Researchers' Perspectives on Supply Chain Risk Management

Supply chain risk management (SCRM) is a nascent area emerging from a growing appreciation for supply chain risk by practitioners and by researchers. However, there is diverse perception of research in supply chain risk because these researchers have
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  Researchers’ Perspectives on Supply ChainRisk Management ManMohan S. Sodhi and Byung-Gak Son Cass Business School, City University London, London EC1Y 8TZ, UK,, Christopher S. Tang Anderson School of Management, University of California, Los Angeles, California 90095-1481, USA, S upply chain risk management (SCRM) is a nascent area emerging from a growing appreciation for supply chain risk bypractitioners and by researchers. However, there is diverse perception of research in supply chain risk because theseresearchers have approached this area from different domains. This paper presents our study of this diversity from theperspectives of operations and supply chain management scholars: First, we reviewed the researchers’ output, i.e., the recentresearch literature. Next, we surveyed two focus groups (members of Supply Chain Thought Leaders and InternationalSCRM groups) with open-ended questions. Finally, we surveyed operations and supply chain management researchersduring the 2009 INFORMS meeting in San Diego. Our findings characterize the diversity in terms of three ‘‘gaps’’: a definitiongap in how researchers define SCRM, a process gap in terms of inadequate coverage of response to risk incidents, and amethodology gap in terms of inadequate use of empirical methods. We also list ways to close these gaps as suggested by theresearchers. Key words : supply chain risk management; researcher survey; literature review; research agenda  History : Received: December 2009; Accepted: January 2011 by Ananth Raman, after 2 revisions. 1. Introduction Company executives are reporting increased concernsabout the rise of supply chain risks. This makes sup-ply chain risk management (SCRM) attractive as aresearch area to academics who wish to have impacton business. On the other hand, the area is stillemerging and has rather unclear boundaries at thisstage, leading to questions about diversity among re-searchers in terms of the scope of SCRM, possibly inrelation to their perception of industry needs. More-over, with researchers having different domainexpertise, questions naturally arise about the diver-sity of research tools and their appropriateness, again,in relation to the perceived industry need. This paperuses a field research study to characterize this diver-sity of scope and research tools in the researchers’perception of SCRM. We believe these findings pro-vide a basis for collaboration among the researchersthemselves and with industry.Although we initially took the traditional approachof literature review, i.e., examining the research out-put, the fact that SCRM is still at a nascent stage madeit more appealing to conduct a field research study of researchers in this area. As articulated by Eisenhardt(1989) and Yin (2003), field research is a well-estab-lished research method in the management literatureespecially for new research areas that require explo-ration. In the operations management literature,Meredith (1998), Seuring (2005), and Voss et al.(2002) have argued that field research study is anappropriate approach for conduct exploratory inves-tigations of new operations management topics thatare not well defined or understood—certainly SCRMfits that description. Jehn et al. (1999) have used amulti-method field study method to explore diversityin workgroups—in our case we wish to explore di-versity among researchers, so we too decided to use amulti-method field study.Adapting the methodology presented by Burgess(1984) and Voss et al. (2002), we first carried out directobservations to make our perceptions more concrete,then gathered some evidence through surveys of focusgroups, and finally sought confirmation and addi-tional information through a survey. Thus, we employthe three methods—‘‘participant observation, infor-mant interviewing, and enumeration (sampling)’’—advocated by Zelditch (1962) for field research.Specifically, first, we obtained direct observations of diversity in the output of SCRM researchers by re-viewing some recent research literature so as toformulate our own perception of diversity in scopeand research tools. Second, we conducted open-endedsurveys of two focus groups of supply chain research-ers—supply chain management researchers at the 2008 Supply Chain Thought Leaders  ( SCTL )  Conference  in PRODUCTION AND OPERATIONS MANAGEMENT POMS 1 Vol. 21, No. 1, January–February 2012, pp. 1–13  DOI  10.1111/j.1937-5956.2011.01251.x ISSN  1059-1478| EISSN  1937-5956|12|2101|0001  ©  2011 Production and Operations Management Society  Madrid, Spain, 1 and risk management scholars atthe  2008 International Supply Chain Risk Management (  ISCRiM )  Conference  in Trondheim, Norway. 