Collaboration and Risk Mitigation Capability in Supply Chains: A Conceptual Framework

Transcription

1 Page 1 of 20 ANZAM 2010 Collaboration and Risk Mitigation Capability in Supply Chains: A Conceptual Framework Sajad Fayezi School of Management and Marketing, Deakin University, Australia sajad.fayezi@deakin.edu.au Dr Ambika Zutshi School of Management and Marketing, Deakin University, Australia ambika.zutshi@deakin.edu.au Dr Andrew O Loughlin School of Management and Marketing, Deakin University, Australia andrew.oloughlin@deakin.edu.au

2 ANZAM 2010 Page 2 of 20 ABSTRACT The process of identification, assessment and mitigation of risks is of strategic importance to supply chain profitability and continuity. Researchers have strived to propose diverse set of quantitative and qualitative models for supply chain risk management. Many of the strategies and approaches discussed in literature are based on relationship management. Collaboration, as a type of relationship, provides a better context for risk management and mitigation in supply chain. Although, the notion of collaborative relationships is highly advocated in literature, nevertheless, no explication on collaboration-risk mitigation interaction has been identified. The framework presented in this paper is anticipated to conceptualise collaboration-risk mitigation interactions. Keywords Supply chain, Risk mitigation, Collaboration, Agility, Flexibility, Visibility SUPPLY CHAIN: RISKS AND RELATIONSHIPS Mason-Jones and Towill (1997, 1998, 1999, 2000) have shown that every organisation in the supply chain (SC) has the responsibility to efficiently transform its customers demand information into products and services. The attributes of quality, speed and cost to successfully undertake this transformation are intertwined and subject to uncertainty (Norrman & Jansson 2004). Business management philosophies such as supply chain management suggest the collective effort of SC partners in order to achieve this transformation by integrating and managing key inter- and intraorganisational business processes (Ho, Au & Newton 2002; Mentzer et al. 2001). However, the inherent uncertainty in SC activities (Mason-Jones & Towill 1998) and the impact of globalisation and trends such as outsourcing have been moving both practitioner and academic attention towards the investigation of how risk might manifest itself in the SC. Risk is a relative and multidimensional concept (Zsidisin 2003a). Kaplan and Garrick (1981) for instance, when defining risk highlighted that it involves both uncertainty and damage. From their perspective uncertainty is a lack of knowledge about existing state or future outcome and damage is some form of loss (e.g. financial). March and Shapira define risk as: the variance in the probability distribution of outcomes, their likelihoods and their subjective values (1987: 1404). In this study, based on Zsidisin (2003b) and Neiger (2009), risk in the context of the SC has been defined as: Any adverse event that negatively impacts the achievement of operational, tactical, or strategic objectives of supply chain members and is predominantly caused by supply, demand, market or product sources.

3 Page 3 of 20 ANZAM 2010 It is well-established that failure to manage risks across the SC can be very costly and have significant negative consequences for all parties (Hendricks & Singhal 2005). These consequences can range from financial and reputational loss right across to a loss of life and threat to individual safety (Cousins, Lamming & Bowen 2004; Zsidisin 2003a). This in turn signifies the importance of managing risks across the SC. Within the literature, risk management responses tend to focus on either relationship management or strategic/proactive purchasing (Khan & Burnes 2007). For instance, supplier development and certification are among risk-handling strategies discussed in the literature (Krause 1999; Matook, Lasch & Tamaschke 2009; Smeltzer & Siferd 1998; Zsidisin & Ellram 2003). The initial motivation for this research has come from the lack of research in the explication of the interactions between collaboration and risk mitigation in SC. Although the supply chain relationships literature places considerable emphasis on collaborative relationships, as a means of effective management of SC activities (see for example Barratt 2004; Kampstra, Ashayeri & Gattorna 2006; Min et al. 2005; Singh & Power 2009), there are only few instances where the dynamics of collaboration for supply chain risk management (SCRM) have been discussed (see Harland, Brenchley & Walker 2003; Hallikas, Karvonen, Pulkkinen, Virolainen & Tuominen 2004; Hallikas, Puumalainen, Vesterinen & Virolainen 2005). Paradoxically, when it comes to defining the concept of SCRM, there appears to be a general consensus among researchers that the role of collaboration and coordination among SC partners for effective management of risks is extremely important (see for example definitions by Faisal, Banwet & Shankar 2007b; Jüttner, Peck & Christopher 2003; Norrman & Jansson 2004; Tang 2006a). As a consequence the literature points towards SCRM as a developing area of research (Jüttner 2005; Paulsson 2007), and this paper therefore seeks to explore one of the more poorly researched areas in SCRM, the interplay between supply chain collaboration and its resiliency against risk events. Particularly, the objective of this study is two-fold. First, to shed light on the relationships between supply chain collaboration and risk mitigation capability based on reviewing the literature and, second, to develop and present a conceptual framework (see Figure 2) that assists in understanding of the complex relationship between collaboration and risk mitigation in SC.

