Sourcing Flexibility and Supply Chain Performance

Sourcing flexibility, i.e., the capability of a company’s procurement processes to respond rapidly to changing supply requirements is one of the building blocks of supply chain agility. In today’s decentralized supply chains, companies increasingly depend on their suppliers for value creation. Hence, understanding the causes and consequences of sourcing flexibility is critical. Based on a survey of 336 companies from Europe and the U.S., we show that sourcing flexibility is curvilinearly (U-shaped) related to supply chain performance. Companies with either low or high levels of sourcing flexibility exhibit high supply chain performance, whereas medium levels of sourcing flexibility reduce a company’s supply chain performance by up to 30%. That is, the “stuck in the middle” phenomenon, which is frequently observed in areas of strategy and organization, is evident in procurement decisions as well.