The risk thematic is not new in management, but it is a recent and growing subject in supply chain management. Supply Chain Risk Management (SCRM) plays a major role in successfully managing business processes in a proactive manner. Supply chain risk has multiple sources including process, control, demand, supply and environment. Supply chain management, faced with these risks, requires specific and adequate responses such as techniques, attitude and strategies for management of risk. This paper is based on an empirical study of 142 general managers and logistics and supply chain managers in 50 different French companies. It demonstrates that for organizations to be effective, SCRM must be a management function that is inter-organizational in nature and closely related to strategic and operational realities of the activity in question. Moreover, the findings of our empirical study suggest that effective SCRM is based on collaboration (collaborative meetings, timely and relevant information exchanges) and the establishment of joint and common transverse processes with industrial partners.
In 2002, Christopher and Towill indicated that supply chain management was experiencing increasing exposure to risk [8]. Shortly thereafter, Blackhurst et al.[2] confirmed that firms were being confronted by increasing supply chain risks and Zsidisin et al.[66] underscored the dramatic consequences of negative events on companies. Market globalization, reduced product lifecycles, complex international networks of industrial partners, unpredictable demand, uncertain supply, cost pressures, the necessity to be lean and agile, increasing use of outsourcing and off-shoring, and reliance on suppliers make up some of the elements contributing to these difficult and ongoing situations [10], [17], [20], [22], [24], [39], [43] and [52].
Mitroff and Alpaslan [42] make an historic pronouncement concerning major crises. According to their analysis, the number of “normal” accidental crises, whether natural or man-made, is increasingly being overshadowed by abnormal or deliberately precipitated crises. Coleman [9] confirms this by stating that the frequency of man-made disasters increased exponentially during the 20th century in OECD countries. His analysis shows that this exponential growth in disaster frequency is largely due to an increase in traditional hazards such as fires and explosions, rather than from new technologies. Elkins et al.[11] observe that this increase concerns both the potential for and magnitude of disruption. There is a limited number of DSS for supply chain risk management and one of them is by Li and Liao [33] and Tsai [55]. They developed DSS for dynamic alliance and cash flow risks in supply chain.
Supply chain risks are numerous and varied and many studies have tried to list them including those by Chopra and Sodhi [5]; Christopher and Peck [7]; Hallikas et al.[16]; Jüttner et al.[25] and Jüttner [24]. Studies concerning sources of supply chain risk are also numerous. For example, Harland et al.[17] focused on different classifications of risk types in their literature review spanning from 1996 to 2000. These risks concern different branches of management including (but not limited to) strategy, operations, supply, customer relations, asset impairment, competition, reputation, financial markets, fiscal and regulatory requirements, and legal.
Chopra and Sodhi [5] propose disruptions, delays, systems, forecasts, intellectual property, procurement, receivables, inventory, and capacity as the nine main sources of supply chain risk. Meanwhile Christopher and Peck [7] identify process, control, demand, supply, and environment as five risk sources. In 2003, Jüttner et al.[25] focused on environmental, network and organizational risk sources for supply chains. But some years later, Jüttner [24] noted two other sources of risk: supply and demand. Taking a slightly different angle, Kleindorfer and Saad [27] emphasize three sources that increase disruption risk: operational contingencies (including equipment malfunctions and systemic failures), natural hazards (earthquakes, hurricanes and storms), terrorism and political instability. Kiser and Cantrell [26] highlight internal risks (risks in manufacturing, business, planning and control, mitigation and contingency) and external risks (risks in demand, supply, environment, business and physical plant). And finally, Wagner and Bode [57] divide the sources into five distinct classes: demand side; supply side; regulatory, legal and bureaucratic; infrastructure, and catastrophic. Hua et al.[21] develop a multi-agent simulation model to study the impact of various operational parameters and decisions, such as horizontal competition among retailers, order allocation strategies of retailers, wholesale price of manufacturers, characteristics of market demand and number of retailers, on bankruptcy propagation.
Supply chain vulnerability can also be considered a risk factor and can be defined as “exposure to serious disturbance arising from supply chain risks and affecting the supply chain's ability to effectively serve the end customer market” [37]. Extant literature has focused on identifying sources of uncertainty and the risk emanating from them. Several authors develop methodologies for risk identification and assessment [5]. Risk identification consists of quantifying risks and this information can then be used in deriving risk mitigation strategies [5].