4 ANZAM 2010 Page 4 of 20 It is to be noted that the framework presented in this paper is our first step towards addressing the identified gap in the literature and can direct the future research towards the development of collaborative risk management and mitigation research model. In developing the framework, we have utilised the empirically tested instrument for measuring supply chain collaboration (collaboration index) proposed by Simatupang and Sridharan (2005a). Furthermore, the risk mitigation capability is conceptualised as the agility-flexibility-visibility triangle. The paper proceeds by discussion on the SCRM and major studies in this area. In addition, the description of the dimensions of risk mitigation capability is presented. Then, we look at major supply chain collaboration literature and elaborate on collaboration elements. Next, we describe our framework followed by an explication of the interactions among components of the framework. Finally, few practical implications and possible future researches are discussed in a concluding section. SUPPLY CHAIN RISK MANAGEMENT Faisal et al. define SCRM as the process of risk mitigation achieved through collaboration, coordination and application of risk management tools among the partners, to ensure continuity coupled with long term profitability of the supply chain (2007b: 23). Studies by, for example, Smeltzer and Siferd (1998), Sheffi and Rice (2005), and Knemeyer, Zinn and Eroglu (2009) have shown that a proactive approach to SCRM will make organisations and their supply chains more resilient against unexpected events. Broadly the research in SCRM can be categorised into three groups. First, studies that generally address risk management in supply chains and try to give a better understanding about the subject matter (see for example Christopher & Lee 2004; Jüttner et al. 2003; Khan & Burnes 2007; Peck 2006; Zsidisin 2003a). The second group incorporates those studies that address the risk management issues in specific industries and supply chains (see Norrman & Lindroth 2004 (Telecome); Sinha, Whitman & Malzahn 2004 (Aerospace); van Der Vorst, Beulens, De Wit & van Beek 1998 (Food)). Studies that propose quantitative models and frameworks for the management and analysis of risk in supply chains and networks (see Faisal, Banwet & Shankar 2006; Hallikas et al. 2004; Knemeyer et al. 2009; Ritchie, Brindley & Armstrong 2008) make up the final group.

5 Page 5 of 20 ANZAM 2010 In an effort to clarify the concept of SCRM, Jüttner et al. (2003) have distinguished between four basic constructs of SCRM namely risk sources, risk consequences, risk drivers and risk mitigation strategies (see Figure 1). Succinctly, their framework demonstrates that sources of risk (i.e. environmental, organisational or SC-related) can cause adverse consequences of risk (e.g. financial loss, reputation damage). The sources of risk can be further instigated by risk drivers, such as, globalisation and outsourcing whilst potentially being offset by certain mitigation strategies (e.g. postponement, multiple sourcing). Each of the constructs in Figure 1 and their interactions can be seen as a stream of research in SCRM literature. For instance, Zsidisin and Ellram (2003) drawing on multiple case studies consider risk mitigation practices of purchasing organisations in two forms: buffer-based (e.g. multiple sourcing) and behaviour-based (e.g. supplier development). Furthermore, Tang (2006a) states that approaches used to mitigate SC risks centre on: supply management, demand management, product management, and information management. Dimensions of Supply Chain Risk Mitigation Capability There are various tools and initiatives discussed in the literature for the analysis, management and mitigation of risks in SC, such as, FMEA (failure mode and effect analysis), scenario analysis, multiple souring, relationship development and supplier certification (Blome & Henke 2008; Zsidisin & Ellram 2003). Based on the literature, major dimensions of risk mitigation capability in supply chains can be conceptually classified into three elements of agility, flexibility and visibility. When these elements are present and operationalised it allows an organisation to cope with operational disruptions whilst also making it resilient against disasters. Consequently, practitioners efforts targeted towards reducing risk exposure in the SC have tended to focus on managing these three elements. Agility refers to the use of market knowledge and integrated processes to respond to the unpredictable short-term supply and demand changes quickly to handle the external disruptions smoothly (Christopher 2000; Lee 2004; Naylor, Naim & Berry 1999; Swafford, Ghosh & Murthy 2006). Van Hoek et al. (2001) highlight the importance of understanding the SC operating environment and its capabilities in order to better implement agile strategies. The operating environment can be conceived

6 ANZAM 2010 Page 6 of 20 as the impact of product types (functional/innovative) and economic trade-offs. The operating capabilities can be considered as four factors of market sensitivity (understanding the market), virtual integration (leveraging information), process integration (managing change and uncertainty) and network integration (cooperating to compete) (Christopher 2000; van Hoek et al. 2001). Over the last decade several notable events have had a major impact on SC agility, for example, the 9/11 attacks where many supply chains had to reinvent themselves when borders were closed and transportation companies had restricted movements, or the SARS epidemic where cross border movements were restricted and transportation was carefully monitored. During each incident, the concept of SC agility gained critical importance as businesses struggled with changes in the operating environment (Lee 2004). The characteristics and requirements of SC agility has given rise to many strategies and initiatives in supply chain management, such as the rapid replenishment and postponed fulfilment (Christopher & Towill 2001). The often-cited case of Nokia and Ericsson demonstrates how agile supply chains can quickly recover from sudden setbacks (Craighead, Blackhurst, Rungtusanatham & Handfield 2007; Lee 2004; Norrman & Jansson 2004; Tang 2006b). Both Scandinavian companies were sourcing a key component for their mobile telephones from a Philips facility in Albuquerque, which suddenly caught on fire. Nokia implementing a postponement strategy was able to quickly locate other suppliers whilst Ericsson being unable to sense the threat faced a huge loss (Lee 2004; Norrman & Jansson 2004). It was only after this accident that Ericsson took on a proactive approach towards managing its SC risks (see Norrman & Jansson 2004 for further details). The ability of organisation to adapt to unexpected circumstances with limited changes and without severe disorganisation is called flexibility (Skipper & Hanna 2009; Zhang, Vonderembse & Lim 2002). Flexibility enhances SC resiliency and creates a competitive advantage for organisations (Sheffi & Rice 2005; Tang & Tomlin 2008). Duclos et al. (2003) maintain that components of SC flexibility are operations, organisational, information systems, logistics, supply, and market flexibility. According to Skipper and Hanna (2009) strategic tools, such as contingency planning can significantly reduce the risk exposure of SC against disruptions through enhancing its flexibility. Their research highlights the importance of top management support, intra- and inter-organisational resource

