Examining the role of stakeholder pressure and knowledge management on supply chain risk and demand responsiveness

• Date: 06 May 2014
• DOI: https://doi.org/10.1108/IJLM-10-2012-0111
• Published date: 06 May 2014
• Pages: 202-223
• Author: David E. Cantor,Jennifer Blackhurst,Mengyang Pan,Mike Crum
• Subject Matter: Management science & operations,Logistics

Examining the role of stakeholder

pressure and knowledge

management on supply chain risk

and demand responsiveness

David E. Cantor and Jennifer Blackhurst

Department of Supply Chain and Information Systems, Iowa State University,

Ames, Iowa, USA

Mengyang Pan

Department of Management Sciences, The Ohio State University, Columbus,

Ohio, USA, and

Mike Crum

Department of Supply Chain and Information Systems, Iowa State University,

Ames, Iowa, USA

Abstract

Purpose – The purpose of this paper is to contribute to the supplychain risk management literature

by examining how stakeholders place pressure on the firm to engage in risk management activities.

Design/methodology/approach – This paper utilizes a survey approach to test the nomological

model. The analysis was carried out using structural equation modeling techniques.

Findings – The results demonstrate that stakeholders place pressure on the firm to mitigate risk and

that knowledge management (KM) and joint planning activities with suppliers serve as mediating

roles in the model. The process-oriented model reveals that these factors influence the firm’s ability to

be responsive to customer demand.

Originality/value – The research represents one of the first papers to empirically test how

stakeholder theory and KM contributes to risk mitigation activities. Additionally, the paper shows

the impact of KM factors on risk mitigation activities. The paper attempts to explain from both a

theoretical and empirical perspective how and why firms are engaging in risk mitigation activities

and how the impacts demand responsiveness.

Keywords Risk management, Stakeholder pressure, Joint planning

Paper type Research paper

1. Introduction

Today’s supply chains are under intense competitive pressure and face high levels

of supply chain risk. Because of the complexity and uncertainty associated with

managing supply chain partners and processes, the potential for supply chain risk

has increased in recent years (Pettit et al., 2010; Knemeyer et al., 2009). Thus, firms

are faced with the challenge to mitigate supply chain risk (Blackhurst et al., 2011;

Braunscheidel and Suresh, 2009). There is, therefore, a burgeoning amount of

interest in examining how firms can develop effective supply chain risk mitigation

strategies.

Firms can utilize a variety of approaches to plan for and mitigate supply chain

risk. Many firms leverage their knowledge management (KM) cap abilities to mitigate

supply chain risk. Indeed, there is growing interest on the role of KM in the field

of supply chain management. A firm’s KM capabilities can enable the organization to

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0957-4093.htm

Received 17 October 2012

Revised 10 March 2013

18 June 2013

Accepted 30 September 2013

The International Journal of Logistics

Management

Vol. 25 No. 1, 2014

pp. 202-223

rEmeraldGroup PublishingLimited

0957-4093

DOI 10.1108/IJLM-10-2012-0111

202

IJLM

25,1

mitigate a disruptive event (e.g. parts not being delivered due to a supplier strike) or

uncertainty (e.g. parts not being delivered in the expected time frame) in the

supply chain. Our study builds upon prior supply chain risk and KM research.

For example, Hult et al. (2007) showed how KM can play a critical role in reducing

lead time uncertainty in the supply chain. Hult et al. (2004) linked knowledge

development to supply chain cycle time where the supply chain members are

integrated strategically. Moorman and Miner (1997) found that an organization can

enhance short-term financial p erformance of new products by having higher levels of

knowledge and greater dispersion of that knowle dge allowing the firm to reduce

uncertainty and risk in the supply chain. Craighead et al. (2009) showed that the KM

capacity in a supply chain has a positive influence on a firm’s responsiveness to the

external environment.

The firm can also leverage its joint planning activities with the supply base to

mitigate supply chain risk. Previous joint supply chain planning research has provided

initial insight into the mechanisms through which joint planning with suppliers may

mitigate risk in the supply chain. First, trust and commitment, attained in an

integrated relationship, contributes to a reduction of opportunism from suppliers and

the willingness of suppliers to coordinate activities with their customers along the

supply chain (Pettit et al., 2010; Primo, 2010; Richey, 2009). Kovacs and Tatham (2009)

discovered that strong relationship management enhanced immediate response

for humanitarian organizations despite a lack of physical capital resources. Second,

effective sharing and using information and knowledge in an integ rated supply chain

strengthens a company’s capability to evaluate partners and react to disruptions

(Prahinski and Fan, 2007; Richey, 2009). Third, risks are mitigated by improved

teamwork, knowledge sharing, and joint problem solving in an integ rated supply chain

(Cheng, 2011; Braunscheidel and Suresh, 2009; Primo, 2010). Treleven and Schweikhart

(1988) describe how risks can be mitigated through improved sourcing strategies

with their suppliers.

Firms are pressured by stakeholders to invest in KM to mitigate supply chain risk.

Stakeholders in a supply chain may be defined as any individual or group who can

affect or is affected by the achievement of an organization’s objectives (Freeman, 1984;

Donaldson and Preston, 1995; Phillips et al., 2003; Sarkis et al., 2010). Supply chain

stakeholders include clients, shareholders, employees, and NGOs/society (Sarkis et al. ,

2010). Stakeholder may exert influence and control over a firm if that stakeholder has a

critical resource (Kolk and Pinkse, 2006) such as suppliers sharing knowledge. In terms

of linking supply chain risk and stakeholders, Spekman and Davis (2004) illustrate that

there are six areas of supply chain risk including responding to the corporate social

responsibility requirements of key stakeholders. In this paper, we contend that firms

are pressured by stakeholders to invest in KM to mitigate supply chain risk. While the

above-mentioned studies, among many others, have demonstrated that KM cap abilities

can enable a firm to increase its responsiveness to changes in the exte rnal and internal

environment, our study contends that a firm’s KM capabilities can also help a firm

address risk in the supply chain. In turn, effective risk management allows a firm to

respond to changes in customer demand.

This paper examines how stakeholders exert pressu re on the firm to mitigate

supply chain risk. In so doing, this paper examines the KM and joint planning

mediating process that enables the firm to mitigate supply chain risk. As such, this

paper builds upon Sarkis et al. (2010) and Hult et al. (2007) by examining how fir ms

respond to stakeholder pressure by enhancing its KM capabilities across the supply

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Supply chain

risk and demand

responsiveness