a grounded definition of supply risk

Journal of Purchasing & Supply Management 9 (2003) 217–224

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doi:10.1016/j.pu

A grounded definition of supply risk

George A. Zsidisin*

Department of Marketing and Supply Chain Management, The Eli Broad Graduate School of Management, Michigan State University,

N362 North Business Complex, East Lansing, MI 48824-1122, USA

Received 10 December 2001; received in revised form 11 December 2002; accepted 27 July 2003

Abstract

All purchasing organizations encounter supply risk, whether it is explicitly understood and assessed, or reactively managed. The

purpose of this paper is to provide a grounded definition of supply risk. Case study data from seven purchasing organizations

uncovered various definitions of supply risk. These definitions focus on the sources of supply risk, emanating from individual

supplier factors and market characteristics, and the outcomes of supply risk events, which involve the inability of purchasing firms to

meet customer requirements and threats to customer life and safety. Findings from this research provide practitioners and

academicians a starting point for understanding supply risk and insights as to how supply risk can negatively affect business

operations.

r 2003 Elsevier Ltd. All rights reserved.

Keywords: Supply risk; Grounded theory; Risk; Uncertainty

1. Introduction

Risk and uncertainty have been studied in numerousbusiness settings and have warranted significant inves-tigation in corporate functions, such as managerialdecision making (March and Shapira, 1987; Shapira,1995; Yates and Stone, 1992), strategy (Ruefli et al.,1999; Sitkin and Pablo, 1992; Wiseman and Bromiley,1991), operations (Newman et al., 1993; Pagell andKrause, 1999), accounting (Ashton, 1998; Baucus et al.,1993), finance (Chow and Denning, 1994; Ho and Pike,1992) and distribution (Celly and Frazier, 1996; Lassarand Kerr, 1996). Risk has been defined as ‘‘the extentto which there is uncertainty about whether potentiallysignificant and/or disappointing outcomes of decisionswill be realized’’ (Sitkin and Pablo, 1992, p. 10).Inherent in this definition are the dimensions ofoutcome uncertainty, outcome expectations, and outcome

potential.From transaction cost (Williamson, 1975) and agency

(Eisenhardt, 1989a) theory perspectives, outcome un-

certainty is associated with the variability of outcomes,lack of knowledge about the distribution of potential

7-353-6381x269; fax: +1-517-432-1112.

ess: [email protected] (G.A. Zsidisin).

e front matter r 2003 Elsevier Ltd. All rights reserved.

rsup.2003.07.002

outcomes, and uncontrollability of outcome attainment.According to prospect theory (Kahneman and Tversky,1979), outcome expectations suggest that positive ex-pected returns facilitate different decision framing anddecision-making behavior than negative expected out-comes. The third dimension of risk, outcome potential,argues that individuals often overweight extreme out-comes, even if their likelihood of manifestation isremoved (Kahneman and Tversky, 1979; Sitkin andPablo, 1992).

Risk within a supply management context may beviewed in a similar manner. For example, there can beoutcome uncertainty associated with whether a supplieris able to make product design and specification changesin a timely manner for new products (Bidault et al.,1998). However, there is little understanding of whatrisk means within a supply management context,although a few scholars have begun to address theissue. Harland et al. (2003), in their study of riskassessment and management tools, adopt a definition ofinput risk from Meulbrook (2000). In addition, Zsidisinet al. (1999) provide a preliminary definition of supplyrisk in their exploratory study of supply risk assessmentsand contingency plans. However, a grounded definitionof supply risk has yet to emerge in the purchasing andsupply management literature. Therefore, the purpose of

ARTICLE IN PRESSG.A. Zsidisin / Journal of Purchasing & Supply Management 9 (2003) 217–224218

this paper is to provide the purchasing and supplymanagement field with a definition of supply risk inorder to guide and encourage future research on supplyrisk and its management.

2. Definitions of risk

The concept of risk has been extensively studied invarious business contexts. Three notable studies provid-ing insights to the meaning of risk are provided below.