7 Page 7 of 20 ANZAM 2010 alignment, information technology usage and collaboration among trading partners. Multiple/localised sourcing, flexible manufacturing, postponement and responsive pricing are among other strategies that can be used to help to mitigate SC risks through increasing its flexibility (Blome & Henke 2008; Tang & Tomlin 2008). Cisco, for instance, uses flexible design and standardised processes which allow them to easily switch its manufacturing process from one supply network to another (Lee 2004). Visibility is a function of accessibility and the availability of relevant information about various SC entities and their operations to the relevant SC parties (Christopher & Lee 2004; Goh, Souza, Zhang, He & Tan 2009). Visibility enables SC members to foresee movements in inventory, product and demand to be able to plan ahead and function as part of a well-orchestrated effort (Rao 2004). Unpredictable events such as disruption in a production process of a manufacturer, if visible, allow timely remedial actions by the chain members (Rao 2004). In some cases however, the problem may be further compounded by the very real issue that the SC lacks sufficient transparency and, for example, one member of chain is not able to visualise, or comprehend the full extent of the supply chain dynamics in terms of inventory planning, work flows, production scheduling, sales, demand forecasts and order status. This has the effect of creating, what O Loughlin and Clements (2007) have termed as Supply Chain Myopia, where information passing through the SC may be interrupted or misaligned through participant activities and interests. Information sharing is a key to SC visibility and increases its operational performance (Barratt & Oke 2007; Childerhouse, Hermiz, Mason-Jones, Popp & Towill 2003; Lee & Whang 2000; Mason-Jones & Towill 1997). Christopher and Lee (2004) explain that lack of visibility and control over SC processes, either upstream or downstream, reduces confidence and adds to the uncertainty which in turn can exacerbate risk taking behaviour in the SC. Companies such as Dell have strived to improve their responsiveness and reduce their cost by sharing information with their suppliers (e.g. via supplier hubs) and customers (e.g. through joint replenishment and planning) in order to reduce the uncertainty and risk (Fawcett, Osterhaus, Magnan, Brau & McCarter 2007; Lee 2002). For the purpose of this paper, based on preceding discussion the risk mitigation capability of SC is considered in terms of its agility, flexibility, and visibility dimensions.

8 ANZAM 2010 Page 8 of 20 SUPPLY CHAIN COLLABORATION Managing relationships is one of the major aspects of effective supply chain management (Childerhouse 2002). Similar sentiments were echoed by Böhme (2009) who considered relationship management as an integral part of supply chain integration practices. Managing inter-organisational relationships has been widely discussed as an important risk-handling strategy in supply chains (Khan & Burnes 2007; Zsidisin, Panelli & Upton 2000). Loyalty to existing suppliers, developing new suppliers and building long-term partnerships with suppliers and customers are examples of the relationship-based risk-handling strategies (Khan & Burnes 2007; Mitchell 1995; Puto, Wesley & King 1985; Zsidisin et al. 2000; Zsidisin & Ellram 2003). Much of the literature in supply chain relationships has tended to focus on the different types and stages of relationships (Knoppen & Christiaanse 2007; Skjoett-Larsen, Thernøe & Andresen 2003), their relation to SC strategies (Cousins & Spekman 2003), and their theoretical foundations (Svahn & Westerlund 2009). Among different types of relationships (e.g. transactional, relational, and collaborative), the ways to model, explain, plan, and measure collaboration has been of interest to many researchers (Barratt 2004; Kampstra et al. 2006; Simatupang & Sridharan 2005b). Correspondingly, issues such as power and dependency, trust and commitment, and risk and reward have gain critical important in supply chain collaboration literature (Barratt 2004; Humphries & Wilding 2004; Min et al. 2005; Simatupang & Sridharan 2002). Fawcett and Magnan (2002), while explaining the realities of supply chain integration, position the collaboration as a more appropriate descriptor for supply chain integration as their findings reveal that SC practices seldom result in the theoretical ideals of integration (ideals in terms of goal congruence, communication, information sharing, risk and reward sharing). In a collaborative relationship, SC members work closely together, make joint decisions and share risk, reward and information in high levels so as to improve their performance (Barratt 2004; Hoyt & Huq 2000; Simatupang & Sridharan 2002). Collaboration Elements Simatupang and Sridharan (2005a) proposed a collaboration index to measure the extent of collaboration between SC members. The index is based on collaborative practices in information

