Risk management in hybrid value creation

Abstract

In the market for tangible goods, there is an increasing shift from the production of single individual products towards individualized mass customization. In contrast to this, so-called hybrid value bundles are getting more and more importance in achieving market share and in allowing for differentiation from competitors. Hybrid value bundles are integrated solutions combined of tangible and intangible goods. For these complex solutions, subparts are delivered from different suppliers and are bundled by a focal supplier. These bundles are delivered as a single solution to the customer. Heterogeneous suppliers within the supplier network require a complex supplier relationship management. Classic supply chain management techniques fail because of the specific requirements of hybrid value bundles, e.g. strong customer integration, different product lifecycles of the individual components or incompatible product specification. One key issue in supplier management is risk management. For this, the focal supplier has to evaluate its suppliers according to risk characteristics and then choose to take those that implicate the lowest risk. In hybrid value creation, one serious problem is the availability of guaranteed information. Especially for service components, relevant information is not available, not assured, or the supplier does not want to provide them. Therefore, a risk management model for hybrid value creation has to deal with incomplete, varying information. In this article, a risk management model is presented, which takes care of the specific requirements of hybrid value bundles in complex supply networks. This risk management model serves as a risk assessment framework for a focal supplier to identify supply chains with the lowest risk for a specific offering.