Proactive supply risk management methods for building a robust supply selection process when sourcing from emerging markets

Abstract

PurposeThis paper aims to identify proactive supply risk management methods which can be used to reduce or remove risk sources during the supplier selection process, in the context of Western‐based manufacturing companies that source from emerging markets.Design/methodology/approachLearning from the literature and conducting multiple‐case study analyses of five Western‐based manufacturing companies' sourcing experiences from emerging markets.FindingsThe experiences of five Western‐based manufacturing companies suggested that applying the risk management process into supplier selection was particularly important and effective for supply risk reduction when sourcing from emerging markets. Supply risk sources must be identified and proactive supply risk management methods must be used to remove or reduce risk sources for effective supply risk management. The proactive risk management methods discovered in this research are: conducting a supplier questionnaire covering a wide range of business dimensions of the supplier; performing a technical review; negotiating a risk mitigation plan; employing local‐based procurement staff; using a total cost estimate; applying a strict part qualification process.Research limitations/implicationsA multiple‐case study methodology employs a limited number of case studies and therefore may restrict the generalisation of research findings. Manufacturing companies are used as case study organisations for this research. Therefore, the research findings are particularly applicable and useful to manufacturing companies but might not be valid for other types of company. The research focuses on supply risk reduction during the supplier selection process, while further research into other stages of the supply management process is desirable.Practical implicationsThe generated proactive supply risk management methods are useful to manufacturing companies looking to source or aiming to improve their sourcing experiences from emerging markets.Originality/valueThe literature provides valuable contents in terms of concepts but lacks proactive supply risk management methods for supply risk management when sourcing from emerging markets. The generated proactive supply risk management methods based on first‐hand information are valuable both to academics and practitioners in this field.