Supplier Selection in a Turbulent World

Daniel Dumke — Thu, 21 Oct 2010 09:42:00 +0000

At the moment I am focussing more on the interviews I am conducting for my research, so I am not reading as much anymore. I therefore try to select articles which are both useful for my research and my blog.

Today I read an article with the fuzzy title “Supply chain risk in turbulent environments — A conceptual model for managing supply chain network risk” by Peter Trkman and Kevin McCormack.

The authors present a framework for the identification and prediction of supply risk.

Conceptual Framework for assessing Supplier Risk (Trkman and McCormack 2009)

Risk and Turbulence

The authors define risk as an adverse event with a given likelihood and outcome. They further distinguish the source of risks similar to Christopher and Peck (2004) depending on the origin of the risk: a) Endogenous uncertainty (from within the Supply Chain) and b) Exogenous uncertainty (discrete events and continuous risks). Turbulence is not defined per se but turbulent conditions are defined by …

… frequent and unpredictable market and/or technological changes with in an industry which accentuate risk and create an inability to forecast accurately.

Major drivers of turbulence are market and technological turbulence.

Prediction of supplier risk

Supplier Performance and Uncertainty Matrix (Trkman and McCormack, 2009)

The authors suggest to measure the supplier performance on three levels:

strategic (eg. quality)
tactical (eg. order cycle time) and
operational (eg. number of complaints).

But they also admit that these indicators are not sufficient to predict supplier risks and should be enhanced by additional information on the the supply chain (type and structure) and the business structure. All factors can be found in the figure above.

These indicators then form the basis for a decision on the supplier portfolio. To support this process the authors also developed a supplier performance and uncertainty matrix.

Conclusion

I liked the idea of the article: How can you best identify and assess/predict risks in the supply chain? This is one of the most important questions in Supply Chain Risk Management. But I think the implementation leaves more holes than it needs to.

The Pros:

The authors are conceptualizing a more holistic approach to assess supplier risk
They also give hints on how to this process can be supported (by the matrix for supplier selection)

The Cons:

I would have loved to see more detail on many of the points mentioned, so I would think twice before using the framework without modification.

Fuzzy wording

The title promised new research on supply chain risk in turbulent environments, but the article was only about the supplier selection process. Until chapter three it was not made clear that the authors are only talking about supplier risk (before it was still called supply risk). And there is no explanation on why they used risk and uncertainty interchangeably
Definitions

I did not find a definition for turbulence or any other term beside “risk” (see above)
Framework

Due to the fact that the framework is conceptual I would have loved to see more arguments on why the selected factors have been chosen and why the framework is complete.
Matrix

Even though I like this way of thinking about the supplier selection, the matrix is flawed since the axis are not independent (performance usually is contingent on the turbulence around, but I have to admit that’s the same for the Growth-Share-Matrix as well)
Prediction

The authors talk about predicting the risk of suppliers, but do not give any (conceptual) hint on how to do this with the given framework.

I hope this review was helpful for you! If you have any comments, questions or suggestions you can use the comment section below or contact me directly.

Reference:

Trkman, P., & McCormack, K. (2009). Supply chain risk in turbulent environments—A conceptual model for managing supply chain network risk International Journal of Production Economics, 119 (2), 247-258 DOI: 10.1016/j.ijpe.2009.03.002

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