Supply risk interrelationships and the derivation of key supply risk indicators

Increasing product and service complexity, outsourcing, and globalization lead to complex and dynamic supply networks. Within supply networks, interrelationships and mutual connections among supply risks often create additional challenges for risk monitoring. During normal operation, risk interrelationships remain largely hidden until the occurrence of a specific risk. Understanding these interrelationships is therefore important to increase the effectiveness of risk monitoring. In this paper, the interrelationships between supply risks are quantified and supply risks are categorized according to their role within the system. We follow a network oriented approach as defined by system theory. Our explorative research utilizes data from expert evaluations in selected case companies and emphasizes that strong interrelationships and mutual connections exist between supply risks. We draw on these findings to establish a small and efficient set of key supply risk indicators, making the results highly relevant for executives seeking to improve risk monitoring. (C) 2014 Elsevier Inc. All rights reserved.