2 Finally,to obtain evidence and additional information,we surveyed a broad-based group of 200-plus re-searchers who attended our keynote speech on SCRMduring the  2009 Institute of Operations Research and Management Science (INFORMS) National Meeting  inSan Diego. 3 Our findings characterize the diversity of scope andresearch tools as three research ‘‘gaps’’ in SCRM: (1) adefinition gap—there is no clear consensus on thedefinition of SCRM (because some limit the scope of SCRM to rare but large impact events while others believe that SCRM is about demand-supply uncer-tainties); (2) a process gap—there is lack of research onan important aspect of the risk management process,namely, the response to supply chain risk incidents;and (3) a methodology gap—there is shortage of em-pirical research in the area of SCRM. The researcherssurveyed in the third step of our study also providedinitial answers on how to close these gaps.Our contribution to the operations management lit-erature is having characterized the diversity of researchers’ perspectives in SCRM, in contrast to thepublished literature, thus creating a basis for research-ers to collaborate with each other, with industry, andwith research journals. However, there are limitationsof our study and of our approach, in particular aboutnot having studied moderating effects such as edito-rial policies or particular topical and methodologicalinterests of research journals—see, for instance, Sodhiand Tang (2008) in the context of operations research.Still, we hope this paper provides useful insights forresearchers and journal editors not only in the area of SCRM directly but also in other emerging researchareas.Thispaper is organized as follows: We provide some background in section 2 and the motivation for ourresearch in section 3. Section 4 presents our method-ology. In sections 5, 6, and 7, we present our resultsregarding each of the three steps we undertook, re-spectively: a study of the research output, focusgroups, and formal survey. In section 8, we providesuggestions made by the surveyed researchers on howto close these gaps. The paper concludes in section 9. 2. Background Since the early 1990s, many firms have implementedvarious supply chain initiatives to increase revenue, toreduce costs, and/or to reduce assets. However, tomeet these goals, most supply chains became morecomplex and consequently more vulnerable to dis-ruptions than they were before (Craighead et al. 2007).Moreover, external factors such as natural hazard,purposeful human agents, global outsourcing (Bakshiand Kleindorfer 2009), and shorter product life cycle(Sodhi 2005) have heightened the risk exposure of supply chain. To reduce vulnerability, there have beencalls for ‘‘resilience’’ (cf. Sheffi 2005) or ‘‘robustness’’(cf. Tang 2006).There are many examples of significant supplychain disruptions: Mattel recalled 19 million toys dueto lead paint or loose magnets in 2007; in 2006, due toa fire hazard, Dell recalled 4 million laptop computer batteries made by Sony, Ericsson reported year-endlosses of US$2.34 billion for the mobile phone divisionafter its supplier’s semiconductor plant caught on firein 2000, Land Rover laid off 1400 workers after theirsupplier became insolvent in 2001, Dole suffered alarge revenue decline after their banana plantationswere destroyed after Hurricane Mitch hit SouthAmerica in 1998, and Ford closed five plants forseveral days after all air traffic was suspended afterSeptember 11 in 2001 (Chopra and Sodhi 2004, Sheffi2005).Such disruptions can have not only long-term stockprice effects but also loss of reputation and even lossof life. Based on an analysis of 827 disruption an-nouncements made over a 10-year period, Hendricksand Singhal (2005a) found that companies sufferingfrom the occurrence of uncertain events experienced33–40% lower stock returns relative to their industry benchmarks over the 3-year time period starting 1year before and ending 2 years after the event an-nouncement date.The impact of such incidents has led to a growinginterest in the area of supply chain risk and its man-agement, as evidenced in the number of industrysurveys, practitioner conferences, and consultancy re-ports devoted to the topic, e.g., Muthukrishnan andShulman (2006). According to a study conducted byComputer Sciences Corporation, 60% of the firms sur-veyed acknowledged that their supply chains arevulnerable to disruptions (CSC 2004). Supply chainexecutives in IBM believe that SCRM is the secondmost important issue for them (IBM 2008). Also, theresearch by AMR in 2007 reported that 46% of theexecutives believe that better SCRM is needed (Hill-man and Keltz 2007). However, few