9 Page 9 of 20 ANZAM 2010 sharing, decision synchronization, and incentive alignment and they had used these three dimensions in their study on benchmarking supply chain collaboration (Simatupang & Sridharan 2004). One of the essential features of collaborative relationships is information sharing between buyers and suppliers (Whipple, Lynch & Nyaga 2009). From a SC perspective, this is not merely desirable but mandatory (Towill 1997). If the foundation of replenishment, forecasting and planning decisions is based on accurate and current information, SC partners will be able to reduce uncertainty and risk in their mutual transactions (Christopher & Lee 2004; Lee 2002). Researchers have shown that information-enriched supply chains perform better (Lee & Whang 2000; Mason-Jones & Towill 1997). Generally, when buyers and suppliers have incomplete or inaccurate information about demand forecasts, order status, and production schedule there is an information asymmetry in their relationship which may result in sub-optimal decision making (e.g. decisions based on an educated guess) (Simatupang & Sridharan 2002). Joint decision making by SC partners with regards to the planning and operating context is called decision synchronization (Simatupang & Sridharan 2005a). It is also referred to as a form of nonequity governance agreed by involved partners in order to pursue certain super-ordinate objectives which, if attained, can benefit all of them (Joshi & Stump 1999; Jap 2001; Lejeune & Yakova 2005). Decision synchronization can be within different areas of supply chain management such as procurement, order entry procedures, delivery schedules, product/service design, and quality monitoring/improvements (Biehl, Cook & Johnston 2006; Simatupang & Sridharan 2005a). Joint planning and resolution (through the formation of cross-functional and organisational teams) allow SC partners, for instance, to jointly develop process improvement strategies in face of SC problems (e.g. delay in lead-time). This joint effort may result in better commitment of partners towards the implementation of these strategies as they are collectively discussed and agreed upon. The empirical study by Biehl et al. (2006) shows the positive role of joint decision making (as a key attribute of collaborative SC relationships) on the better SC performance. Incentive alignment is a mechanism for realigning benefits and costs when there is a process change in the SC (Simatupang & Sridharan 2002). Imbalances in benefits and costs of SC partners may

10 ANZAM 2010 Page 10 of 20 potentially undermine the stability of relationships and cause it to break down, or worse still become adversarial (Simatupang & Sridharan 2005b). Therefore, sharing costs, risks and benefits can enhance the commitment of SC partners and motivate joint resolution among them which eventually direct partners towards total profit belief (Simatupang & Sridharan 2004). It is also important to note that opportunistic behaviours such as forward buying and diverting are among outcomes of misaligned incentives among SC members (Simatupang & Sridharan 2002, 2005a). FRAMEWORK From our perspective the more collaborative links a company can develop with its suppliers, distributors and customers the better they are able to manage their internal and external risks. As mentioned earlier there are many diverse strategies, approaches and tools to manage risks in the SC. Nonetheless, a gap exists in the literature with respect to the impact of collaboration on the risk mitigation capabilities of the SC participants. Figure 2 presents our conceptual framework that will pave the first step to bridge this gap. The framework is composed of three collaboration axes (elements) and an equilateral triangle of agility-flexibility-visibility which has its center matched upon the origin of collaboration axes. This assumption helps to better explain dynamics of the framework. Currently, each edge of the triangle is shown to be limited by two collaboration axes which in turn creates a corresponding plane. For instance, the agility edge is limited by incentive alignment and information sharing axes and results in agility plane. This highlights our contention that agility, flexibility, and visibility dimensions are not equally affected by three elements of collaboration. For instance, agility is shown to be mostly influenced by incentive alignment and information sharing. The dotted lines show the permeability of collaboration elements for two reasons, firstly, their uneven impact on agility, flexibility, and visibility dimensions and, secondly, their own interrelationships. The interrelationship among collaboration elements means that efforts on one element may facilitate and enhance another one. For instance, incentive alignment can motivate joint decision making by SC partners (Simatupang & Sridharan 2004).

11 Page 11 of 20 ANZAM 2010 The risk mitigation capability of a SC is shown at the core of the triangle. As the SC partners efforts in collaborative practices of information sharing, decision synchronization, and incentive alignment increases the area of envelope covering the agility, flexibility, and visibility planes also increases which implies the improvement in risk mitigation capability through improvement in its three basic dimensions. We therefore postulate that collaboration practices in terms of information sharing, decision synchronization and incentive alignment will improve the risk mitigation capability of SC. The Impact of Collaboration Elements on Agility-Flexibility-Visibility In Figure 3a we draw attention to the agility dynamic. Four main constructs of an agile SC are virtual integration, process alignment, network integration, and market sensitivity (Christopher 2000; Christopher & Towill 2000). Faisal et al. (2007a) in their study of measuring SC agility listed the key attributes for each of these constructs. Their work also supports our contention concerning the importance of information sharing, decision synchronization and incentive alignment as the main elements underpinning SC agility. In effect, agile supply chains tend to be more information-based rather than inventory-based (Christopher 2000). Moreover, collaborative decision-making and problem solving within planning and operational contexts, allow SC partners to better respond to the changes as a group or team, rather than having to manage the issues in isolation. Thus, we hypothesise that: Hypothesis 1. Collaboration in terms of information sharing will positively impact the risk mitigation capability of supply chain by improving its agility. Hypothesis 2. Collaboration in terms of decision synchronization will positively impact the risk mitigation capability of supply chain by improving its agility. The flexibility process has been highlighted in Figure 3b. Organisations in order to select and develop certain capabilities to cope with risk and uncertainty require information about their environment, operational accidents and possible disasters (Fawcett, Calantone & Roath 2000). Therefore, flexibility within the SC is heavily dependent on effective and consistent information sharing. Moreover, decision synchronization across SC functions such as procurement, manufacturing, and distribution