2.1. Baird and Thomas

Baird and Thomas (1990) have defined risk from eightdifferent perspectives. Their arguments incorporateviews from finance, marketing, management, strategy,and psychology. Table 1 presents the eight riskdefinitions and a brief description of each. The firstthree definitions—variability of returns, variance, andmarket risk—focus on the organization’s financialreturn. The last two definitions of risk as disaster andas accounting risk measures relate to the risk of acompany going bankrupt. These definitions of riskprovide evidence that risk is a multi-dimensionalconstruct and differs according to business function.

2.2. Shapira (1995)

An often-cited definition of risk in the academicliterature is ‘‘the variance of the probability distributionof outcomes’’ (March and Shapira, 1987, p. 1404;Shapira, 1995, p. 43). However, Shapira (1995) foundthat very few managers define risk in those terms.

Table 1

Risk characteristics and definitions

Reference Risk characteristics

Baird and Thomas (1990) Variability of returns

Variance

Market risk

Risk as innovation

Risk as lack of information

Risk as entrepreneurship

Risk as disaster

Accounting risk measures

Shapira (1995) Downside of risk

Magnitude of possible losses

compared to its probabilities

Distinction between risk taking

and gambling

Risk as a multi-faceted construct

Instead, managers identify (1) the downside of risk, (2)its magnitude of possible losses, (3) the act of risk takinginvolving the use of skills, judgment and control, and (4)risk as a concept that cannot be captured with a singlenumber. A list of these four risk aspects and briefdefinitions is also presented in Table 1. These findingsalso suggest that the term ‘‘risk’’ can be perceived indifferent ways, and no single definition of risk may beappropriate in all circumstances.

2.3. Yates and Stone (1992)

Yates and Stone (1992) note that risk entails (1) theelements of loss, (2) the significance of loss, and (3) theuncertainty associated with loss. Within the elements of

loss are three additional factors. First, risk is not limitedto one specific loss that can occur. This is similar to thevariance of outcomes discussed by March and Shapira(1987), with the exception that it focuses only on losses.For example, a fire that destroys a supplier’s plant canaffect production for 1, 2 days, or even months. Theincident can result in various degrees of loss (outcomes)for the supplier as well as the supplier’s customers.Losses are also experienced in reference to an outcome.What is important is not the loss itself, but the actualoutcome in comparison to an expected outcome.Another facet of loss is multiplicity, in which lossescan transcend multiple categories such as financial,performance, and time loss.

The second aspect of risk is the significance of loss. Itis often assumed by researchers and laypersons that themore significant the potential losses in a situation, thegreater the implied risk. For example, there would begreater perceived loss by a purchasing firm if a supplier’s

Definition

Firm performance evaluated in terms of return and growth criteria

Variability of the probability distribution of returns

The use of the capital asset pricing model to measure risk

Risk conditions equated with conditions characterized by newness,

uncertainty, and lack of information

Information scarcity as a key facet of uncertainty in terms of the

existence of important resources and commitment duration

Independence of action in venturing into the unknown

Strategies that could result in corporate disaster, bankruptcy or ruin

Accounting ratios related to risk of ruin, default or bankruptcy

Risk being associated with a negative outcome

At least one possible outcome of an uncertain situation having a bad

outcome

Risk taking is associated with using skills, judgment, and control,

while gambling is not

Risk cannot be captured with a single number, since multiple facets

such as financial, technical, marketing, production and other risk

aspects exist

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Table 2

Supply risk definitions and characteristics

Reference Risk characteristics Definition

Harland et al. (2001) Supply risk Adversely affects inward flow of any type of resource to enable operations to take

place; also termed ‘input risk’

Zsidisin et al. (1999) Supply risk The transpiration of significant and/or disappointing failures with inbound goods

and service

Mitchell (1995) Buyer demographics The effects of factors such as age, professional organization membership, education,

and job experience on risk perceptions

Job function Risk perceptions differ according to the job and position of the buyer

Decision-making unit The greater the risk involved, the greater the propensity to group, buy and share the

risk involved

Buyer’s personality Intrinsic motivational factors exist, such as the need for certainty, self-confidence,

and the need to achieve, which affect individual risk perceptions

Buy-type Perceived risk differs if it is considered a new buy, modified rebuy, or straight rebuy

