Supply-side Risk Research Articles

Building construction supply chain resilience under supply and demand uncertainties

This paper presents a multi-product, multi-period construction supply chain model, accounting for supplier capacity and material demand uncertainties. Robust optimisation is adopted to address model uncertainties. Research questions proposed are focused on: i). back-up sourcing and backordering decisions' sensitivity to associated cost factors, and ii). effects of the supply chain inventory system on the overall cost and risk management. The answers to these questions provide valuable insights for enhancing the resilience of construction supply chains and are informative for general contractors. Firstly, the back-up sourcing decision is the most sensitive to back-up suppliers' unit material price and unit transportation fees. Secondly, back-up sourcing and backordering primarily address the supply-side risk. Lastly, while inventory holding can be costly, it effectively mitigates the financial uncertainties resulting from varying project demand. These findings highlight the need for extensive quantitative modelling research on other resilient strategies in the context of construction supply chains.

Stock returns in global value chains: The role of upstreamness and downstreamness

We study how upstreamness and downstreamness affect stock returns in global value chains. Upstreamness and downstreamness, which are computed from world input–output tables, measure the average distance from final consumption and primary inputs. We find that downstreamness explains expected returns, whereas upstreamness does not. The downstreamness return premium reflects investors’ compensation for taking on supply-side risks that accumulate along global value chains, such as labor and competition risks. We show that investors perceive far downstream industries as riskier when their suppliers have high unionization rates or labor shares. In addition, far downstream industries operate in more competitive value chains and are characterized by elevated input and output price uncertainties, which makes them particularly risky.

How Perspectives on Food Safety of Vendors and Consumers Translate into Food-Choice Behaviors in 6 African and Asian Countries

BackgroundConsumption of unsafe foods increases morbidity and mortality and is currently an issue, particularly in low- and middle-income countries. Policy actions to ensure food safety are dominated by mitigation of biological and chemical hazards through supply-side risk management, lessening the degree to which consumer perspectives of food safety are considered. ObjectivesThis study aimed to provide an in-depth understanding, from vendor and consumer perspectives, of how food-safety concerns of consumers translate into their subsequent food-choice behaviors in 6 diverse low- and middle-income countries. MethodsSix Drivers of Food Choice projects (2016–2022) provided transcripts from 17 focus group discussions and 343 interviews conducted in Ghana, Guinea, India, Kenya, Tanzania, and Vietnam. Qualitative thematic analysis was used to identify emerging themes important to food safety. ResultsThe analysis suggests that consumers constructed meaning about food safety through personal lived experience and social influences. Community and family members contributed knowledge about food safety. Concerns about food safety were influenced by reputations of and relationships with food vendors. Consumers’ mistrust of food vendors was amplified by purposeful adulteration or unsafe selling practices and new methods used to produce food. Moreover, consumers were reassured of food safety by positive relationships with vendors; meals cooked at home; implementation of policies and following regulations; vendor adherence to environmental sanitation and food-hygiene practices; cleanliness of vendors’ appearance; and vendors’ or producers’ agency to use risk mitigation strategies in production, processing, and distribution of food. ConclusionsConsumers integrated their meanings, knowledge, and concerns about food safety to achieve assurance about the safety of their foods when making food-choice decisions. The success of food-safety policies hinges on consideration of consumers’ food-safety concerns in their design and implementation, alongside actions to reduce risk in food supply.