companies havetaken commensurate actions (Muthukrishnan andShulman 2006).The impact of man-made disasters such as 9/11 andof natural disasters such as Hurricane Katrina fuelledgreater interest in SCRM in companies. Hewlett Pack-ard formed the Procurement Risk Management Groupto manage supply chain risks on the procurement side(Nagali et al. 2008), and Cisco formed the SCRM teamthat is responsible for ensuring supply chain resil-iency. In the aftermath of Katrina, company executivesfrom Procter & Gamble, Walmart, and SYSCO began Sodhi, Son, and Tang:  Perspectives on Supply Chain Risk Management 2  Production and Operations Management 21(1), pp. 1–13,  ©  2011 Production and Operations Management Society  sharing their SCRM processes (Bednarz 2006). Erics-son implemented a new organization that isresponsible for developing SCRM process after expe-riencing the huge financial loss caused by a small fireat a supplier’s plant in March 2000 (Norrman and Jansson 2004). After its recall of toys, Mattel formed anew division to audit, monitor, and respond to supplychain risks (Pyke and Tang 2009).At the same time, consulting firms such as Deloitteand PriceWaterhouseCoopers (PWC) and insurancecompanies such as Zurich Insurance establishedSCRM as a new area of practice. Deloitte’s and PWC’sSCRM practices provide consulting services aroundassessing and mitigating supply chain risks arisingfrom product development to outsourcing and fromfinance to logistics. Zurich’s SCRM practice providesconsulting services for reducing supply chain failuresand insurance coverage including supplier defaultsand supply delay so that the insurer can reduce fi-nancial risk exposure.In response, there is increasing research interest insupply chain risk. This response includes books onSCRM (e.g., Brindley 2004); Zsidisin and Ritchie(2008), Wu and Blackhurst (2009), Sodhi and Tang(2011); special issues on SCRM (e.g., Ritchie and Brin-dley (2007), Narasimhan and Talluri (2009), Cao et al.(2009), and literature review of SCRM (e.g., Paulsson2004, Tang 2006). 3. Motivation for This Study Because SCRM is still a nascent area, most researchersin this area tend to come from different more estab-lished areas. Hence, it is natural to expect a diverse setof viewpoints on what the scope of the field is andwhat research methodologies are appropriate at thisstage. This diversity is unavoidable as we saw withsupply chain management in the 1980s. It may even be beneficial in fuelling the kind of rapid growth inSCRM literature we have seen up to 2010.However, this diversity affects collaboration withother researchers and the review process in journalpublication. In addition, this diversity makes it difficultfor researchers to articulate the impact of their researchin the context of other existing papers in this area.Moreover, it can also hamper research engagementwith industry. With a decade or so of SCRM literature behind us as of 2010, it is a good time to establish aconsensus regarding SCRM research based on our un-derstanding of industry need. A useful first step would be to characterize the diversity in scope and in the useof research methods among researchers. Consideringthe researchers’ perceptions of industry needs—it ishard to escape the headline-grabbing stories aboutmajor supply chain risk events—such characteriza-tion could help build a consensus with an eye towardsindustry need. As such, we are interested in gaining a better understanding from the research community it-self regarding the scope and the appropriateness of research methodologies. 4. Methodology To examine the diversity in scope and research tools,our multimethod field research study is based on thefollowing three steps: (1) carry out direct observationsof the researchers’ output; (2) gather evidence throughsurveys of focus groups of researchers aided by open-ended questionnaires; and (3) seek confirmation andadditional information through a formal survey of alarge group of researchers. To better understand  scopediversity , we looked at how (implicitly or explicitly)researchers have  defined  supply chain risk or SCRMand how they have addressed the  process  of SCRM:identify, assess, mitigate or respond, and communi-cate. To understand  research - tool diversity , we looked atthe  research methodologies  that researchers have used.We now describe the aforementioned three steps inmore detail. Step 1 : Direct observations. We obtained direct ob-servations of SCRM research activities by reviewingsome recent research literature so as to examine howwell the SCRM literature met the needs of industry inthe eyes of the researchers. Our goal was to form ourown perception regarding how researchers perceivethe scope including the definition of SCRM and whatresearch methodologies they employ. We reviewedtheir output of their efforts, i.e., academic papers thatspecifically