Product characteristics Technical complexity and value of the item are positively correlated with the degree

of perceived risk

Degree of customer/supplier

interaction

The extent of communication or state of the relationship between a buyer and

supplier influences the degree of perceived risk

Characteristics of customer/

supplier markets

The propensity to innovate, stability of the market structure, and growth rate affects

risk perceptions

Company size The occurrence of performance risk is much higher among buyers in small

companies because of the firm’s limited ability to tolerate financially unfavorable

decision consequences

Organizational performance Risk taking is affected by the relationship between the company’s current position

and some critical reference points

Country Country of origin of the buyer affects an individual’s risk preference

G.A. Zsidisin / Journal of Purchasing & Supply Management 9 (2003) 217–224 219

failure results in the chance of losing $10,000 ofcustomer business as compared with the chance a recallwill occur that would result in a loss of millions ofdollars in revenue.

The third risk element is uncertainty, where uncer-tainty is associated with the degree of confidence adecision maker can develop probability and outcomeassessments of decisions (Mitchell, 1995; Luce andRaiffa, 1957; Chiles and McMackin, 1996). Additionalfacets of uncertainty involve a lack of understanding bydecision maker about the loss categories that exist, andwhich losses can occur.

3. Prior definitions of supply risk

There are few definitions for risk within the context ofsupply. Kraljic (1983) discusses risk in terms of supplymarket complexity. Kraljic’s perspective of risk incor-porates supply scarcity, the pace of technology and/ormaterials substitution, entry barriers, logistics cost orcomplexity, and monopoly or oligopoly conditions.Other definitions of supply risk that do exist haveemerged from research studies focusing on supply riskassessments and management. Harland et al. (2003)define supply risk as one of 11 risk types. They adoptMeulbrook’s (2000) definition of supply risk as ‘‘ad-versely affects inward flow of any type of resource to

enable operations to take place; also termed as ‘inputrisk’.’’ (p. 308). In addition, Zsidisin, Panelli, and Uptondefine supply risk as ‘‘the transpiration of significantand/or disappointing failures with inbound goods andservice’’ (p. 187). This definition focuses on outcomesand was proposed in an exploratory study of supply riskassessments and contingency plans. Mitchell (1995) hasinvestigated risk within organizational buying behavior.His literature search uncovered numerous factors thatpotentially affect managerial risk perceptions of pur-chasing professionals. A summary of prior definitionsof supply risk and supply risk factors can be found inTable 2.

The remainder of this paper will discuss the researchmethod implemented for creating a grounded definitionof supply risk. Next, the research findings, whichdescribe supply risk by its sources and outcomes, arepresented. Industry characteristics and differences arethen presented to illustrate how they affect organiza-tions’ definitions of supply risk. Managerial implicationsand conclusions are provided at the end of the paper.

4. Research method

The research process consisted of conducting casestudies with purchasing organizations involved in supplyrisk management. The case studies were used to build a


theory of supply risk using a grounded theory approach(Eisenhardt, 1989b; Glaser and Strauss, 1967; Wacker,1998), where ‘‘the researcher begins with an area of studyand allows the theory to emerge from the data’’ (Straussand Corbin, 1998, p. 12). Case study participants werepre-screened through initial telephone, in-person, ore-mail interviews. Organizations with established supplyrisk assessment or risk management processes weresolicited for further study, even if no formal definitionof supply risk existed at their firms. The case studies wereconducted until the researcher reached a point ofinformation saturation, where many of the concepts ofsupply risk discussed by the case study participantsbecame repetitious (Strauss and Corbin, 1998).

A case study research protocol was created prior todata collection and refined after the pilot case study. Allof the case studies were conducted at the companies’locations. In the few circumstances where in-personinterviews were not possible with certain individuals,telephone interviews were conducted following theguidelines proposed by Walton (1997).