Perspectives about Food Safety in Diverse Low- and Middle-income Countries

ObjectivesConcerns about unsafe food influence food choice and consumption of unsafe foods increase morbidity and mortality, particularly in low- and middle-income countries. Addressing unsafe food is dominated by mitigation of biological and chemical hazards through supply-side risk management, with less emphasis on individuals’ experiences and perspectives of food safety. We aimed to identify and categorize perspectives about food safety in five countries. MethodsFive studies designed to address drivers of food choice in low- and middle-income countries provided transcripts from 17 focus groups discussions and 303 interviews in Kenya, Ghana, India, Guinea, and Vietnam. We analyzed transcripts using a priori and emergent coding techniques that involved a constant comparative method. ResultsIndividuals constructed meaning about food safety through personal experience and social influences. Community and family members contributed knowledge about food safety. Concerns about food safety were influenced by reputations of and relationships with vendors. Concerns were amplified by mistrust of vendors’ purposeful adulteration, unsafe selling practices, and new methods to produce food. Individuals were reassured of food safety by positive relationships with vendors; home-cooked meals; implementation of policies and regulations being followed; vendor adherence to environmental sanitation and food hygiene practices; cleanliness of vendors’ appearance; vendors’ or producers’ agency to use risk mitigation strategies; and transparency in production, processing, and distribution of food. ConclusionsIndividuals’ perspectives about food safety influence food choice behaviors. The success of food-safety policies hinges on consideration of these perspectives. Funding SourcesThe Drivers of Food Choice (DFC) Competitive Grants Program, funded by the Bill & Melinda Gates Foundation and the UK Government’s Foreign, Commonwealth & Development Office.

A causality analysis of risks to perishable product supply chain networks during the COVID-19 outbreak era: An extended DEMATEL method under Pythagorean fuzzy environment

In nowadays world, firms are encountered with many challenges that can jeopardize business continuity. Recently, the coronavirus has brought some problems for supply chain networks. Remarkably, perishable product supply chain networks, such as pharmaceutical, dairy, blood, and food supply chains deal with more sophisticated situations. Generally, during pandemic outbreaks, the activities of these industries can play an influential role in society. On the one hand, products of these industries are considered to be daily necessities for living. However, on the other hand, there are many new restrictions to control the coronavirus prevalence, such as closing down all official gatherings and lessening the work hours, which subsequently affect the economic growth and gross domestic product. Therefore, risk assessment can be a useful tool to forestall side-effects of the coronavirus outbreaks on supply chain networks. To that aim, the decision-making trial and evaluation laboratory approach is used to evaluate the risks to perishable product supply chain networks during the coronavirus outbreak era. Feedback from academics was received to identify the most important risks. Then, experts in pharmaceutical, food, and dairy industries were inquired to specify the interrelations among risks. Then, Pythagorean fuzzy sets are employed in order to take the uncertainty of the experts’ judgments into account. Finally, analyses demonstrated that the perishability of products, unhealthy working conditions, supply-side risks, and work-hours are highly influential risks that can easily affect other risk factors. Plus, it turned out that competitive risks are the most susceptive risk in the effect category. In other words, competition among perishable product supply chain networks has become even more fierce during the coronavirus outbreak era. The practical outcomes of this study provide a wide range of insights for managers and decision-makers in order to prevent risks to perishable product supply chain networks during the coronavirus outbreak era.

Supply-side risk modelling using Bayesian network approach

ABSTRACT Organisations’ vulnerability to risks exponentially increased in the past decade, thereby highlighting the need to develop additional effective risk management strategies. This research uses a systematic literature review as a foundation for designing a supply risk model that uses a Bayesian belief network. The proposed model aims to identify the most critical objective and subjective risk factors influencing supply chain networks. Moreover, the proposed methodology has been demonstrated through a case study conducted in an Indian manufacturing, in which inputs were taken from supply chain and risk management experts. Hugin Expert software was used to design and run simultaneous simulations on the Bayesian network. The top three factors found to influence business profitability were delays, product technology, and fuel price. The proposed model can be reengineered as conditions change and new information becomes available, thereby ensuring that risk analysis remains current and relevant along the timeline of the any disruption.

