SUMMARY
Managing supply risk is an essential element of the overall supply management task. As the complexity of risk management has increased, responsiveness seems dominated by varying the level of inventory and using multiple supply sources as means of creating buffers. This research uses the framework of agency theory in managing supplier behaviors as a means to reduce supply risk and the impact of detrimental events. Empirical results indicate that purchasing organizations address various sources of supply risk by implementing management techniques that reduce the likelihood that detrimental events will occur. Firm size, purchases as a percentage of sales, and industry characteristics were also found to influence the manner in which supplier behaviors are managed.
Purchasing organizations are exposed to risk in their interactions with suppliers, whether it is recognized and managed, addressed in a cursory manner, or altogether ignored. In order to understand the supply risk that exists, purchasing organizations can proactively assess the probability and impact of supply risk in advance, or reactively discover risk after a detrimental event occurs. The purpose of this study is to explore, analyze, and derive common themes on supply risk assessment techniques. Findings from this research indicate that purchasing organizations can assess supply risk with techniques that focus on addressing supplier quality issues, improving supplier processes, and reducing the likelihood of supply disruptions. From an agency theory perspective, these risk assessment techniques facilitate the obtaining of information by purchasing organizations to verify supplier behaviors, promoting goal congruence between buying and selling firms, and reducing outcome uncertainty associated with inbound supply.
The concern and study of supply risk and supply continuity has recently come to the forefront in managing business and conducting research. This empirical study of U.S. and German firms investigates the relationship between perceived supply risk sources and supply disruption occurrence, as well as the use of supply chain resiliency practices to reduce disruption frequency. We demonstrate that supply managers' concerns with risk emanating from suppliers and the supply market are positively related to supply disruption occurrence. We further show how and when implementing flexibility and redundancy may reduce the effects of supply disruptions.
SUMMARY
There has been a growing emphasis in business on outsourcing production activities and focusing on core competencies. The decision to outsource the production of goods and services, however, has inherent risk. The purposes of this article are to describe characteristics of inbound supply that affect managerial perceptions of supply risk and to create a classification of those supply risk sources. An analysis of case study data suggests that supply risk is perceived by the effect that purchased items and services have on corporate profitability, market factors, and supplier characteristics. By understanding the characteristics of supply risk, supply management professionals can implement strategies for better managing that risk.
Purchasing organizations use various strategies and techniques to minimize the chance and impact of detrimental events occurring in the supply base. Supply risk assessments are a necessary first step in managing those risks. An analysis of in-depth interviews with purchasing professionals from nine companies indicates that purchasing organizations often create contingency plans, and implement process-improvement and buffer strategies in response to perceived supply risks discovered in assessments. Even though risk assessments, contingency plans, and risk management efforts are generally acknowledged as being important, many of those interviewed believed that there was not enough done in their organizations to mitigate supply-related risks.
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