  This manuscript investigates the problem of locational complexity, a type of
complexity that emanates from a companys territorial strategy. Using an
entropy-based measure for supply chain structural complexity (
pars-complexity), we develop a theoretical framework for analysing the effects
of locational complexity on the profitability of service/manufacturing
networks. The proposed model is used to shed light on the reasons why network
restructuring strategies may result ineffective at reducing complexity-related
costs. Our contribution is three-fold. First, we develop a novel mathematical
formulation of a facility location problem that integrates the pars-complexity
measure in the decision process. Second, using this model, we propose a
decomposition of the penalties imposed by locational complexity into (a) an
intrinsic cost of structural complexity; and (b) an avoidable cost of ignoring
such complexity in the decision process. Such a decomposition is a valuable
tool for identifying more effective measures for tackling locational
complexity, moreover, it has allowed us to provide an explanation to the
so-called addiction to growth within the locational context. Finally, we
propose three alternative strategies that attempt to mimic different approaches
used in practice by companies that have engaged in network restructuring
processes. The impact of those approaches is evaluated through extensive
numerical experiments. Our experimental results suggest that network
restructuring efforts that are not accompanied by a substantial reduction on
the target market of the company, fail at reducing complexity-related costs
and, therefore, have a limited impact on the companys profitability.