Sourcing decision under interconnected risks: an application of mean–variance preferences approach

Supply chains are customarily associated with multiple interconnected risks originated from supply side, demand side, or from the unanticipated background uncertainties faced by a firm. Also, effective functioning of supply chain hinges on sourcing decisions of inputs (raw materials). Therefore, there is a striking need to analyse the risk preference of the decision maker while going for optimal sourcing decision under varying degree of interconnected supply chain risks. This study addresses this issue by analysing the comparative static effects under interconnected supply chain risks for a risk averse decision-maker, manufacturing and selling products in a regulated market under perfect competition. The decision-maker faces not only supply-side risk (due to random input material prices) but also interconnected risks arising out of background risk (setup costs risk) and demand-side risk (output prices risk). With preferences defined over the mean and standard deviation of the uncertain final profit, this study illustrates the effects of the changes in the pairwise correlations between the three above mentioned risks on the optimum input choice of the manufacturer. To contextualise this study, an India-based generic drug manufacturer cum seller has been considered as a case in the parametric example of our model. Adaptation of the mean–variance framework helps obtaining all the results in terms of the relative trade-off between risk and return, with simple yet intuitive interpretations.

The impact of alternative financial supply chain management practices on supply risk: A relationship quality and buyer relative power perspective

Despite increasing attention being paid to financial supply chain management (FSCM) practices as key factors that enable firms to gain competitive advantage, there is limited research on the consequences of such practices and their impact on buyer-supplier relationships. In particular, the existing literature lacks evidence of how FSCM practices can help buying firms to manage their supply-side risk. Using the two theoretical angles of relationship quality and buyer relative power, this study empirically examines the impact of FSCM practices on supply risk. Based on a cross-sectional survey of 244 manufacturers in Iran, the results show that depending on the quality of the buyer-supplier relationship and the level of buyer relative power, different FSCM practices should be implemented to mitigate supply risk. Our empirical findings present important implications for both theory and practice.

Empirical research on the relationships between demand- and supply-side risk management practices and their impact on business performance

PurposeThis paper integrates research on demand- and supply-side risk management practices to better explain how to achieve competitive advantage in dynamic business conditions. The purpose of this study is to develop a model linking supply chain flexibility, agility, robustness and resilience and to investigate its relationships and impact on business performance.Design/methodology/approachThe authors conduct a review of existing literature to derive their hypotheses and operationalize the respective constructs. The formulated research model is then validated applying partial least squares structural equation modeling on survey data from 89 multi-national companies based in Europe.FindingsThe authors find a significant positive relationship between supply chain flexibility and supply chain agility as well as supply chain robustness and supply chain resilience, respectively. Additionally, it is argued that supply chain flexibility, agility and resilience have significant positive impact on individual dimensions of business performance.Originality/valueThe relationships between supply chain flexibility, agility, robustness, resilience and business performance are investigated and empirically validated altogether in a single model for the first time, providing a clear separation of these terms and shedding further light on the management of supply chain risks.

Perspectives on Food Safety and Their Influence on Food Choice in Low- and Middle-Income Countries

Abstract Objectives Current efforts to address food safety through supply-side risk management consider food safety primarily in terms of biological and chemical hazards, ignoring the importance of individuals’ experiences and perspectives. This study aimed to understand how experiences and perspectives of food safety influence food choice in low- and middle-income countries (LMICs). Methods The Drivers of Food Choice Competitive Grants Program funded 15 projects that aimed to understand food choice among the poor across 10 LMICs in Sub Saharan Africa and South and South East Asia. Summaries of the role of food safety in decisions about food choice were reviewed with principal investigators from 6 projects with significant findings. We used an iterative process of thematic analysis across all project summaries followed by respondent validation to categorize findings with shared meaning into themes of conditions and characteristics that either contributed to perceptions of a lack of food safety or to an overall perspective on food safety. Results Food was considered to be safe if purchased from vendors who had good food and personal hygiene practices or with whom individuals had positive relationships. Food was also considered to be safe if it was prepared at home. Perceptions of a lack of food safety were increased by fears of adulteration by vendors and contamination in physical environments with poor sanitation or handling practices. Policies and regulations offered increased guarantees of safety but were not always trusted nor convenient, and social networks and the media were important sources of both real and false information about food safety. Conclusions Individuals rely on their experiences, attitudes, knowledge, and perceptions in making decisions about what foods to buy, prepare, and consume, and from which sources. Understanding how perspectives of food safety influence food choice can be harnessed to improve food safety and contribute to sustainable healthy diets. Efforts to achieve sustainable healthy diets through behavior change communication or incentives to supply chain actors must acknowledge perspectives on food safety as important drivers of food choice. Funding Sources UK Government's Foreign, Commonwealth & Development Office and the Bill & Melinda Gates Foundation.