12 ANZAM 2010 Page 12 of 20 would help trading partners to enhance their flexibility by providing an environment where alignment of resources and capabilities (for an agreed-upon decision) among SC partners can be achieved. Thus, we hypothesise that: Hypothesis 3. Collaboration in terms of information sharing will positively impact the risk mitigation capability of supply chain by improving its flexibility. Hypothesis 4. Collaboration in terms of decision synchronization will positively impact the risk mitigation capability of supply chain by improving its flexibility. In Figure 3c we draw attention to the visibility issues. Pipeline transparency and visibility cannot be achieved unless trading partners share the relevant information across SC (Barratt & Oke 2007). One of the benefits of visibility would be reduction in the so-called Bullwhip Effect across SC as decisions (e.g. order decisions) can be made upon real-time information (Mason-Jones & Towill 2000). Mutual understanding of collaborative decision making and problem solving may also assist SC members to share more information (including information that is both sensitive and/or critical), as the parties learn to trust each other (O'Loughlin & Clements 2007). Thus, we hypothesise that: Hypothesis 5. Collaboration in terms of information sharing will positively impact the risk mitigation capability of supply chain by improving its visibility. Hypothesis 6. Collaboration in terms of decision synchronization will positively impact the risk mitigation capability of supply chain by improving its visibility. Incentive alignment may also directly or indirectly (through facilitating information sharing and decision synchronization) impact the risk mitigation capability dimensions. It can act as an engine for the smooth implementation of any collaborative action formulated by trading partners. In an ideal scenario from our perspective the three elements of collaboration act as complimentary loops which constantly nurture agility-flexibility-visibility triangle. Therefore, the relevant hypotheses are: Hypothesis 7. Collaboration in terms of incentive alignment will positively impact the risk mitigation capability of supply chain by improving its agility.

13 Page 13 of 20 ANZAM 2010 Hypothesis 8. Collaboration in terms of incentive alignment will positively impact the risk mitigation capability of supply chain by improving its flexibility. Hypothesis 9. Collaboration in terms of incentive alignment will positively impact the risk mitigation capability of supply chain by improving its visibility. To explain the impact of collaboration elements on risk mitigation capability let us consider a hypothetical example. In this scenario a government suddenly introduces a new regulatory requirement that has a direct impact on importing certain items into the country. The manufacturer in this country is highly depended on a particular item that has to be sourced by an overseas supplier. The supplier of this manufacturer is affected by the new regulation and this new requirement can potentially close down the whole production line and the SC processes. The conceptual framework illuminates the role of collaboration between manufacturer and supplier in order to enable them to better manage the impact of such incidents (regulatory risk). In this example the collaborative practices in information sharing, decision synchronization and incentive alignment may improve the visibility across the relationships between the two parties and facilitate their quick response and adaptation and in due course improve their collective risk mitigation capability. Swift acquisition and dissemination of information should save time and allow them to reach to an equally beneficial decision. Further, the significance of risk sharing manifests itself in the presented scenario. If the partners do not have a commitment to their obligations they would not stick to their collaboration responsibilities. This example reinforces the issue of trust within the collaboration which is out of the scope of this paper. CONCLUSION AND FUTURE RESEARCH In this paper we have highlighted gap in SCRM research by explaining the impact of collaboration on risk mitigation capability of SC members and accordingly presented a conceptual framework (see Figure 2) as our first step toward closing this gap. The framework illustrates how collaboration elements can impact the risk mitigation capability dimensions of SC: agility, flexibility, and visibility and the interrelationships amongst collaboration elements.

14 ANZAM 2010 Page 14 of 20 Understanding the link between supply chain collaboration and organizational risk mitigation capability has a number of important practical implications for SC managers. Our framework emphasises the necessity for thorough risk profile assessment of potential, for instance, suppliers in the supplier selection process (Micheli, Cagno & Zorzini 2008; Trkman & McCormack 2009). From our point of view, managers should look at their prospective suppliers as collaborative partners who are competent in collaborative practices as this would help them to strengthen their risk mitigation capability. It is important to state that meticulous selection of suppliers can assure organisations that adding the new supplier into their supplier portfolio would contribute to their risk mitigation capability improvement. Moreover, the framework encourages SC managers towards establishment of more collaborative links as it can positively impact trading partners risk mitigation capability. This is in line with Hallikas et al. (2005) who state that the risks of collaboration must be counterbalanced by the benefits of collaboration such as mutual relationship-related learning and joint forms of risk management. Therefore, we contend that the more collaborative links an organisation can establish across its SC the better it can safeguard the SC processes against potential disruptions. This paper, apart from its overarching objective, aimed at paving the way for development of collaborative risk management research model of different SC environments (Vanany, Zailani & Pujawan 2009). Future research will need to focus on the evolving nature of collaborative relationships (Kampstra et al. 2006), the issue of trust and commitment as a hallmark of collaborative relationships (Humphries & Wilding 2004), and the various levels of collaboration in terms of scope and scale (e.g. operational, tactical, strategic or internal and external) (Barratt 2004; Skjoett-Larsen et al. 2003). The next step of this study will be to identify and explore the collaborative relationships and risk mitigation practices in a particular industry SC (Jüttner et al. 2003) with reference to the presented framework and then test the hypotheses and provide some empirical validation. This approach will provide a better focus and reliability to discussions and findings in SCRM research as the multidimensionality of risk (Zsidisin 2003a) and complexity of SC (Surana, Kumara, Greaves & Raghavan 2005) call for more specificity in their investigations.

