
when they make decisions as to whether or not to enact or implement specific operational and
supply chain policies and initiatives.
 290 X.-F. Shao

First, supply chain managers should reconsider sourcing decisions. In the past few years, many
companies have implemented nationwide or global sourcing strategies for lower costs. But longer
distances also make supply chains more vulnerable to disruptions. As geographic dispersion is
negatively related with a firm’s disruption mitigation capabilities, managers should not only focus
on cost savings, but also consider the location of suppliers when they make sourcing strategies. It
is especially important to those Chinese companies which begin to adopt JIT purchasing and lean
production strategies. As Ellegaard (2008) stated, local sourcing created flexibility to cope with
the risk. A combination of low-cost long-distance sourcing and local sourcing may make a firm be
more flexible and responsive to supply chain disruptions. And demand that key suppliers should
carry inventory in local warehouses can also make one’s supply chain more robust to disruption.
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As to those multinational companies which source from China, supply chain managers should
balance savings from China sourcing against potential risks associated with disruptions. The costs
of foreign exchange rate fluctuation, duty/custom regulations, quality problems, political and
economical instability and international logistics challenges may be enormous when compared
to the price of outsourced part (Canbolat et al. 2008).
Second, supply chain managers should improve their supply chain agility and make contingency
plans.According to our research results, agility can enhance a firm’s disruption recovery capability.
When disruption occurs, an agile supply chain can respond quickly and take measures to cope
with the disruption to reduce the negative impact. A good example was the response of Wal-Mart
to Hurricane Katrina in 2005. Wal-Mart started planning alternative routes and emergency staging
areas even while Katrina was still a tropical depression in the Atlantic Ocean. The combination
of a data management system that allowed Wal-Mart to meet fast-changing customer needs and a
network of facilities, stores and distribution centres allowed them to react to the disaster by quickly
moving essential merchandise to the effected communities. After the hurricane, Wal-Mart was
able to bring 66% of its stores in the effected region back into operation within two days and
93% within seven days (Ratick, Meacham, and Aoyama 2008). The case highlights the value of
agility and contingency planning. In the past few years, many companies have greatly reduced
the number of suppliers for lower prices. Although single sourcing strategy may lead to higher
quality and lower total cost, the dependence on a single source also exposes a greater risk of supply
chain interruption (Yu, Zeng, and Zhao 2009). Supply chain managers should plan secondary
sources to turn to for supplies, manufacturing or transportation needs when primary sources are
interrupted.
Third, supply chain managers should emphasise the importance of integration and cooperation
of supply chain partners. Integration is positively related with both warning capability and recovery
capability. Many companies suffer from supply chain disruptions due to supply chain coordination
problems. Mitigating disruption involves first understanding the key players in one’s supply chain
and establishing the need to work together to minimise the potential for disruptions. Companies
should collaborate with key suppliers and customers to mitigate the impact of supply chain
disruption effects. Seamless supply chain operations require a high level of integration within
and across organisations. The most effective integration of supply chain networks will be those
that are able to get the mix of information requirements, physical logistics and collaboration
right, providing shared benefits to a majority of partner organisations (Power 2005). Supply chain
integration requires an infrastructure enabling effective information flows, streamlined logistics
and robust and durable collaborative arrangements between supply chain partners. Partners in a
supply chain should establish long-term collaborative relationships to seamlessly integrate inter-
firm process to enhance quick response (QR) ability. And cross-function and cross-company
teams should be established to solve problems. As to those multinational companies sourcing
from China, putting some employees on the ground to manage and monitor their supply chains
and to establish ongoing cooperation relationships with their Chinese suppliers may greatly lower
the risk of disruption.
 International Journal of Logistics: Research and Applications 291

Fourth, supply chain managers should try to improve the visibility of their supply chains.
Improve visibility to key supply chain nodes that can quickly detect disruptions. Companies should
deploy visibility systems to ensure quicker response to disruptions. When a disruption occurs, key
executives need a quick way to be alerted that a problem occurred. Thus, it is important to track
demand, inventory and capacity levels at key nodes in the supply chain, including ports and ship-
ping locations. Each player should be required to produce a detailed plan of disruption awareness
and identify contingency plans that can be executed if disruptions occur. In order to enhance dis-
ruption warning capability, updated information on the visibility of inventory, demand and plans
should be shared. And companies should timely communicate with critical partners to identify
current issues that may disrupt daily operations and take measures in advance to reduce them.
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Current communication and information technologies, such as QR, collaborative planning, fore-
casting and replenishment methods (Sparks and Wagner 2003) and radio frequency identification
technology (Attaran 2007), allow for improved information integration and supply chain visibil-
ity. These technologies provide supply chain visibility and enable trading partners to collaborate
more effectively, plan more accurately and respond more rapidly up and down the supply chain.

