Modelling the Enablers of Supply Risk Management Using Interpretive Structural Methodology

Modelling the Enablers of Supply Risk Management Using Interpretive Structural Methodology

Kunal Ganguly (IIM Kashipur, India) and Debabrata Das (IIM Kashipur, India)
DOI: 10.4018/978-1-5225-4754-9.ch016

Abstract

The purpose of this paper is to develop a structural framework for supply risk management process (SRMP) and establish its link with Supplier Selection (SS). Interpretative Structural Modelling (ISM) approach is used to develop the structural framework. The enablers for SRMP are identified through extensive literature review and further discussion held with managers/ senior engineers in an Indian Automobile manufacturing company. In the second stage of the work, the structural framework is developed where the enablers are classified into four categories based on their driving power and dependence. The identification of enablers and their linkages for SRMP which influences SS sheds light on the problem of supply risk management efforts. This can enable managers in deciding the priority of various enablers and linkages between them. This can also help supply chain managers to take proactive steps in improving these enablers and consider Supply Risk for the SS process.
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Introduction

Few areas of management interest have risen to prominence in recent years as rapidly as supply chain risk management (SCRM), both from the practitioners’ perspective and as a research area. Current business trend shows increasing trend in outsourcing, reduction of the supplier base, long term relationships with suppliers, reduced inventory, and short lead times. These business activities have potential to increase risks in the supply chain and redefine the functions of the business units. The purchasing function including the supplier selection is no longer an operational function but a strategic level decision. To make a prudent supplier selection decision, it is important to plan for uncertainty to manage risk. The objective of risk management in the supply chain is to protect organizations from unpredictable events and their adverse effects (Barbara & Borghesi, 2006). Tang (2006) believes that effective supply chain risk management (SCRM) has become a need for today’s companies. Although supply chain management has always had a strong emphasis on risk, the notion of supply chain risk management has gained an increasing popularity in recent years (Kelindorder & Saad, 2005; Chopra & Sodhi, 2004; Chistopher & Lee, 2004).

Linking Supply Risk Management to Supplier Selection

An increasing dependence on suppliers leads companies to be even more exposed to uncertain events, so that supply risk management process (SRMP) becomes necessary as part of supply management (Zsidisin & Ellram, 2003; Wu, Blackhurst & Chidambaram, 2006). Thus supplier selection (SS) becomes one of the most important issues for purchasing managers (Hsu & Chin, 2006). An effort has to be made at various organizational levels to implement process improvement strategies to reduce the risk propensity, for example by forming strategic alliances (Giunipero & Eltantawy, 2004) and by developing suppliers (Krause & Handfield, 1999). SRMP is strongly related with risks arising from improper SS (Giunipero & Eltantawy, 2004). One of the most influential activities in the whole procurement process and the supply management performance is the proper supplier selection. Although supplier selection/development is considered a part of the conceptual supply risk framework, little has been done to translate the conceptual work into operational approach (Ritchie & Brandley, 2007). In the literature, SS and SRMP are generally studied separately, and with little linkage established between the two issues (Mitcheli, Guido, Cagno & Marta, 2008). This research aims at understanding the linkage between SS and SRMP and identifying the major enablers.

The articles based on SRMP practices per se in an Indian context are rare. As documented by many authors (Prakash 2011; Thakkar, Kanda & Deshmukh 2012; More & Basu 2013), the Indian business environment currently poses considerable challenges to achieving supply chain efficiency. On a 16-point scale, India and the US receive a supply chain risk index of 9 and 4, respectively (Arntzen, 2010). It is thus imperative to study the SRMP in the Indian context. To go ahead, the enablers for SRMP are identified and classified followed by exploration of the interactions among the enablers for an automobile supply chain in India.

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