A hybrid approach for quantifying supply chain risk and prioritizing the risk drivers

Abstract

PurposeThe purpose of this paper is to identify various risk and sub-risk drivers that affect the supply chain (SC) performance and to propose a framework to quantify the overall SC risk index by considering the importance of each risk and sub-risk drivers and their mutual interactions.Design/methodology/approachA hybrid method based on decision-making trial and evaluation laboratory and analytical network process has been proposed to develop the risk quantification framework. A case study of Indian petroleum supply chain (PSC) has been illustrated to explain the proposed method.FindingsThe results of this study found that transportation/logistics (delivery system), quality of the petroleum products, crude supply, customer’s order and legal/political regulations are the most significant risk drivers of a typical PSC. It is also found that the Indian PSC possesses a risk score of 34 percent.Research limitations/implicationsThe quantification of risk in operational measure provides an unblemished representation of the overall SC risk. Unlike the existing financial measure, it takes complex subjective operational effectiveness like product quality, customer satisfaction, etc., into consideration. Identifying the high-prioritized risks helps the decision and policy makers to merely focus on the most prominent risk drivers, and reduce the impact of overall SC risk. Planning a risk mitigation strategy at a given level of risk is however beyond the scope of this research.Originality/valueThe paper develops a risk quantification framework in the context of a PSC.