Supply risks
Samenvatting ‘An Agency Theory Investigation of Supply Risk
Management’
Every organization needs to acquire goods and services in order to carry out its mission and
goals. Varying degrees of risk are associated with obtaining these inputs. An unplanned
event may occur in their acquisition, delivery, and use that can negatively affect a firm’s
ability to serve its own customers. Supply risk is defined as the probability that such an
event will occur and the resulting detrimental consequence on the purchasing firm.
Because the context for managing supply risk involves a principal (purchasing organization)
and agents (suppliers), an appropriate theoretical perspective for studying supply risk
management is agency theory.
There are different supply risk sources:
The purchasing organization (principal) should embrace management efforts that reduce
the probability and/or impact of a detrimental event that could arise with the supplier
(agent). The question is then what firms can do when supply uncertainty becomes a
significant factor.
The management of risk can be categorized by behavior- and buffer-based management:
A behavior-based focus addresses supplier processes rather than simply outcomes.
Agents (suppliers) are evaluated on their behaviors, which then have an effect on
outcomes.
Buffers are an outcome-based approach to dealing with risk. Rather than reduce the
likelihood of a detrimental event, firms employ buffers to reduce the detrimental
effects of supply risk events.
And award suppliers that consistently meet predetermined criteria
Samenvatting ‘An Agency Theory Investigation of Supply Risk
Management’
Every organization needs to acquire goods and services in order to carry out its mission and
goals. Varying degrees of risk are associated with obtaining these inputs. An unplanned
event may occur in their acquisition, delivery, and use that can negatively affect a firm’s
ability to serve its own customers. Supply risk is defined as the probability that such an
event will occur and the resulting detrimental consequence on the purchasing firm.
Because the context for managing supply risk involves a principal (purchasing organization)
and agents (suppliers), an appropriate theoretical perspective for studying supply risk
management is agency theory.
There are different supply risk sources:
The purchasing organization (principal) should embrace management efforts that reduce
the probability and/or impact of a detrimental event that could arise with the supplier
(agent). The question is then what firms can do when supply uncertainty becomes a
significant factor.
The management of risk can be categorized by behavior- and buffer-based management:
A behavior-based focus addresses supplier processes rather than simply outcomes.
Agents (suppliers) are evaluated on their behaviors, which then have an effect on
outcomes.
Buffers are an outcome-based approach to dealing with risk. Rather than reduce the
likelihood of a detrimental event, firms employ buffers to reduce the detrimental
effects of supply risk events.
And award suppliers that consistently meet predetermined criteria