15 Page 15 of 20 ANZAM 2010 References Barratt M. (2004). Understanding the meaning of collaboration in the supply chain. Supply Chain Management: An International Journal, 9(1), Barratt M, & Oke A. (2007). Antecedents of supply chain visibility in retail supply chains: A resourcebased theory perspective. Journal of Operations Management, 25(6), Biehl M, Cook W, & Johnston D. (2006). The efficiency of joint decision making in buyer-supplier relationships. Annals of Operations Research, 145(1), Blome C, & Henke M. (2008). Single Versus Multiple Sourcing: A Supply Risk Management Perspective. In GA Zsidisin & B Ritchie (Eds.), Supply chain risk: A handbook of assessment, management, and performance (Vol. Volume 124 of International series in operations research & management science, pp ): Springer. Böhme T. (2009). Supply Chain Integration: A Case-based Investigation of Status, Barriers, and Paths to Enhancement University of Waikato, Hamilton. Childerhouse P. (2002). Enabling seamless market-orientated supply chains. Cardiff University, Wales, UK. Childerhouse P, Hermiz R, Mason-Jones R, Popp A, & Towill DR. (2003). Information flow in automotive supply chains: Identifying and learning to overcome barriers to change. Industrial Management & Data System, 103(7), Christopher M. (2000). The agile supply chain: Competing in volatile markets. Industrial Marketing Management, 29(1), Christopher M, & Lee H. (2004). Mitigating supply chain risk through improved confidence. International Journal of Physical Distribution & Logistics Management, 34(5), Christopher M, & Towill D. (2000). Supply chain migration from lean and functional to agile and customised. Supply Chain Management: An International Journal, 5(4), Christopher M, & Towill D. (2001). An integrated model for the design of agile supply chains. International Journal of Physical Distribution and Logistics Management, 31(4), Cousins PD, Lamming RC, & Bowen F. (2004). The role of risk in environment-related supplier initiatives. International Journal of Operations & Production Management, 24(6), Cousins PD, & Spekman R. (2003). Strategic supply and the management of inter- and intraorganisational relationships. Journal of Purchasing and Supply Management, 9(1), Craighead CW, Blackhurst J, Rungtusanatham MJ, & Handfield RB. (2007). The severity of supply chain disruptions: Design characteristics and mitigation capabilities. Decision Sciences, 38(1), Duclos L, Vokurka R, & Lummus R. (2003). A conceptual model of supply chain flexibility. Industrial Management and Data Systems, 103(6), Faisal M, Banwet D, & Shankar R. (2006). Supply chain risk management: Modeling the enablers. Business Process Management Journal, 12(4), Faisal M, Banwet D, & Shankar R. (2007a). An approach to measure supply chain agility. International Journal of Industrial and Systems Engineering, 2(1), Faisal M, Banwet D, & Shankar R. (2007b). Quantification of risk mitigation environment of supply chains using graph theory and matrix methods. European Journal of Industrial Engineering, 1(1), Fawcett S, Calantone R, & Roath A. (2000). Meeting quality and cost imperatives in a global market. International Journal of Physical Distribution and Logistics Management, 30(6), Fawcett S, & Magnan G. (2002). The rhetoric and reality of supply chain integration. International Journal of Physical Distribution & Logistics Management, 32(5), Fawcett S, Osterhaus P, Magnan G, Brau J, & McCarter M. (2007). Information sharing and supply chain performance: the role of connectivity and willingness. Supply Chain Management: An International Journal, 12(5), Goh M, Souza RD, Zhang AN, He W, & Tan PS. (2009). Supply chain visibility: A decision making perspective. Paper presented at the The 4th IEEE Conference on Industrial Electronics and Applications (ICIEA 2009). Hallikas J, Karvonen I, Pulkkinen U, Virolainen V-M, & Tuominen M. (2004). Risk management processes in supplier networks. International Journal of Production Economics, 90(1),

