Procurement risk management under uncertainty: a review

Abstract

PurposeThe purpose of this paper is twofold, first providing researchers with an overview about the uncertainties occurred in procurement including applicable approaches for analyzing different uncertain scenarios, and second proposing directions to inspire future research by identifying research gaps.Design/methodology/approachPapers related to supply chain risk management and procurement risk management (PRM) from 1995–2017 in several major databases are extracted by keywords and then further filtered based on the relevance to the topic, number of citations and publication year. A total of over 156 papers are selected. Definitions and current approaches related to procurement risks management are reviewed.FindingsFive main risks in procurement process are identified. Apart from summarizing current strategies, suggestions are provided to facilitate strategy selection to handle procurement risks. Seven major future challenges and implications related PRM and different uncertainties are also indicated in this paper.Research limitations/implicationsProcurement decisions making under uncertainty has attracted considerable attention from researchers and practitioners. Despite the increasing awareness for risk management for supply chain, no detail and holistic review paper studied on procurement uncertainty. Managing procurement risk not only need to mitigate the risk of price and lead time, but also need to have sophisticated analysis techniques in supply and demand uncertainty.Originality/valueThe contribution of this review paper is to discuss the implications of the research findings and provides insight about future research. A novel research framework is introduced as reference guide for researchers to apply innovative approach of operations research to resolve the procurements uncertainty problems.