Decision Analysis Techniques in Supply Risk Assessment

Supply risk assessment has become a priority on the agenda of supply chain managers and purchasing departments. Multifarious unforeseen supply chain vulnerabilities and disruptions that have affected organizations in the last decade have caused losses of hundreds of millions of dollars in industries ranging from pharmaceuticals and consumer goods to electronics and automotive. At the heart of all these issues, there is a common challenge, namely the lack of robust processes to manage supply chain risk as the world becomes more interconnected and complex. Effective tools that companies can use to model and manage supply chain risk exist, but are still limited. Borrowing risk assessment models from large companies without adapting to the specific context of the firm may be dangerous because the realities in which companies operate are different. Also, the business environment changes at a very fast rate, thus constantly posing new challenges in managing supply chains. Although there is not a one-fit-all solution to risk assessment, the objective of this chapter is to provide an overview of the main risk assessment tools, as well as their characterization in order to support decision-makers to better manage supply chain risk during the strategic sourcing process.