16 ANZAM 2010 Page 16 of 20 Hallikas J, Puumalainen K, Vesterinen T, & Virolainen V-M. (2005). Risk-based classification of supplier relationships. Journal of Purchasing & Supply Management, 11(2-3), Harland CM, Brenchley R, & Walker H. (2003). Risk in supply networks. Journal of Purchasing & Supply Management, 9(2), Hendricks K, & Singhal V. (2005). An empirical analysis of the effect of supply chain disruptions on long-run stock price performance and equity risk of the firm. Production and Operations Management, 14(1), Ho DCK, Au KF, & Newton E. (2002). Empirical research on supply chain management: A critical review and recommendations International Journal of Production Research, 40(17), Hoyt J, & Huq F. (2000). From arms-length to collaborative relationships in the supply chain: An evolutionary process. International Journal of Physical Distribution & Logistics Management, 30(9), Humphries A, & Wilding R. (2004). Long term collaborative business relationships: The impact of trust and C3 behaviour. Journal of Marketing Management, 9(10), Jap SD. (2001). Perspectives on joint competitive advantages in buyer-supplier relationships. International Journal of Research in Marketing, 18(1-2), Joshi AW, & Stump RL. (1999). The Contingent Effect of Specific Asset Investments on Joint Action in Manufacturer-Supplier Relationships: An Empirical Test of the Moderating Role of Reciprocal Asset Investments, Uncertainty, and Trust. Journal of the Academy of Marketing Science, 27(3), Jüttner U. (2005). Supply chain risk management: Understanding the business requirements from a practitioner perspective. International Journal of Logistics Management, 16(1), Jüttner U, Peck H, & Christopher M. (2003). Supply chain risk management: Outlining an agenda for future research. International Journal of Logistics: Research and Applications, 6(4), Kampstra R, Ashayeri J, & Gattorna J. (2006). Realities of supply chain collaboration. International Journal of Logistics Management, 17(3), Kaplan S, & Garrick BJ. (1981). On the quantitative definition of risk. Risk Analysis, 1(1), Khan O, & Burnes B. (2007). Risk and supply chain management: Creating a research agenda. International Journal of Logistics Management, 18(2), Knemeyer AM, Zinn W, & Eroglu C. (2009). Proactive planning for catastrophic events in supply chains. Journal of Operations Management, 27(2), Knoppen D, & Christiaanse E. (2007). Supply chain partnering: a temporal multidisciplinary approach. Supply Chain Management: An International Journal, 12(2), Krause DR. (1999). The antecedents of buying firms' efforts to improve suppliers. Journal of Operations Management, 17(2), Lee H. (2002). Aligning supply chain strategies with product uncertainties. California management review, 44(3), Lee H. (2004). The triple-a supply chain. Harvard Business Review, 82(10), Lee H, & Whang S. (2000). Information sharing in a supply chain. International Journal of Manufacturing Technology and Management, 1(1), Lejeune MA, & Yakova N. (2005). On characterizing the 4 C's in supply chain management. Journal of Operations Management, 23(1), March JG, & Shapira Z. (1987). Managerial perspectives on risk and risk taking. Management Science, 33(11), Mason-Jones R, & Towill D. (1997). Information enrichment: designing the supply chain for competitive advantage. Supply Chain Management: An International Journal, 2(4), Mason-Jones R, & Towill D. (1998). Shrinking the supply chain uncertainty circle. Control, September, Mason-Jones R, & Towill D. (1999). Total cycle time compression and the agile supply chain. International Journal of Production Economics, 62(1-2), Mason-Jones R, & Towill D. (2000). Coping with uncertainty: Reducing Bullwhip behaviour in global supply chains. Supply Chain Forum: An International Journal, 1(1),

17 Page 17 of 20 ANZAM 2010 Matook S, Lasch R, & Tamaschke R. (2009). Supplier development with benchmarking as part of a comprehensive supplier risk management framework. International Journal of Operations and Production Management, 29(3), Mentzer JT, DeWitt W, Keebler JS, Min S, Nix NW, Smith CD, et al. (2001). Defining supply chain management. Journal of Business Logistics, 22(2), Micheli G, Cagno E, & Zorzini M. (2008). Supply risk management vs supplier selection to manage the supply risk in the EPC supply chain. Management Research News, 31(11), Min S, Roath AS, Daugherty PJ, Genchev SE, Chen H, Arndt AD, et al. (2005). Supply chain collaboration: What's happening? International Journal of Logistics Management, 16(2), Mitchell V-W. (1995). Organizational risk perception and reduction: A literature review. British Journal of Management, 6(2), Naylor JB, Naim MM, & Berry D. (1999). Leagility: Integrating the lean and agile manufacturing paradigms in the total supply chain. International Journal of Production Economics, 62(1-2), Neiger D, Rotaru K, & Churilov L. (2009). Supply chain risk identification with value-focused process engineering. Journal of Operations Management, 27(2), Norrman A, & Jansson U. (2004). Ericsson's proactive supply chain risk management approach after a serious sub-supplier accident. International Journal of Physical Distribution & Logistics Management, 34(5), Norrman A, & Lindroth R. (2004). Categorization of supply chain risk and risk management. In C Brindley (Ed.), Supply chain risk. Hampshire: Aghgate Publishing Limited. O'Loughlin A, & Clements M. (2007). Relational exchange, supply chain myopia and zones of turbulence. Paper presented at the International Research Conference on Quality Innovation and Knowledge Management. Paulsson U. (2007). On managing disruption risks in the supply chain The DRISC model. Lund University, Lund. Peck H. (2006). Reconciling supply chain vulnerability, risk and supply chain management. International Journal of Logistics: Research and Applications, 9(2), Puto CP, Wesley EP, III, & King RH. (1985). Risk Handling Strategies in Industrial Vendor Selection Decisions. the journal of marketing, 49(1), Rao S. (2004). Supply Chain Management: Strengthening the Weakest Link! : Frost & Sullivan. Ritchie B, Brindley CS, & Armstrong N. (2008). Risk assessment and relationship management: Practical approach to supply chain risk management. International Journal of Agile Systems and Management 3(3-4), Sheffi Y, & Rice JB. (2005). A supply chain view of the resilient enterprise. MIT Sloan Management Review, 47(1), Simatupang TM, & Sridharan R. (2002). The collaborative supply chain. International Journal of Logistics Management, 13(1). Simatupang TM, & Sridharan R. (2004). Benchmarking supply chain collaboration: An empirical study. Benchmarking: An International Journal, 11(5), Simatupang TM, & Sridharan R. (2005a). The collaboration index: A measure for supply chain collaboration. International Journal of Physical Distribution & Logistics Management, 35(1), Simatupang TM, & Sridharan R. (2005b). An integrative framework for supply chain collaboration. International Journal of Logistics Management, 16(2), Singh P, & Power D. (2009). The nature and effectiveness of collaboration between firms, their customers and suppliers: a supply chain perspective. Supply Chain Management: An International Journal, 14(3), Sinha P, Whitman L, & Malzahn D. (2004). Methodology to mitigate supplier risk in an aerospace supply chain. Supply Chain Management: An International Journal, 9(2), Skipper JB, & Hanna JB. (2009). Minimizing supply chain disruption risk through enhanced flexibility. International Journal of Physical Distribution & Logistics Management, 39(5),