The case study organizations consisted of a conve-nience sample of electronics and aerospace firms. Fivemanufacturers in the electronics industry were selecteddue to rapid technological development cycles anddynamic customer demand changes (Fine, 1998). Toobtain insights as to whether supply risk and supply riskmanagement differ between industries, two firms in theaerospace industry were also selected. Informationgathering techniques such as obtaining historical dataand documentation, and conducting anywhere from threeto six structured interviews with various professionalpurchasing personnel and other key informants fromeach firm, were implemented during the case studies.

Since one of the goals of the research was toinvestigate how purchasing organizations define risk,the purchasing function was the unit of analysis.Purchasing professionals were asked how their organi-zations define supply risk. If a formal organizationaldefinition of supply risk did not exist, the researcherasked how that individual defined supply risk from apurchasing organization perspective.

Data generated in the case studies was subject to openand axial coding analysis, as per the guidelines set byMiles and Huberman (1984), Strauss and Corbin (1998),and Yin (1994). Open coding breaks down case study datain order to analyze, conceptualize, and develop categoriesfor the data. Axial coding is a technique that makesconnections among categories, groups issues during first-level coding, and summarizes the issues into themes.

5. Research findings

The research findings indicate that there are a varietyof ways to define supply risk. Two of the organizations,

Cell and Semi1, have formal organizational definitionsof supply risk. The five other organizations did not haveformal definitions of supply risk disseminated through-out their firms. However, each of the case studyparticipants had an explicit understanding of whatsupply risk means within their position and organiza-tion. These definitions of supply risk were discussed interms of sources and outcomes, as discussed below.

5.1. Organizational definitions of supply risk

Cell defines supply risk as ‘‘the danger that events ordecisions will obstruct the company’s achievement of itsobjectives.’’ The events and decisions include potentialdirect losses as well as opportunity costs. This definitionof risk is disseminated and understood throughout theorganization. The purchasing and supply managementfunction at Cell has adopted this definition of risk in itssupply strategy to support overall corporate goals anddirection.

In contrast, Semi1 defines supply risk as ‘‘anythingthat impedes the introduction of a new product, or anyevent that could disrupt production.’’ This definition ofsupply risk focuses on the introduction of new products.By the time a product is considered mature, Semi1believes that most supply risk characteristics havealready been identified.

5.2. Classification of supply risk

The majority of firms in this study do not currentlyhave formal definitions for supply risk. However, eachof the respondents from those firms had strongconceptions of what supply risk means to theirorganizations. Case study participants provided defini-tions of supply risk by its sources and outcomes. Thesources of supply risk were described in terms ofindividual supplier failures and supplier market char-acteristics. Respondents conceptualized the outcomes ofsupply risk by the inability to meet customer require-ments and threats to customer life and safety. Table 3provides an overview of the classifications and relatedfactors that the case study participants used to definesupply risk.

5.2.1. Sources of supply risk

According to the case studies, the sources of supplyrisk tend to arise from individual supplier failures andfrom market factors. The individual supplier failuresthat define the scope of supply risk were the inability tohandle demand fluctuations, quality problems at sup-plier plants, and the inability to stay in pace withtechnological changes. In addition, supply risk wasunderstood in terms of supplier market characteristics.Market characteristics include sole sources (such as

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Table 3

Classification of supply risk definitions

Aero1 Comp1 Comp2 Cell Aero2 Semi1 Semi2

Sources

Individual supplier failures X X X X X X

New product development problems X X

Delivery failures X

Relationship issues X

Supplier obligations to other customers X

Quality problems X X

Price/cost increases X X X

Inability to meet quantity demand X X

Technologically behind X

Discontinuity of supply X

Market characteristics X X X X

Sole source/limited qualified sources X X

Market shortages X X

Commodity price increases X X

Geographic concentration of suppliers X X

Supplier patents X

Outcomes

Inability to meet customer requirements X X X X X X X

Unable to meet customer specifications X X

Subcontractor failures X

Impedes new product introductions X X

Missed shipments X X

Negative effect on profit targets X X X X X

Loss of customer business X

Failure to meet customer demand X

Threats to customer life and safety X X

Product liability and integrity X X

Quality failures result in loss of life X X


suppliers having a patent) and market capacity con-straints.

