A conceptual framework for improving effectiveness of risk management in supply networks

• Pages: 77-98
• DOI: https://doi.org/10.1108/IJLM-11-2018-0289
• Published date: 19 February 2020
• Date: 19 February 2020
• Author: Atanu Chaudhuri,Abhijeet Ghadge,Barbara Gaudenzi,Samir Dani
• Subject Matter: Logistics,Management science & operations

A conceptual framework for

improving effectiveness of risk

management in supply networks

Atanu Chaudhuri

Durham University Business School, Durham, UK

Abhijeet Ghadge

Cranfield School of Management, Cranfield University, UK

Barbara Gaudenzi

Department of Business Administration, University of Verona, Verona, Italy, and

Samir Dani

Huddersfield Business School, University of Huddersfield, Huddersfield, UK

Abstract

Purpose –The purpose of the paper is to develop a conceptual framework for improving the effectiveness of

risk management in supply networks following a critical literature review.

Design/methodology/approach –A critical review of 91 scholarly journal articles published between 2000

and 2018 supports the development of an integrated conceptual framework.

Findings –The findings emphasize that supply chain integration (SCI) can have both a positive and negative

impact on the effectiveness of risk management in supply networks. It is possible to have a positive effect when

SCI can be used to develop competencies in joint risk planning within the organization and with wider supply

network members and, in turn, to develop collaborative risk management capabilities. Supply network

characteristics can influence whether and the extent to which SCI has a positive or negative impact on risk

management effectiveness.

Research implications –The conceptual framework can be used to empirically assess the role of SCI for

effective risk management. Dynamicevaluation of the effectiveness of risk management and potential redesign

of the supply network by considering other contingent factors are some future research avenues.

Practical implications –There is a need for developing specific competencies in risk planning within

organizations and joint risk planning with supply network members which, in turn, can help develop

collaborative risk management capabilities to improve the effectiveness of risk management in supply

networks. Network characteristics will influence whether and the extent to which SCI results in the

effectiveness of risk management.

Originality value –Moving beyond recent (systematic)reviews on supply chain risk management, this study

develops a novel conceptual framework interlinking SCI and the effectiveness of risk management while

considering network characteristics.

Keywords Supply chain risk management, Supply chain integration, Supply network characteristics,

Conceptual framework

Paper type Conceptual paper

1. Introduction

Supply chain risk management (SCRM) is characterized by a coordinated approach amongst

supply chain members involving cross-company collaboration between partners (Norrman

and Jansson, 2004;Tang, 2006;Thun and Hoening, 2011). However, risk management

processes appear to remain mostly restricted within focal firms (Fan and Stevenson, 2018).

Such a single-firm approach may not be effective for SCRM (Cheng and Kam, 2008)as

multiple risks may originate and propagate across different tiers in the supply chain network

Improving

effectiveness of

supply chain risk

management

77

The authors would like to thank anonymous reviewers for their constructive recommendations for

improving the overall quality of manuscript.

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0957-4093.htm

Received 17 November 2018

Revised 23 May 2019

27 September 2019

5 December 2019

Accepted 11 December 2019

International Journal of Logistics

Management, The

Vol. 31 No. 1, 2020

pp. 77-98

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-11-2018-0289

(Ghadge et al., 2013;Heckmann et al., 2015). Effectiveness of risk management could be

measured in terms of reduced risk (Tse et al., 2011), better preparedness (Li et al., 2006;J€

uttner

and Maklan, 2011), better response (Sheffi, 2001), higher resilience (Pettit et al., 2010), and

overall decrease in probability of occurrence and severity of risks (Lavastre et al., 2014).

Supply chain integration (SCI) can be considered as a key enabler of effective risk

management across networks; however, only a few studies have investigated its role as an

enabler for SCRM (Pettit et al., 2010;J€

uttner and Maklan, 2011). Transparency and visibility

along the supply chain increase the capability to identify and manage risks (Faisal et al., 2006;

Wagner and Silveira- Carmagos, 2012). Apart from ensuring visibility of risk, there is a need

by supply network members to incorporate the acquired information into the risk

management decision-making process. Hence, successful SCRM is dependent on the firms’

learning orientation across traditional intra- and inter-firm boundaries to effectively deploy

business intelligence and to mitigate the effects of supply chain disruptions (Sheffi and Rice,

2005;Manuj and Mentzer, 2008). Lavastre et al. (2014) found that managing SCRM at a

strategic level with supply chain partners ensured the success of SCRM. Wiengarten et al.

(2016) show that companies can complement and strengthen the impact of their supplier

integration practices through SCRM. More recently, Revilla and Saenz (2017) found that firms

pursuing an inter-organizational orientation (collaborative and integral) faced the lowest

levels of supply chain disruption. Carefully managed sharing of information, expertise and

priorities between public and private sector organizations and between key players can

develop collaborative and trusted relationships, which are imperative for pre-disruption

preparation and post-disruption rapid response (WEF, 2012).

Christopher et al. (2011) note that while companies take steps in implementing risk

mitigationstrategies, network strategieslike collaboration wereoverlooked. However, SCI can

have both benefits and disadvantages. Multiple authors have noted that integration among

firms in the supply network will lead to an increased dependency and, in effect, higher risk

exposure (Wielandand Wallenburg, 2013;Hallikas et al., 2004),as risks in one link are likely to

affect other links in the network (Norrman and Jansson, 2004;Waters, 2011). Moreover,

managingmultiparty collaborationin a complex supply networkis, itself, very difficult as each

member will have their own objectives (Jain et al.,2008) and may have different capabilities

(Singh,2011). Also, security concernsof shared data may have a negativeimpact on SCI (Kache

and Seuring, 201 4). Colicchia and Strozzi (2012) highlight the need to consider the impact of

risks arisingout of network collaboration. This facthighlights how such integration practices

could represent sources of risks (Zhao et al., 2013). Following this perspective, Wieland and

Wallenburg (2013) propose that future research shoul d examine the advantages and

disadvantages of integration. In fact, surprisingly, Kache and Seuring (2014) do not find any

strong relationship of integration to theirconstruct of supply chain risk.

Despite the above findings, there is limited understanding on which competencies and

capabilities companies need to develop for increasing the positive effect while minimizing the

negative effect of SCI on risk management effectiveness. A large number of reviews have

been conducted on SCRM (e.g., Tang, 2006;Rao and Goldsby, 2009;Tang and Musa, 2011;

Colicchia and Strozzi, 2012;Ghadge et al., 2012;Sodhi et al., 2012;Heckmann et al., 2015;Ho

et al., 2015;Zhu et al., 2017;Fan and Stevenson, 2018;Friday et al., 2018). The above reviews

play an important role in synthesizing the large body of knowledge on SCRM by identifying

and classifying all types of risks, their underlying factors, the various risk management

approaches and the methodologies used. Nevertheless, these reviews do not specifically

address how the effectiveness of risk management can be improved by increasing the

positive effect while minimizing the negative effect of SCI. Clearly this is an evident gap in the

SCRM literature, aptly identified by Fan and Stevenson (2018).Zhu et al. (2017) focus on how

SCI can secure performance maintenance or improvement but do not explore how SCI can

improve the effectiveness of SCRM. Friday et al. (2018) identify the capabilities required for

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