18 ANZAM 2010 Page 18 of 20 Skjoett-Larsen T, Thernøe C, & Andresen C. (2003). Supply chain collaboration. International Journal of Physical Distribution & Logistics Management, 33(6), Smeltzer LR, & Siferd SP. (1998). Proactive Supply Management: The Management of Risk. The Journal of Supply Chain Management, 34(1), Surana A, Kumara S, Greaves M, & Raghavan U. (2005). Supply-chain networks: a complex adaptive systems perspective. International Journal of Production Research, 43(20), Svahn S, & Westerlund M. (2009). Purchasing strategies in supply relationships. Journal of Business & Industrial Marketing, 24(3/4), Swafford PM, Ghosh S, & Murthy N. (2006). The antecedents of supply chain agility of a firm: Scale development and model testing. Journal of Operations Management, 24(2), Tang C. (2006a). Perspectives in supply chain risk management. International Journal of Production Economics, 103(2), Tang C. (2006b). Robust strategies for mitigating supply chain disruptions. International Journal of Logistics: Research and Applications, 9(1), Tang C, & Tomlin B. (2008). The power of flexibility for mitigating supply chain risks. International Journal of Production Economics, 116(1), Towill DR. (1997). The seamless supply chain: The predator's strategic advantage. International Journal of Technology Management, 13(1), 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), van Der Vorst JGAJ, Beulens AJM, De Wit W, & van Beek P. (1998). Supply Chain Management in Food Chains: Improving Performance by Reducing Uncertainty. International Transactions in Operational Research, 5(6), van Hoek R, Harrison A, & Christopher M. (2001). Measuring agile capabilities in the supply chain. International Journal of Operations and Production Management, 21(1/2), Vanany I, Zailani S, & Pujawan N. (2009). Supply chain risk management: Literature review and future research. International Journal of Information Systems and Supply Chain Management, 2(1), Whipple JM, Lynch DF, & Nyaga GN. (2009). A buyer's perspective on collaborative versus transactional relationships. Industrial Marketing Management, In Press, Corrected Proof. Zhang Q, Vonderembse MA, & Lim J-S. (2002). Value chain flexibility: A dichotomy of competence and capability. International Journal of Production Research, 40(3), Zsidisin GA. (2003a). A grounded definition of supply risk. Journal of Purchasing & Supply Management, 9(5-6), Zsidisin GA. (2003b). Managerial perceptions of supply risk. Journal of Supply Chain Management: A Global Review of Purchasing and Supply, 39(1), Zsidisin GA, & Ellram LM. (2003). An agency theory investigation of supply risk management. Journal of Supply Chain Management: A Global Review of Purchasing and Supply, 39(3), Zsidisin GA, Panelli A, & Upton R. (2000). Purchasing organization involvement in risk assessments, contingency plans, and risk management: An exploratory study. Supply Chain Management: An International Journal, 4(4),

19 Page 19 of 20 ANZAM 2010 Figures Figure 1: Basic Constructs of Supply Chain Risk Management (From Jüttner et al. 2003: 201) Risk drivers (e.g. globalisation &outsourcing) Risk sources (e.g. machine failure) + Risk mitigation strategies (e.g. supplier development) - Risk consequences (e.g. financial loss) Figure 2: Conceptual Framework Incentive Alignment Flexibility Agility RMC Decision Synchronization Visibility Information Sharing RMC = Risk Mitigation Capability

20 ANZAM 2010 Page 20 of 20 Figure 3: The Impact of Collaboration Elements on Agility-Flexibility-Visibility IA IA IA Flexibility Agility Flexibility Agility Flexibility Agility DS Visibility IS DS Visibility IS DS Visibility IS a) b) c) IS = Information Sharing DS = Decision Synchronization IA = Incentive Alignment