An emergent framework for supply chain risk management and performance measurement

Abstract

Changes in the ‘shape’ of risk (ie sources, nature, triggers, scale, rapidity and severity of consequences) relating to supply chains pose challenges for risk management and the underpinning discipline domains such as Operations Research that have traditionally provided guidance and support. The aim is to evaluate these challenges, specifically in the context of supply chain risk management and to consider new approaches to support management. An overall Supply Chain Risk Management Framework is constructed, comprising five components—risk drivers, risk management influencers, decision maker characteristics, risk management responses and performance outcomes. The focus is towards the risk management influencers, recognizing that other components have been investigated elsewhere in the operations literature. Four elements are identified within this risk management component, two conventional elements, rewards and risks, and two new elements, timescale and portfolio effects. An empirical case example is employed to illustrate these issues of risk management in the manufacturing sector and to evaluate the approaches employed to manage risk and performance. The conclusion drawn is that the proposed Supply Chain Risk Management Framework with the inclusion of the risk management influencers component provides a more robust description of the factors that affect the nature of the risk management responses in particular situations. This also demonstrates the need for the Operations Research discipline to evolve a more diverse set of risk management tools and approaches (ie both quantitative and qualitative) to effectively address the diversity of issues and contexts.