As outlined above, SCRM is very important given the new economic and industrial environment in which firms currently work. The purpose of this present research is to contribute to and provide a more complete understanding of SCRM by studying three aspects of SCRM: attitudes toward risk, tools used to understand risk, and the ways in which decisions are made. We have formulated three general research questions for the study: (i) What are supply chain managers' attitudes toward risk? (ii) What tools are used to manage risk? (iii) What managerial techniques are considered the most effective in minimizing supply chain risk, and most efficient in terms of supply chain risk management? In an attempt to answer to these questions, we employ an empirical methodology (questionnaire with closed questions) and statistical analysis. We will not try to identify or define different supply chain risks because many studies have already broached this daunting subject including Chopra and Sodhi [5], Tang and Tomlin [50] and Jüttner [24]. Other studies have addressed specific fields such as networks [14], [15], [16] and [44], agility [38], and inbound perspective [59]. Still others have dealt with domains such as fashion products and commodities [39], aerospace supply chains [47], the American chemical industry [27] and [28], the American automotive industry (using a qualitative methodology) [10], the aerospace industry in the UK [19], and the European automotive industry [58]. Only a limited number of research projects have focused on (i) the organizational structure of the SCRM in a firm, and (ii) ways to manage supply chain risk in a dyadic approach (with industrial partners). Therefore, our research is microeconomic in focus that is, at a firm level and not macroeconomic focus. Moreover, in our study we try to adopt a practitioner's perspective, focusing on analysis of tools and attitudes adopted in a firm.
In this section, we summarize key findings, limitations and some future research directions.
6.1. Key findings
The aim of this paper is to understand and analyze management of business risks associated with supply chains. After defining Supply Chain Risk Management (SCRM) from the literature, we sought to enrich this definition by providing both an inter- and an intra-organizational vision. We have also attempted to provide, via our empirical study, a transversal vision into several organizations making up the chain. We find that for the companies in our study identifying supply chain risk is an unavoidable and necessary task that continues to pose certain problems. This function is, however, integrated in performance measures for logistics partners. Thus, companies adopt a proactive attitude, they are aware of the risks, they allocate resources and are organized (individually or by coordinating with their industrial partners) to manage risk. The term SCRM was not frequently used in manager discourses encountered during our study; however, real practices dramatically demonstrate their concerns in this area.
A company is never isolated, as it is part of a chain. Likewise, to be effective, SCRM cannot be practiced in isolation. The very definition of supply chain management, managing the flow of products, components and information, must be transversal and seek to integrate supply chain partners. Transversal management seems very appropriate to effectively manage supply chains and risks. Our study clearly demonstrates that SCRM is an operational management tool with tangible actions manifesting in the field, relayed by department heads, and with the participation of operators and employees. It is also a strategic tool with a defined long term master plan allocating resources and demonstrating willingness to collaborate with industrial partners within an organization and between different partners of the same chain. This conclusion fully supports current main stream research in Supply Chain Management, i.e. that collaboration is the key to overall supply chain performance.
6.2. Limitations of the research
Limitations to our research include methodological concerns in the statistical part of the paper, a sample composed of firms with differing characteristics from several fields, and the simplicity of the chosen statistical tools (average and standard deviation). With more sophisticated instruments much more could be done with the data base presented in this paper. In this study we were interested in respondent perceptions and not the reality of risk and of SCRM. As a result, there are some biases in terms of history, maturation, contamination, and selection. This is a classic problem encountered when the research question focuses on managers and their practices. Theoretical limitations concern the fact that we neither study the source of supply chain risks, nor their consequences on performance.
6.3. Further research
It would be interesting to construct a typology of attitudes toward risk and try to characterize companies based on their adoption of different responses to risk. Also, suitable models and techniques should be developed for evaluating the impact of risks in supply chain and its management. Detailed case studies should be conducted to study how different companies perceive risks in their supply chain, assessment of their risks both in terms of severity and impact on the organizational performance and subsequently the strategies, techniques and tools used for mitigating the effect of supply chain risks.
