Mapping supply chains on risk and customer sensitivity dimensions
| Published date | 01 July 2006 |
| Date | 01 July 2006 |
| DOI | https://doi.org/10.1108/02635570610671533 |
| Pages | 878-895 |
| Author | Mohd Nishat Faisal,D.K. Banwet,Ravi Shankar |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Mapping supply chains on risk
and customer sensitivity
dimensions
Mohd Nishat Faisal, D.K. Banwet and Ravi Shankar
Department of Management Studies, Indian Institute of Technology,
New Delhi, India
Abstract
Purpose – With the emergence of the concepts of lean, agile and leagile paradigms for supply chains,
organizations have little idea as to which model suits them based on the their supply chain’s ability to
counter risks and take on the challenges of the fast changing customer preferences. This paper aims to
map supply chains on these two dimensions.
Design/methodology/approach – A model is proposed by which suitable supply chain strategy
can be selected based on customer sensitivity and risk alleviation competency dimension. Graph
theoretic approach is applied to quantify these dimensions for three case supply chains.
Findings – The proposed model was tested for three Indian SMEs clusters and suitable supply chain
strategy was suggested.
Research limitations/implications – It is recommended that the model be tested for those supply
chains which have established themselves as lean, agile or leagile entities.
Practical implications – Suggested model would help organizations to select suitable supply chain
strategy based on customer sensitivity and risk alleviation competency and the transition required in
tune with the market requirements in which they operate. Also the areas which need improvements
from the perspective of risk alleviation competency or customer sensitivity can be easily delineated.
Originality/value – Mapping supply chains based on quantification of customer sensitivity and risk
alleviation competency dimension is a novel effort in the area of supply chain management.
Keywords Supply chain management, Risk management,Consumer behaviour
Paper type Research paper
1. Introduction
Every human endeavor involves risk and the success or failure of any venture depends
crucially on how we deal with it (Dey and Ogunlana, 2004). The word risk carries
different connotations and is generally associated with finance and terms like options,
futures, swaps in context of managing risks are commonly used intoday’s business
parlance. According to Emblemsva
˚g and Kjølstad (2002) the word “risk” is derived from
the early Italian word risicare, which originally meant “to dare.” Mitchell (1999)
discussed the relationship between objective and subjective risk, and suggested that
objective risk must exist in theory. He also concluded that an objective measure of risk is
difficult to obtain and all that can be easily measured is the subjective or perceive d risk.
An effective program of risk management is an ongoing process of assessment,
intervention and fallback planning (McGrew and Bilotta, 2000) and according to
Bandyopadhyay et al. (1999) four major components of risk management are:
(1) risk identification;
(2) risk analysis;
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0263-5577.htm
IMDS
106,6
878
Industrial Management & Data
Systems
Vol. 106 No. 6, 2006
pp. 878-895
qEmerald Group Publishing Limited
0263-5577
DOI 10.1108/02635570610671533
(3) risk-reducing measures; and
(4) risk monitoring.
In the global economy along with the risks businesses are also faced with customers
harder to generalise and thus managing variety and quantity with least cost
ramifications is a challenge. Customer sensitivity is a trait which helps the
companies to understand better about their customers and the markets which they
serve. But there are no quick fix solutions to build customer sensitive supply chains’
and supply chain strategists have found it to be one of the most challenging tasks.
Today supply chains are striving to improve upon customer sensitivity dimension
by taking advantages of outsourcing and leveraging their partners’ capabilities.
This endeavor has ramifications in the form of an increase in risk susceptibility as
along with their capabilities, partners also bring new risks to the overall supply
chain. Thus, organisations have to assess and evolve strategies to manage risks
outside their organisational boundaries impacting the overall supply chain. Further
contemporary research also recommends that supply chains need to be designed as
lean, agile or leagile according to the type of product and the requirements of the
markets (Christopher, 2000; Mason-Jones et al., 2000; van-Hoek et al., 2001;
Christopher et al., 2004). But a supply chain design based only on the requirements
of the markets without sufficient regard to the inherent risks is fraught with high
probability of failure. In literature no study was found which considered the impact
of risk on the structure of the supply chain. So the major objectives of this paper
can be stated as:
.To develop a model that maps traditional, lean, agile and leagile supply chains
on customer sensitivity and risk alleviation competency dimensions.
.To evaluate the suggested model for case supply chains by quantifying risk
alleviation competency and customer sensitivity dimensions.
2. Supply chain risk management
Supply chain management (SCM) involves managing complex flow of information,
materials, and money across multiple functional areas both within and among
companies. The aim is to achieve goals related to total system performance rather than
optimisation of a single phase in a supply chain (Helo and Szekely, 2005). Typically the
goals for SCM are to develop value-added processes that deliver innovative,
high-quality, low-cost products on time with shorter development cycles and greater
responsiveness (Fawcett and Magnan, 2004). This necessitates companies to identify,
evaluate, rank, and manage its supply chain risks. Company’s obsession with speed
and costs also causes supply chains to break down particularly during the launch of
new products (Lee, 2004). According to Speckman and Davis (2004) as supply chains
takes advantage of core competences of partnering firms it should also be prepared to
manage the risks that may emanate because of partnering firms practices related to
environment and ethics. Successful companies would be those that can identify and
develop contingency plans for various risks that exist internally and externally to the
organisation (Zolkos, 2003). Although at the strategic level supply chain risk
management is relatively new and rapidly expanding discipline (Gunasekaran et al.,
Risk and
customer
sensitivity
879
To continue reading
Request your trial