Supply Chain Risk Management Literature Review

This chapter presents a review of existing literature related to the research problem. It provides the understanding and insight necessary to develop a logical framework on compliance; to generate ideas for possible areas of research; identify a number of studies worthy of further evaluation; as well as providing opportunity to expand on the work of others.

This chapter discusses the theoretical explanations on supply chain risk management and an empirical review carried out. For the purpose of the review, the chapter is divided into the following sub-headings: definitions of risk, supply chain risk management, supply chain risk issues, risk identification in supply chain, risk sources in supply chain, and mitigation strategies in supply

They also discuss the impact of implementing a single or a combination of mitigation strategies towards supply chain flows. There is no simple solution to managing supply chain risk. The implementation of one strategy in mitigating a particular risk may cause the supply chain to face another risk. Therefore, it is important for all members of the supply chain to have a common understanding of supply chain risk. Chopra and Sodhi (2004) propose the use of ‘stress testing’. Since each supply chain is unique, the risk mitigation strategies should be tailored accordingly to suit the entire supply chain. Even though they are not explicitly distinguished, the risk categories discussed by Chopra and Sodhi (2004) are established on the basis of supply chain flows. However, a clear definition of the fundamentals of risk seems to be lacking. In some of the risk categories, such as the forecast risk, where the authors highlight the issues of the bullwhip effect, one may argue whether this could be considered as operational uncertainty and could be managed with correctly operating supply chain.

We note that in operations management literature, the terms ‘uncertainty’ and ‘risk’ have been used interchangeably. Supply risk usually refers to the occurrence of uncertainties that may halt the inward flow of the supply

Furthermore, with the expansion of global supply chain, the orthodox definition of supply chain risk needs urgent revision (Barry, 2004; Quinn, 2006). In another set of literature, risk is viewed as the negative outcome after the impact of events. Christopher and Lee (2004) look at it broadly as any negative consequence resulting from any external event, whereas Paulson (2005) specifically identifies risk as “an event with negative economic consequences”. However, some authors view risk as the variance of outcome, no matter whether it affects the organisation positively or negatively (Spekman and Davis, 2004; Crone,