Supply Chain Risk Factors and Corporate Repute in Pharma Industry of Thailand

Dealing with the risk factors has got much attention specifically in the health and pharmaceutical industry. However, due to complex nature, several risk both financial and non-financial in nature are associated with the title of supply chain in pharmaceutical industry. The purpose of this research is to analyze the various risk factors which are linked with the supply chain in the pharma sector of Thailand to predict the trends in corporate repute. For this purpose, supply side risk factors, demand side risk factors, financial risk factors, and operational risk factors were selected from the existing literature of supply chain. Besides, reputational trends through five sub items were observed through set of these risk factors. To examine the relationship between the variables, a questionnaire was developed for the data collection in the economy of Thailand with a sample of 169 respondents. The results show that supply chain risk factors like lack of information sharing, lack of captain category supplier, interest rate risk, exchange rate risk, machine or equipment failure, quality risk are significantly and adversely impacting on the different dimensions of corporate repute in pharma sector of Thailand. Besides, detailed review of the literature has demonstrated that this research is among the initial contribution for discussing the relationship between supply chain risk factors and their influence on the corporate repute in pharmaceutical sector of Thailand. for this reason, various stakeholders would get the benefit from the study findings in compiling the future studies on the similar topic. However, research limitations like expanding the sample size, considering cross country analysis, and implication of structural modelling approaches may provide some interesting and different results in coming time.

Understanding the impact of supply-side decisions and practices on supply risk management

PurposeIn the era of market turbulence, sourcing specialists consistently face challenges to keep the availability of the material efficiently and effectively without any disruption. Sourcing strategies and planning have a huge impact on procurement performance. The purpose of this paper is to examine the relationships among different sourcing strategies and supply risk management and performance and additionally, the role of procurement practices in different strategic settings.Design/methodology/approachThis is empirical research that collected data gathered from 223 procurement specialists working in various manufacturing firms through a structured questionnaire. Valid data is then analyzed through the structure equation modeling technique for hypotheses testing.FindingsThe findings of this study reveal that supplier development is a partial complementary mediator between multiple supplier strategy and supply-side risk management. While in a volatile business environment, strategic supplier strategy has a significant negative impact on supply-side risk management, and in this case supplier development acts as a competing partial mediator between the two. Contract management has resulted in an important mechanism to be deployed in a strategic sourcing strategy. It is also shown that supplier risk management is also associated with improved supply management performance.Practical implicationsThis paper establishes an explanation of theoretical and practical understanding of sourcing strategies and empirically shows that supplier development is the appropriate mechanism to deal with supply-side risk management, which in turn positively impacts on supplier management performance.Originality/valueThis study contributes to supply chain risk management literature, especially in the context of strategic risk management and explains how a strategic decision can impact supply risk management. This provides a piece of empirical evidence regarding the use of well-established procurement practices to improve supply performance.

Analysing supply chain risk management capabilities through collaborative and integrative approach

In the era of market turbulence and external uncertainty, supply chain risk management is getting top attention in almost every dynamic business. The study is carried out to empirically investigate relational factors influencing demand side and supply side risk management. A sample of 149 valid responses was gathered through a structured questionnaire from marketing, planning, supply chain and logistics professionals from the textile sector and was analysed using partial least square smart (PLS) structural equation modelling (SEM) using SmartPLS 3.2.4. This research will significantly contribute to the literature of supply chain risks management (SCRM) as well as helping risk management professionals to understand the integrative and collaborative approach to improve supply chain resilience and robustness.