5.2.1.1. Individual supplier failures. Five of the sevenfirms noted individual supplier factors within theirdefinitions of supply risk. For example, a respondentfrom Aero1 stated ‘‘Supply risk is when there aresuppliers that their failure would affect the ability forour firm to make financial goals at the end of the year.’’This definition of supply risk specifies supplier failuresas a cause of supply risk. However, the definition doesnot provide any detail about what constitutes failure.

Two additional definitions of supply risk providemore details regarding individual supplier failures. Arespondent from Comp1 believed, ‘‘Supply risk is theinability to develop products on time and deliver thoseproducts into manufacturing.’’ In addition, one Comp2participant stated, ‘‘Supply risk is the uncertaintyassociated with supplier activities, obligations, and ingeneral, supplier relationships. Supply risk boils downto the three components of price (best deal), quantity,and demand.’’ These definitions of supply risk indicate

that supply risk originates from individual supplierfailures, and these failures consist of issues such asquality, delivery, relationships, and price.

5.2.1.2. Market characteristics. Several supply risk de-finitions focused on factors originating from marketcharacteristics instead of individual supplier failures.For example, a respondent from Aero2 was concernedwith availability. This respondent noted, ‘‘Supply risk ishaving a single or sole source supplier, without having aproven or established second sourcey[which] occurswhen there are patents on [the] supplier end without abackup.’’

There were two recent incidents related to marketcharacteristics that affected the perceptions of manycase study respondents. The first one involved thetantalum capacitor shortage that occurred in 2000.Several of the case study respondents noted that part ofthe shortage was due to the rapid growth of the cellularphone industry. Although most of the firms expectedgreater demand for those capacitors, none of themanticipated the extent that the cellular phone growth


would have on their firm’s ability to acquire piece partssuch as tantalum capacitors. This incident was discussedby many case study respondents in their perceptions ofwhat supply risk means to their organizations.

A second incident that several of the case studyrespondents described in their definitions of supply riskwas the September 1999 earthquake in Taiwan. Thisevent had significant repercussions for many firms,especially in preparation for forecasted sales of theholidays. The earthquake disaster had detrimentaleffects on many suppliers, which had subsequent rippleeffects throughout many supply chains.

5.2.2. Outcomes of supply risk

Supply risk was also defined in terms of negativeoutcomes, specifically the inability to meet customerrequirements or threats to customer life and safety. Allthe firms understood supply risk in terms of meetingcustomer requirements, which can result in the loss ofcustomer business and detrimentally affect revenues andprofits. Threats to customer life and safety, on the otherhand, arise from issues with product integrity, dur-ability, and reliability. If a product has a failure in thefield, such as a part on an aircraft, the ramification ofthat failure can lead to consumer injury or even death.

5.2.2.1. Inability to meet customer requirements. All ofthe organizations stated that supply risk results in theinability of the purchasing firm to meet their customers’requirements. For example, one respondent from Aero1stated, ‘‘Supply risk is the failure to provide a seamlessflow of product to the customer that meets or exceedsspecification.’’ Another example of supply risk resultingin the inability to meet customer requirements wasprovided by a participant in Comp2, who stated,‘‘Supply risk affects getting product out to market(i.e. built by subcontractors). It is an event that disruptsthe delivery of products to the customer, or impedesthe production of new items to customers.’’

Since these firms perceive the effects of supply riskfrom a supply chain perspective, the organizations aredefining supply risk in reference to meeting customerdemand. Specifically, the case study firms not onlylooked at supply risk from the link between their firmand supplier organizations, but also its effect on theirinternal operations, on customer firms, and eventuallyon the final consumer. To emphasize this point, onerespondent from Comp1 stated, ‘‘Supply risk is thepotential for a supply constraint on a subassembly orcomponent that affects the shipment of product.’’ Inaddition, an Aero2 case study respondent viewed supplyrisk as ‘‘ynot being able to satisfy customer demand. Itaffects the longevity of our firm and jobs.’’ Thesedefinitions of supply risk focus on the ability to meetcustomer demand, and, eventually its impact on theentire supply chain.

