Managerial Perception of Risk, Case Study Example

Executive Summary

There has been an increasing trend in business on the production of outsourcing occupations and direction toward the core functions of supply risk management.  The choice of outsourcing the services and the products has a natural risk aspect. The objective of this literature review is to detail the aspects of inbound inputs which influence the administrative perceptions of supply risk and to formulate categorization of the supply risk origins. An evaluation of the literature review demonstrates that the aspect of supply risk is observed by the influence that the procured products and services exert upon the profits which are realized by corporations, the associated market factors and the qualities of the suppliers. In attaining a comprehension of the risks which are associated with supply, the supply management decision makers can put better strategies to use for the administration of risk (Kraljic 1983; Mitchell 1995; Steele & Court 1996).

In order to review the aspect of the deficiency in the body of knowledge in the fields of supply risk, the objective of this literature review is to ascertain which of the previously reviewed aspects which influence PSM executives  perceptions of supply hazards in their in their corporations. The previous research which has been performed demonstrates the initial schedules of supply hazards and their aspects (Kraljic 1983; Mitchell 1995; Steele & Court 1996). Notwithstanding, these supply hazards have initiated from the performance of a literature review or by being acquired through experiential knowledge. In order to evaluate the initial challenge,  case reviews were performed with personnel from seven procurement organizations in order to ascertain the many by which supply risk is perceived.

The second objective of this literature review is to acquire definitions of the supply risk aspects. There has been no previous classification of the manner by which the supply hazards are perceived by the supply risk executives. In order to supplement the gap in the body of knowledge, the qualities of supply risk which have been concluded in the case reviews had been evaluated and separated into three comprehensive categories of supplier, market and item aspects (Kraljic 1983; Mitchell 1995; Steele & Court 1996).

Introduction

The aspect of supply risk incorporates the possible occurrence of instances which are connected with an incoming supply which can have substantial adverse effects of the procuring firm. There are a number of aspects which influence the manner by which supply management professionals perceive the qualities of risk. The previous research on the subject of supply risk is directed on the way that the risk is evaluated (Steele & Court, 1996; Zsidsin et al., 2000). The research details the manner by which the proactive supply administration activities are incorporated in the decisions of risk management.  (Smeltzer & Siferd, 1998) and supply evaluations of the downside supply risk of the commodities.

Furthermore, the studies on the subjects of supply management which include the certification of suppliers, producing suppliers, the implementation and the application of data management matrices (Chopra & Van Mieghem, 2000; Hartley & Choi, 1996; Larson & Kutchinsky, 1998). Research has indirectly detailed the aspects of supply risk (Kraljic 1983; Mitchell 1995; Steele & Court 1996). Notwithstanding, there is a gap in the body of knowledge  with regards to the supply administration literature on the qualities of supply risk which influences the administrators’ perceptions of supply risk. Consequently, the objectives of this literature review are to acquire insights into the aspects of supply which include the administrative perceptions of supply risk and to formulate an identification of the supply risk origins.

This literature review will initiate with an exploration on the origins of possible risk. A definition of the methodology for the present research is conducted in accordance with the case study procedures and the fulfillment of the research in this area. The literature review subsequently migrates to a review of the information which s sequenced by an analysis of the implications for managers and conclusions (Kraljic 1983; Mitchell 1995; Steele & Court 1996).

Supply Risk

There are a number of aspects of the incoming supply which can influence the administrative perceptions of supply risk. The previous studies which have been conducted on supply risk in the context of possibility and outcome are discussed . The qualities which have the potential of affecting the administrative perceptions of supply risk are subsequently summarized (Kraljic 1983; Mitchell 1995; Steele & Court 1996). Supply risk has been delineated as the possible circumstance of a situation which is related to the incoming supply which originates from the supply chain element or the supply chain by which a number of diverse effects which have the outcome of the producing firm not having the capacity of fulfilling the customer needs or imperil the customers well-being and livelihood (Zsidsin, 2002). In this classification there are two main ideas of possibility and outcome, in the aspect where the risk is composed of the potential of loss and the importance of loss (Yates & Stone, 1992; Mitchell, 1995). The possibility from the perspective of priorities is composed of the quantities of instances that an occurrence takes place, a supply occurrence with adverse effects which is divided by the comprehensive quantity of similarly possible event (Kertinger, 1986). In the context of supply chain management, a model of supply risk would be that if a frost event taking place in the State of Florida which would influence the supply chain demand equilibrium for grapefruit juice products (Steel & Court, 1996).

In the perspective of the procurement and purveying management executive (PSM), there are a variety of factors which can influence supply risk. A few of these factors as demonstrated in Table 1 have been reviewed in previously published literature (Karli 1983; Mitchell, 1995; Steel & Court, 1996). Furthermore, a number of empirical research articles have reviewed the aspects of supply risk as a component of more expansive studies.  in PSM (Kraljic 1983; Mitchell 1995; Steele & Court 1996). As demonstrated in table 1, the supply aspects which influence supply risk assessments may originate from a number of sources.

The capacity limitations of the organizations which are suppliers incorporate the deficiency with regards to the firms’ production matrices to purvey the particular quantities which are required by the clients (Lee et al., 1997). The variations in demand may exert a supplier beyond their capabilities. This exertion may be attributed to the components, the quantity of personnel which are available or the incapacity of attaining the required inputs. The aspects such as the dimensions of the facilities or the occupations which incorporate the procurement of capital machinery  or personnel education does not have the capacity of being able to adjust to modifications in demand.

The aspects of supply risk which are defined in Table 1 and 2 are not exclusive in mutual contexts. The capacity of the limitations may be influenced by the aspects of supply risk which include the mix/ volume variation requisites and the changes which take place in process technology. In the event that a supplier is not able to achieve the adequate augmentations for the variations in volume or the product blending requisites, capacity limitation can occur. In the circumstance that the supplier is unable to adapt to the extended term technological modifications, the supplier may not have the capacity of producing items which are required at enhanced demand indexes. Consequently, a number of the supply risk aspects can be the outcome from the prevalence of supplementary supply risk aspects (Kraljic 1983; Mitchell 1995; Steele & Court 1996).

Research Method

The research methodology was composed of performing case studies with the procurement organizations which were engaged in the management of supply risk. The case reviews approach was chosen as the main research implement for the assessment of the manner by which procurement agents perceive the context of supply risk. The respondents in the case reviews had been screened by primary telephone, face to face or electronic interviews with regards to their engagement in the aspects of management of supply risk. The case reviews were conducted until the empiricist attained a level of data saturation (Strauss & Corbin, 1988) which took place subsequent to the seventh case review and inside of the anticipated scope of six to ten reviews. The responses on Table 1 and Table 2 demonstrate a summary of the answers which had been given by the respondents in the case studies of the seven distinct organizations (Kraljic 1983; Mitchell 1995; Steele & Court 1996).

Table 1  Aspects Influencing the Perception of Supply Risk

Table 2 Characteristics of the Supply Chain

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