Flexibility mechanisms in a dynamic distribution network

Abstract

Purpose With the trend toward implementing flexible strategies to channel management, the network sources of flexibility have received increased attention. This study aims to reveal the dynamic mechanisms underlying the relationship between a distribution network and two types of flexibility: adaptive and proactive. Design/methodology/approach The authors apply agent-based modeling to simulate a three-level distribution network. First, a program of 14 segmentations across 4 stages is developed using NetLogo software. Using data on Company X’s distribution network, the authors simulate a distribution network when either adaptive or proactive flexibility is implemented and compare the performance outcomes of the distribution network. Finally, by using the database generated from an experiment designed with BehaviorSpace, the authors conduct a general linear regression analysis to analyze the effect of network structure on the performance of the distribution network. Findings The authors find that the implementation of adaptive flexibility is connected with a higher level of trust and a lower level of inventory, whereas the implementation of proactive flexibility is associated with a higher level of satisfaction but a higher level of inventory. Also, this study’s analyses show that adaptive flexibility emphasizes short-term efficiency, whereas proactive flexibility put more emphasis on long-term effectiveness. In addition, the authors find that network structure has a significant effect on the distribution network by influencing inventory, satisfaction and trust. Originality/value Theoretically, this study’s results further develop the research on channel management by revealing the interaction between distribution networks and two types of flexibility from a dynamic (rather than static) perspective. Also, the findings help in explaining how network structure can affect the performance of a distribution network. In practice, the results also guide the focal firm in distribution channels to make strategic decisions between adaptive and proactive flexibility to improve channel performance.