Supply risk management and competitive advantage: a misfit model

• Published date: 09 November 2015
• DOI: https://doi.org/10.1108/IJLM-05-2013-0062
• Date: 09 November 2015
• Pages: 459-478
• Author: Jury Gualandris,Matteo Kalchschmidt
• Subject Matter: Management science & operations,Logistics

Supply risk management

and competitive advantage:

a misfit model

Jury Gualandris

UCD Michael Smurfit Graduate Business School, University College Dublin,

Dublin, Ireland, and

Matteo Kalchschmidt

Department of Management, Information and Production Engineering,

Università degli Studi di Bergamo, Dalmine, Italy

Abstract

Purpose –The purpose of this paper is to develop a model of congruence for the management of

supply risk that is easy to apply, but also accurate. The authors also aim at providing empirical

evidence about the relationship between misfit –i.e. the incongruence between a firm’s preparedness in

(supply) risk management and the potential riskiness characterising the context –and competitive

advantage.

Design/methodology/approach –In line with the purpose, literature and field interviews were used

to develop a model of congruence in the context of supply risk management (SRM) and operationalise it

within a questionnaire. Then, the authors collected survey data to validate the model.

Findings –Results show that competitive advantage decreases when the firm’s preparedness in SRM

does not match to the pattern of risk conditions (i.e. environmental vulnerabilities).

Research limitations/implications –The model of congruence here developed is simple to apply

but offer effective decisions support. This study, thus, stimulates future research on the assessment

and management of supply chain risk. This study, also, fosters the attention to the non-linear

relationship between risk management and business performance.

Practical implications –This study develops a modelthat can be used by practitioners to configure

an optimal adoptionof SRM practices. Also, theanalysis allows to draw some specificrecommendations

for supply chain managers aiming at improving their preparedness in SRM.

Originality/value –By relying on SRM literature, the balanced-resilience logic and the theoretical

framework of contingency theory, this study develops and test a model of congruence that shows how

companies can gain competitive advantage through the management of supply risk.

Keywords Risk, Fit, Supply chain management, Balanced-resilience

Paper type Research paper

1. Introduction

In recent decades, the unpredictability of customers’needs and the uncertainty

surrounding technological trajectories have both steadily increased, leading to a higher

potential for supply risk (e.g. Christopher and Peck, 2004; Blackhurst et al.,2011).Atthe

same time, the spread of initiatives such as outsourcing and delocalisation and an

increase in product variety has led to augmented firms’dependency on suppliers, with

significant consequences for firms’ability to recover from supply risk (e.g. Christopher

and Peck, 2004; Blackhu rst et al., 2011). Supply chain managers, however, are becoming

increasingly aware of the importance of managing supply risk effectively: the potential

occurrence of supplier delays (e.g. as a consequence of variation in suppliers’production

lead times), supply distortions (e.g. as a consequence of opportunistic behaviours and

shortages in supply markets) or supplier failures (e.g. as a consequence of vendor

The International Journal of

Logistics Management

Vol. 26 No. 3, 2015

pp. 459-478

©Emerald Group Publis hing Limited

0957-4093

DOI 10.1108/IJLM-05-2013-0062

Received 22 May 2013

Revised 8 November 2013

20 February 2014

15 May 2014

Accepted 10 August 2014

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

www.emeraldinsight.com/0957-4093.htm

459

SRM and

competitive

advantage: a

misfit model

financial instability, because a disruptive incident interrupts the supplier’s internal

operations, or because the supplier vertically integrates andbecomes a direct competitor

of the buying firm) is perceived by practitioners to be one of the most relevant forms of

risk (Zsidisin, 2003; Thun and Hoenig, 2011; Ellis et al., 2010). Yet, managers require

support from academia to develop structured and systemic approaches to assess and

manage these risks properly (Jüttner, 2005).

The literature on supply risk management (SRM) has been growing over the last

decade. Specific factors, or risk conditions, have been identified that increase a sys tem’s

susceptibility to supply risk (Kraljic, 1983; Peck, 2005; Choi and Krause, 2006; Wagner

and Bode, 2006; Wagner et al., 2009; Ellis et al., 2010, 2011; Christopher et al., 2011):

environmental turbulence (ET), difficult supply markets, critical purchases (i.e. complex

and customised) and global sourcing (GS) all greatly influence a firms’exposure to supply

risk. In addition, the literature has studied how managers can reduce their exposure to

supply risk. Besides practices aimed at increasing manufacturing flexibility (Gualandris

and Kalchschmidt, 2013, 2015), four primary purchasing and supply management

practices have been investigated that can counter-balance risk conditions (Harland et al.,

2003; Yu et al., 2009; Thun and Hoenig, 2011; Zsidisin and Wagner, 2011; Ellis et al., 2011;

Blackhurst et al., 2011): dual (or multiple) sourcing, vendor rating (VR) programmes,

supplier integration and development (SID) and revenue-sharing contracts (RSC).

An increased preparedness in SRM may allow firms to effectively anticipate and

overcome supply risk, while taking advantage of problems that affect peers’supply

chains (Sheffi, 2003). Managers, however, are advised to bear in mind the acceptable

cost-benefit trade-off when adopting risk management practices. If on one hand, risk

management helps to mitigate the impact of adverse environmental conditions on

business performance, on the other hand, it absorbs many resources, with negative

implications for profit. Pettit et al. (2010, 2013), for instance, propose and empirically

implement a risk management framework that assumes that operating in conditions

of unbalanced resilience (i.e. when preparedness in risk management does not match the

pattern of a company’s vulnerabilities) is detrimental for competitive advantage.

The SRM literature presents relevant gaps. First, there is a key debate on risk in

terms of qualitative vs quantitative approaches to risk assessment and management

(Zsidisin et al., 2004). As highlighted by Gualandris and Kalchschmidt (2014), in fact,

“qualitative models can be used to evaluate many types of risks in many situations, but

they do not yield reliable results or decision support […] to the contrary, quantitative

tools are usually more accurate but tend to be more complex and thus are usually

developed for specific risks, networks or contexts; they tend to be less useful when

an overall assessment of risk is required”. Second, the application of risk theory to

supply chain management is still in its early stages (Khan and Burnes, 2007; Sodhi

et al., 2012): existing models and their underlying assumptions lack empirical

validation (e.g. Blackhurst et al., 2011; Pettit et al., 2013).

To take a step towards filling these gaps in the literature, this research applied the

balanced-resilience logic proposed by Pettit et al. (2010, 2013) to SRM theory (Kraljic,

1983; Harland et al., 2003; Zsidisin, 2003; Wagner and Bode, 2006; Wagner et al., 2009;

Ellis et al., 2010; Zsidisin and Wagner, 2011; Blackhurst et al., 2011; Christopher et al.,

2011; Gualandris and Kalchschmidt, 2014) with the aim of developing a model of

congruence for the management of supply risk that is easy to apply but also accurate.

A“misfit”index that was able to quantitatively measure a company’s resilience-gap in

SRM was also operationalised. This index reflects the theoretical framework of

contingency theory (Donaldson, 2001) and the state-of-the-art of misalignment schemes

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