A novel classification of supply chain risks: Scale development and validation

Purpose: Supply chain has become an essential element for any organization but risks are the major obstacles in achieving the performance even it can disrupt not only the organization but a whole system. Thus it is compulsory to manage the risks efficiently and effectively. Risk cannot be managed until properly identified, there are numerous studies on risk identification, after comprehensive literature, it has been revealed that the study that identifies overall supply chain risk is scaring. The manufacturing sector of any country is considered as the backbone of any economy, in Malaysia it is the second largest sector in economic contribution and highest in productivity level. The aim of this study is to provide a reliable tool to assess the overall supply chain risks of Malaysian manufacturing through a systematic process.Design/methodology/approach: A detail literature review has been done for categorization of overall supply chain risk sources. Then an instrument has been developed from a pool of items. The questionnaire was purified through pretesting, pilot testing (by the exploratory view) and reliability and validity tests. The data were collected by email from Federation of Malaysian Malaysia (FMM-2017) through systemic probability sampling. Total 132 final responses have been considered for exploratory factor analysis through SPSS 23.Findings: The finding of this study revealed that overall supply chain risks can be categories into seven constructs that are supply side risks, process side risks, demand side risks, logistic side risks, collaboration side risks and environment side risks and the final questionnaire is consisting of 57 items.Research limitations/implications: This study covered tier 1 members of the supply chain. Secondly, the supply chain of manufacturing organizations only has been considered.Practical implications: This study will help the managers to understand what kind of risk sources they can face and which type of risks under these risk sources they should consider while decision making.Originality/value: This article will justify the need for Malaysian manufacturing by providing a validated and reliable instrument for the identification and assessment of their risks under major supply chain risk sources.

Supplier ratings and dynamic sourcing strategies to mitigate supply disruption risks

The selection of a sourcing strategy plays a vital role in managing supply disruptions. The choice regarding the number of suppliers is one of the most important decisions in mitigating supply side risks. In this paper, we analyze single versus dual sourcing strategies of a buying organization in a multi-period setting where the low-cost supplier is exposed to disruption risks. We incorporate supplier ratings based on the performance of the suppliers in a dynamic setting and use them in the sourcing decisions. We develop a stochastic dynamic programming model to formulate the dual-sourcing problem. Our results show that dual sourcing provides maximum cost–benefit under high probability of supply disruption and high-cost differential between the reliable and the unreliable suppliers. The findings of this paper will help supply chain managers formulate optimal sourcing strategies when exposed to supply disruption risks by integrating performance metrics of the suppliers dynamically.

Time traders: Derivatives, Minsky and a reinterpretation of the causes of the 2008 Global Financial Crisis

There are two major competing theoretical explanations of the 2008 Global Financial Crisis: neoclassicism and pos Keynesianism. Neoclassicists assume that crises are exogenous and are thus concerned with assessing the proper regulation and enforcement regime. Central to the post Keynesian position is Hyman Minsky, whose financial instability hypothesis holds that crises are due to the structure of financial assets in complex economies and are thus endogenous. This article uses qualitative financial data to show how derivatives and other exotic instruments (neoclassical analyses) bypassed the deflationary safety valve in Minsky’s financial instability hypothesis. In his model, uncertainty and risk valuations either push demand prices for financial assets below what banks are willing to sell or greater risk valuations will push the costs of producing assets above what the market will pay; initiating a deflationary break. Derivatives broke this mechanism. Lenders in the 2000s used complex financial instruments to artificially eliminate risk, which made the supply-price of financial assets inelastic to upward shifts in uncertainty. Without supply-side risk to push prices above the demand curve, lenders bypassed the mechanism responsible for popping speculative bubbles and initiating deflationary market corrections. Thus, Minsky’s ponzi phase was more difficult to stop than his model would have predicted.

