Supply chain risk management: manufacturing- and service-oriented firms

Abstract

Purpose A risk, when it occurs, causes negative effects on outputs. Typically, risks are not independent as multiple risks occur simultaneously. The purpose of this paper is to compare the impact various risks have on the performance of manufacturing-oriented and service-oriented firms from a supply chain (SC) perspective. Design/methodology/approach First, SC risks were identified and classified into two criteria: context and probability. Then, the different characteristics between manufacturing- and service-oriented firms were distinguished by the theory of goods-dominant logic (GDL) and service-dominant logic (SDL). Structural equations modeling and multiple-group analysis were then used to validate research hypotheses and compare the two groups. Findings The empirical evidence, gathered from the Vietnamese construction sector, indicated that in a serious situation all of the five risks proposed occur at the same time, thus the remarkable 87.1% variance in SC performance was explained. Furthermore, this rate is significant when the two groups are compared: manufacturing-oriented firms (88.3 percent) and service-oriented firms (85.6 percent), implying that risks in the manufacturing-oriented group have a greater effect on SC performance. While manufacturing-oriented companies should pay close attention to the operational and demand risks that adversely affect SC performance, they should treat information risk as an opportunity to improve. Service-oriented companies, however, need to manage supply risk which, in their case, can be attributed to a 51.2 percent variance in SC performance. Moreover, service quality can also be improved remarkably if information risk is well managed. Research limitations/implications This study provides a detailed picture of the relationship between risks and performance in the SC. Risks are illustrated as affecting the SC performance simultaneously, (not separately) and so the approach outlined here will give firms a comprehensive view of their SCs and provide guidelines for predicting the impact risks will have on the SC performance. Moreover, by comparing manufacturing- and service-oriented firms, a thorough overview of risk behaviors is provided and appropriate solutions for each type of company can be determined. Originality/value The “novelty of approach” of this study is in applying GDL and SDL theory to classify the manufacturing-oriented and service-oriented firms. The different characteristics between the two groups are identified and explained in terms of resources, value, network, effectiveness vs efficiency and communication, thus providing an insight into risk management activities in the SC network.