mention that the focus of their investiga-tion is risks/uncertainties in the supply chain, takenfrom a wide range of peer-reviewed journals. We spe-cifically  excluded  papers that dealt with managingsupply-demand risks within the established supply-chain management context—these included most pa-pers using mathematical modelling as the primarymethodology; see Tang (2006) for a review of paperson risk but within the supply chain managementmodelling literature. Given our purpose to character-ize diversity, our aim was to capture the ‘‘breadth’’ of papers rather than conduct an exhaustive survey. Thisstep indicated diversity among researchers in theirdefinition of SCRM, in their addressing different as-pects of the process of SCRM, and in their use of different research methodologies. Ultimately, this stephelped shape our perception about three ‘‘gaps’’ incurrent SCRM research: (1) a definition gap, (2) a pro-cess gap, and (3) a methodology gap—that we discusslater. Step 2 : Exploratory survey of focus groups. To fur-ther explore researcher diversity in scope, inparticular in the definition of supply chain risk andof SCRM, we surveyed two focus groups aided with a Sodhi, Son, and Tang:  Perspectives on Supply Chain Risk Management Production and Operations Management 21(1), pp. 1–13,  ©  2011 Production and Operations Management Society  3  presentation and an open-ended questionnaire(Table 4). One group comprised supply chain man-agement researchers at the  2008 Supply Chain ThoughtLeaders (SCTL) Conference  in Madrid, Spain, and theother comprised SCRM scholars at the  2008 Inter-national Supply Chain Risk Management  (  ISCRiM ) Conference  in Trondheim, Norway. We obtained 42 re-sponses to the open-ended questionnaire from theattendees at these two miniconferences. Their re-sponses helped us to further characterize the diversityof scope in terms of the definition of supply chain riskand of SCRM and also led to a starting point forscoping SCRM. Step 3 : Survey about the three gaps. We used a pre-sentation and a questionnaire with closed-ended aswell as open-ended questions to survey a broad-basedgroup of operations management researchers (Table8). These researchers attended our keynote speech onSCRM during the  2009 Institute of Operations Researchand Management Science  (  INFORMS )  National Meeting in San Diego. We used this survey to seek the opinionof researchers on the gaps we identified in the pre-vious steps. We also sought views from researchersabout what can or should be done to address theseresearch gaps in SCRM. We distributed the question-naire to approximately 200 attendees of the keynotespeech on SCRM during the  2009 INFORMS SanDiego meeting  and obtained 133 responses albeitsome with incomplete responses to the open-endedquestions. 5. Step 1 Findings: Diversity in Scopeand Research Tools We now present our findings based on those threesteps described in the last section. We first looked intothe  types  of risks identified as supply chain risks in theprevious SCRM research; for this, we reviewed onlythose research articles where authors specifically dis-cussed the definition or the scope of supply chainrisks and uncertainties (Table 1). A number of re-search articles on SCRM, including those we reviewedlater (Tables 2 and 3), focus only on a certain aspect of risk or SCRM, and we did not review these for theseeking diversity in definition.Many articles categorize supply chain risks as aninitial step to manage these risks but do so fromwidely different perspectives (Chopra and Sodhi 2004,Christopher and Peck 2004, Hallikas and Virolainen2004, Manuj and Mentzer 2008a,b, Neiger et al. 2009).While the literature we surveyed is not exhaustive, itdoes indicate the absence of any consensus on a defi-nition or scope for supply chain risk (Table 1).Next, we reviewed a sample of papers to under-stand the different SCRM process elements and howthese were covered in the literature. For instance, Ju¨ttner et al. (2003) suggest four elements of managingsupply chain risk: (1) assessing the risk sources, (2)identification of risk concepts, (3) tracking the riskdrivers, and (4) mitigation risks. Likewise, Kleindorferand Saad (2005) identify the process elements as (1) Table1 Diverse Views of Supply Chain Risk in Articles that Aim to Look at SCRM Comprehensively  Articles (in chronological order) Scope of risk Ju ¨ ttner et al. (2003) Based on sources: environmental risk sources, network risk sources, and organizational risk sourcesSpekman and Davis (2004) Six dimensions of supply chain as risk sources, (1) inbound supply, (2) information flow, (3) financial flow, (4) the securityof a firm’s internal information system, (5) relationship with partners, and (6) corporate social responsibilityCavinato (2004) Based on five subchains/networks as risk