A Study on Effective Supply Chain Risk Management: Conceptual Framework

Abstract

The objective of this study is to explore supply chain risk management (SCRM) and introduce an effective risk management conceptual framework for firms exposed to the global business environment. In order to survive in severe global competition, more firms have followed suit in their supply chain management by maintaining lean inventory (JIT), global partnership, and outsourcing. These practices have led firms to more disruptions in different nodes of the supply chain. Optimal balance between the cost of disruption and the cost of countermeasures has remained an unresolved issue for firms. This paper attempts to provide a conceptual framework to categorize firms according to their current maturity of SCRM into low, mid, and high levels. Any effective SCRM should be adopted according to the current risk management maturity level, in order to derive a higher economic effect in the context of a cost-benefit tradeoff. This framework is designed to resolve why some empirical studies on the performance of SCRM have mixed results inconsistent with their predictions.