Supplier Concentration and Cost Structure

The last three decades witnessed an increasing prevalence of concentrated supplier bases, which lead to higher supply disruption risk. We predict that firms with high supplier-base concentration will choose a more elastic cost structure in response to the increased supply disruption risk. Using a unique dataset of 4,530 firm-year observations hand-collected from supplier information disclosed by Chinese listed firms, we document a positive association between supplier-base concentration and cost elasticity. Furthermore, results from five different cross-sectional tests are consistent with supply disruption risk motivating firms with high supplier-base concentration to increase cost elasticity. Finally, additional tests indicate that firms with high supplier-base concentration use more variable capital assets to achieve higher cost elasticity. Our study contributes to the cost management literature by providing the first large-sample empirical evidence on firms’ cost structure decisions in response to supply-side risk factors.

Managerial overconfidence, ability, firm-governance and audit fees

Prior studies document that managerial overconfidence potentially increases the risk of financial misstatements, and that overconfident managers purchase lower quality audits and pay lower audit fees. As a part of the research that evaluates the information value of managerial characteristics to auditors, our study examines how the relationship between managerial overconfidence and audit fees is impacted by managerial ability, and board and audit committee effectiveness in the post-Sarbanes–Oxley (post-SOX) environment. In general, we find a significantly positive relationship between managerial overconfidence and audit fees consistent with the supply-side risk based perspective of audit pricing. However, this relationship is significantly attenuated in higher managerial ability firms where overconfident managers are better able to make proper accounting estimates and judgements required for producing reliable financial statements, and synthesize firm-specific information into appropriate forward looking projections. We find that on an average, the overconfident firms with higher managerial ability pay 6.3% lower audit fees than the overconfident firms with lower managerial ability. Our analyses further show that board characteristics positively impact the relationship between managerial overconfidence and audit fees, suggesting that stronger board monitoring increases the demand for higher quality audits to mitigate the reporting risk of the overconfident firms. On an average, the firms with managerial overconfidence pay additional 9.3% higher audit fees when they are subject to stronger and more effective board oversight. However, we find weaker evidence on the effect of audit committee characteristics on audit fees of the overconfident firms. Our primary results hold for a battery of supplemental tests including the tests using propensity-score matched sample. The study contributes to audit fee and corporate governance literature, and has useful implications for regulators, accounting practitioners, and auditors.

Reducing Collateral Damage in Responses to the Opioid Crisis.

The authors reflect on the harmful side effects of U.S. legal actions against prescription opioid use and how to counteract those side effects. They talk about opioid tolerance and factors behind opioid overdoses. They mention the need to properly care for substance use disorders and chronic pain. They talk about the need for improved community engagement of outreach and service provision after disrupting drug supply chains. They consider supply-side risk reduction outside of medical clinics.

Markov-modulated analysis of a spare parts system with random lead times and disruption risks

Spare parts supply chains are highly dependent on the dynamics of their installed bases. A decreasing number of capital products in use increases the nonstationary supply-side risk especially towards the end-of-life of capital products. This supply-side risk appears to present itself through varying lead times coupled with supply disruptions. To model the nonstationary supply-side risk, we consider an exogenous Markov chain that modulates random lead times and disruption probabilities. Assuming that order crossovers do not occur, we prove the optimality of a state-dependent base stock policy. Later, we conduct an impact study to understand the value of considering stochastic lead times and supply disruption risk in spare parts inventory control. Our results indicate that the coupled effect of random lead times and disruptions can be larger than the summation of individual effects even for moderate lead time variances. Also, the effect of nonstationarity on total cost can be as large as the summation of all risk factors combined. In addition to this managerial insight we present a procedure for supply risk mitigation based on an empirical model and our mathematical model. Experiments on a real business case indicate that the procedure is capable of reducing costs while making the inventory system more prepared for disruptions.