sources, (1) physical, (2) financial, (3) informational, (4) relational, and (5)innovationalChopra and Sodhi (2004) Categorize supply chain risks at a high level as disruptions or delays. These risks pertain to (1) systems, (2) forecast, (3)intellectual property, (4) receivable, (5) inventory and (6) capacity risk Christopher and Peck (2004) Categorize supply chain risks as (1) process, (2) control, (3) demand, (4) supply, and (5) environmentalKleindorfer and Saad (2005) Based on the sources and vulnerabilities of risks, (1) operational contingencies, (2) natural hazards, and (3) terrorism andpolitical instabilityBogataj and Bogataj (2007) Categorize supply chain risks as (1) supply risks; (2) process risks; (3) demand risks; and (4) control risksSodhi and Lee (2007) Categorize supply chain risks in the consumer electronics industry broadly as those requiring strategic decisions and thoserequiring operational decisions, in three categories: (1) supply, (2) demand, and (3) contextual risksTang and Tomlin (2008) Categorize supply chain risks as (1) supply, (2) process, and (3) demand risks, (4) intellectual property risks, (5) behavioral risks,and (6) political/social risksManuj and Mentzer (2008a) Categorize supply chain risks as (1) supply, (2) operations, (3) demand, and (4) other risks including security and currency risksSee Manuj and Mentzer (2008b) for another categorization: (1) supply, (2) operational, (3) demand, (4) security, (5) macro, (6)policy, (7) competitive, and (8) resource risksOke and Gopalakrishnan (2009) Consider low-impact high-frequency and high-impact low-frequency risks in three major categories: (1) supply, (2) demand, andmiscellaneous risks in the retail sectorRao and Goldsby (2009) Categorize supply chain risks as (1) framework and (2) problem specific, and (3) decision making risk  Sodhi, Son, and Tang:  Perspectives on Supply Chain Risk Management 4  Production and Operations Management 21(1), pp. 1–13,  ©  2011 Production and Operations Management Society  specifying sources of risks and vulnerabilities, (2) as-sessment, and (3) mitigation.As such, we classified the existing SCRM literatureaccording to four key elements for managing supplychain risks: (1) risk identification; (2) risk assessment;(3) risk mitigation; and (4) responsiveness to risk in-cidents, the last one subdivided into responsiveness to(a) operational risks (frequent risk events stemmingfrom inherent supply-demand uncertainty); and (b)catastrophic risks (caused by natural or man-madedisasters). We then indentified how articles from a broad base of journals cover these elements of the riskmanagement process (Table 2).Identification of risks and uncertainty is an initialstep to manage supply chain risks according to manyresearchers (e.g. Chopra and Sodhi 2004, Hallikaset al. 2004, Hauser 2003, Manuj and Mentzer 2008a,b,Neiger et al. 2009, White 1995, Wu and Blackhurst2006). Indeed many articles discuss this aspect of therisk management process (Table 2). However, with theexception of Neiger et al. (2009), researchers such asChopra and Sodhi (2004) or Spekman and Davis(2004) cover this step only as a part of a framework of managing SCRM rather than focus on it.The second SCRM process element is assessment,involving the evaluation of the likelihood and of theimpact (Harland et al. 2003, Knemeyer et al. 2009).Many papers covering or mentioning assessment areconceptual papers and, as with risk identification,cover it only as a part of a broad SCRM framework.This is surprising given many researchers’ stated in-terest in honing in on probabilities related to supply Table2 The Elements of SCRM Covered by the Literature  Article Identification Assessment MitigationResponsiveness . . .. . . to operational risks . . . to catastrophic risksTreleven and Schweikhart (1988) X XJohnson (2001) XHendricks and Singhal (2003) XChopra and Sodhi (2004) X X XChristopher and Lee (2004) XGiunipero and Eltantawy (2004) X XNorrman and Jansson (2004) X X X X XSpekman and Davis (2004) X XZsidisin et al. (2004) X X XBlackhurst et al. (2005) X XHendricks and Singhal (2005a) XHendricks and Singhal (2005b) XKleindorfer and Saad (2005) X X X XBrun et al. (2006) XChoi and Krause (2006) XCucchiella and Gastaldi (2006) XGaudenzi and Borghesi (2006) XBogataj and Bogataj (2007) XSodhi and Lee (2007) X XCheng and Kam (2008) X X XManuj and Mentzer (2008a) X X XTang and Tomlin (2008) X XWagner and Bode (2008a) XBraunscheidel and Suresh (2009) X XJiang et al. (2009) XKnemeyer et al. (2009) X X X XNeiger et al. (2009) XOke and Gopalakrishnan (2009) X XRao et al. (2009) XTrkman and McCormack (2009) X XEllis et al. (2010) X Sodhi, Son, and Tang:  Perspectives on Supply Chain Risk Management Production and Operations Management 21(1), pp. 1–13,  ©  2011 Production and Operations Management Society  5
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