Aggregation of Supply Chain Risks Taking the End Customer’s Perspective

Abstract

In theory and in practice, the concept of customer value has gained in importance, e.g. the customer lifetime value and/or the customer perceived value are commonly discussed, focussing either on the company’s or on the customer’s view point.The risk management process (their identification, measurement, control and supervision), which has gained in importance since the International Financial Reporting Standards (IFRS), in particular no. 7, have been issued, is also more and more often discussed. However, the management of risks, so far, just refers to the intra-corporate supply chain; sometimes involving the suppliers, but always abstracting away from the last supply chain element, i.e. the customer. His perception of the whole risk encountered mostly remains out of consideration.Risk (inter)dependencies, which may because- (the risks are initiated by the same or by positively/negatively interrelated events) and/or effect-related (the risk-inducing events support or limit the achievement of the same or of interrelated targets), are also rarely considered. Thus, the total risk is either evaluated too high or too small.Both shortcomings lead to two, so far unanswered questions: How may the total supply chain risk perceived by the customer, i.e. the total Customer Perceived Supply Chain Risk (CPSCRagg), be evaluated (a) abstracting away from any cause and any effect-related risk interrelations and (b) allowing for them. The first question is mostly answered by simply adding all encountered and evaluated risks. The second question, however, so far remains unanswered. The present article proposes a mathematical approach answering to both of the posed questions.