Managing Risk in Virtual Enterprise Networks: A Supply Chain Innovation Perspective

Introduction

In today’s dynamic business environment supply chains and value chains are distributed globally, providing products and services to the customers in short lead times, emphasizing on low costs and high quality. The supply chains are designed and structured thoughtfully in order to optimize resource and skill capability. Sometimes, in order to reduce costs and bring innovation to the supply chain, larger organizations may bring onboard a network of organizations virtually collaborating on a temporary basis. This does not imply that only large organizations are leading the creation of these virtual networks. Some of the smaller organizations, who may have the innovative capabilities and skills but find it intimidating to transact on their own may form these networks to confront larger organizations. These networks can then provide the tools to take on tenders and projects which may have been available only to larger organizations. Thus a virtual enterprise is a temporary relationship of participating members, formed, operated, and dissolved to accomplish specific short- term goals (Reid, et. al., 1996). As supply chains are becoming more globalised and at the same time lean, they are also introduced to a number of uncertainties and risks which if not mitigated can cause severe problems sometimes leading to supply chain termination. Although the literature surrounding supply chain risks is growing, there is still place for more research in this area. Supply chain innovation is a capability that is being considered vital for both mitigating supply chain risks and for creating innovation for the supply chain. The temporary nature of the relationship and the informal structure of Virtual Enterprise Networks can lead to various challenges and risks for the network. It is important to understand these challenges and risks and try to mitigate them in order to create a better and more solid working environment. This chapter presents the challenges and risks involved, and explains how innovation can act as a mitigating and risk relief factor. The chapter also discusses ways of facilitating innovation within the context of a Virtual Enterprise Network (VEN) and ends with a brief discussion regarding the future research areas and conclusion items.