6. Conclusions

In today’s international competitive business environment, with the development of outsourcing

and globalisation, firms are more vulnerable to business disruptions and therefore they should
improve the capabilities to mitigate disruptions in their supply chains. In this paper, we investi-
gate the impacts of supply chain characteristics on disruption mitigation capabilities. We find that
design factors of a supply chain have critical impacts on its disruption mitigation capabilities.
Geographic dispersion of a supply chain has negative impacts on a firm’s disruption mitigation
capabilities, while supply chain integration has direct positive impacts on a firm’s disruption miti-
gation; supply chain agility has a positive impact on a firm’s disruption recovery capability, while
supply chain visibility enhances a firm’s disruption warning capability. According to the implica-
tions of this research, a firm’s disruption mitigation capabilities can be improved by emphasising
the supply chain design and concentrating on operational and supply chain policies and initiatives
that promote cooperation, integration and timely information-sharing.
To our knowledge, this paper is among the first to empirically study the impacts of supply
chain characteristics on disruption mitigation capabilities. It has contributed towards a better
understanding of disruption management in the context of supply chain design and management.
There are some limitations. We have only considered four supply chain factors and used a small
number of measurements for each construct. And we have only considered two disruption miti-
gation capabilities: warning and recovery. Robustness should be included as one of the constructs
of disruption mitigation capabilities in future research.

Acknowledgements
This research is sponsored in part by National Natural Science Foundation of China under grants No. 71072064 and
70872078. The author would like to thank the referees for valuable suggestions and comments.

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Appendix. Constructs, item measures and related literature

Construct/item measure Source

Geographic dispersion
G01 We apply a highly global sourcing Canbolat et al. (2008)
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strategy
G02 Our customers are located at highly Craighead et al. (2007)
different regions
G03 The average geographical spacing Craighead et al. (2007)
among entities within our supply
chain is very large
Agility
A01 We can quickly change the quantities Zhang, Vonderembse, and Lim
for our products produced (2003)
A02 We can changeover quickly from Zhang, Vonderembse, and Lim
one product to another (2003)
A03 Our supply chain is capable of van Hoek, Harrison, and Christopher
responding to real market demand (2001), Christopher (2000)
A04 Improving responsiveness to Swafford (2003)
changing market needs is high
priority in our company
Integration
I01 All of our business functions (e.g. Braunscheidel and Suresh (2009)
marketing, manufacturing, R&D,
finance) are integrated in serving
the needs of our target markets
I02 We use cross-functional teams to Pagell (2004)
solve problems
I03 We strive to establish long-term Shah (2002)
relationships with our suppliers
I04 We work with our suppliers Christopher (2000)
to seamlessly integrate our
inter-firm processes (e.g. order
placement)
Visibility
V01 Inventory levels are visible van Hoek, Harrison, and Christopher
throughout our supply chain (2001), Christopher (2000)
V02 Demand levels are visible van Hoek, Harrison, and Christopher
throughout our supply chain (2001), Christopher (2000)
V03 Information integration with van Hoek, Harrison, and Christopher
partners in our supply chain is (2001)
important
(Continued).
 International Journal of Logistics: Research and Applications 295

Appendix Continued.

Construct/item measure Source

V04 We have high corporate-level Shah (2002)

communication on important
issues with key suppliers
Warning capability
WC01 We are able to detect a pending or Craighead et al. (2007)
realised disruption in our supply
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chain
WC02 Once a disruption occurs, Craighead et al. (2007)
pertinent information is quickly
disseminated to relevant entities
within our supply chain
WC03 We proactively gather relevant Blackhurst et al. (2005)
and timely disruption-related
information to perform predictive
analysis
Recovery capability
RC01 Once a disruption occurs, our Blackhurst et al. (2005)
supply chain reconfiguration
can be performed quickly to
minimise the impacts of supply
chain disruption
RC02 Once a disruption occurs, we can Blackhurst et al. (2005)
quickly assess what areas of the
supply chain will be affected by
the disruption
RC03 Once a disruption occurs, we are Craighead et al. (2007)
able to return the supply chain
to a normal level in a relatively
short period
RC04 Pre-planned actions and procedures Craighead et al. (2007)
are defined in our company to
allow for a quick response should
a disruption occur