Supply chain sustainability risk assessment model using integration of the preference selection index (PSI) and the Shannon entropy

Abstract

PurposeThis study proposes a new model for assessing supply chain sustainability risk integrating subjectivity and objectivity of decision-maker. Research has shown the vacancy of study in dealing with the above issue. To fill this research gap, a new decision support model considering the subjectivity and objectivity of decision-makers in assigning the weight of the supply chain risk reprioritization criteria is presented and demonstrated using a case example.Design/methodology/approachThis study adopts a new decision support model for assessing supply chain sustainability risk based on additional failure mode and effect analysis (FMEA) parameters and its integration with preference selection index (PSI) methodology and the Shannon entropy. A case example of the supply chain small and medium enterprise (SME) producing handy crafts has been used in this study.FindingsThe result of the study reveals critical sustainability risk dimensions and their risk elements demanding management attention to support realization to a more sustainable business operation.Research limitations/implicationsThe use of a single case study is often associated as a limitation in the research studies, and this study is based on findings from SMEs in the handy craft sector in a developing country. Nonetheless, future studies may focus on replicating this study using more samples. This preliminary study provides academics and practitioners with an exemplar of supply chain sustainability risk assessment from the SME in a developing country.Practical implicationsThe result of this study is beneficial for practitioners, particularly owner-managers of SMEs who can use this study as guidance on how to identify and select the critical sustainability risks and plan mitigating strategies accordingly.Originality/valueScientific effort on appraising criticality of supply chain sustainability risks considering subjectivity and objectivity of decision-maker simultaneously is missing in earlier studies. To the best of the author’s knowledge, this is the first paper applying the PSI and Shannon entropy method and using it for evaluating the impact of supply chain risk based on five sustainability pillars. The findings and suggestions for future research initiatives will provide new insights for scholars and practitioners in managing SME supply chain sustainability risks.