5.2.2.2. Threats to customer life and safety. Two of theorganizations also stated the effect of supply risk interms of customer life and safety. Both of these firms aresuppliers in the aerospace industry, where the ramifica-tions of quality and reliability problems can havedevastating effects on consumers. For example, a casestudy participant from Aero2 understood supply riskto ‘‘consist of product liability and integrity where theparts must meet requirements.’’

The final product manufactured by aerospace com-panies can have a direct impact on customer safety ifa failure occurs. Failure of the products manufacturedby electronics firms normally does not have life or deathramifications for their customers. As noted by onerespondent from Aero2, ‘‘There are no service stationsat 33,000 ft.’’

6. Proposed definition of supply risk

The findings from this research provide evidence that,similar to prior definitions of risk, purchasing organiza-tions perceive supply risk as a multi-dimensionalconstruct (Hallikas et al., 2002; Shapira, 1995; Yatesand Stone, 1992). The scope of supply risk was definedin terms of sources, either from individual supplierfailures or market factors, and outcomes, which includethe inability to meet customer requirements and threatsto customer life and safety. Therefore, a new definitionof supply risk is proposed below:

Supply risk is defined as the probability of an incidentassociated with inbound supply from individualsupplier failures or the supply market occurring, inwhich its outcomes result in the inability of thepurchasing firm to meet customer demand or causethreats to customer life and safety.

Supply risk is a multi-faceted concept, since its scopeincludes risk sources and outcomes. In addition, thescope for understanding supply risk differs according toindustry. As the research indicated, aerospace firms aremore likely to understand supply risk in terms of threatsto customer life and safety. The finding that supply riskis a multi-faceted concept that differs according toindustry is similar to prior studies investigating riskdefinitions (Pablo, 1999).

7. Managerial implications

Understanding and managing risk is an importantissue of business and has been extensively studied inmany business disciplines. Even though there is a richstream of literature investigating risk, there has beenlittle research applied to the risk that exists withinbound supply. In order to start closing the research

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Map supply network

Identify risk and its current location

Assess Risk

Manage Risk

Form collaborative supply network risk strategy

Implement supply network

risk strategy

Fig. 1. Supply network risk tool (Harland et al., 2003).


gap in supply risk management, this research, throughthe use of case studies, investigated how organizationsdefine supply risk.

The definitions of supply risk provided by case studyparticipants show that supply risk is a multi-dimensionalconstruct. The most widely held definition of supply riskfocuses on understanding how risk affects a purchasingfirm’s ability to meet its customers’ requirements.However, the meaning of supply risk can differaccording to factors such as industry, source, andoutcome. This contributes to theory by providingresearchers with an empirically based definition forsupply risk and presenting insights into how thosedefinitions may change according to industry context.

In addition, having an empirically grounded defini-tion of supply risk provides greater detail for under-standing an overall supply network risk tool proposedby Harland et al. (2003). The tool, which can be foundin Fig. 1, begins with mapping the supply network, theninvolves identifying risk and its current location,assessing that risk, managing the risk, forming acollaborative supply network risk strategy, and, finally,implementing a supply network risk strategy. One keyelement missing within this tool is how organizationsdefine supply risk. Although Harland et al. (2003)provide an initial definition of supply risk, thatdefinition had not been empirically validated and wasonly one type of risk identified. This research provides agrounded definition of supply risk, which can helppurchasing organizations understand the sources andoutcomes of supply risk for their firms.

The sources and outcomes of supply risk discoveredin this research are not mutually exclusive. In fact,several of the risk characteristics may have a compound-ing effect. For example, the source of risk from theSeptember 1999 earthquake in Taiwan was that manysuppliers of passive components were located within thesame geographical location. From a supply sideperspective of several of the firms in this study, thisevent manifested in market shortages for these compo-nents as well as significant commodity price increases. Inaddition, the outcomes of this event resulted in the lossof customer business, the failure to meet customerdemand, and negative effects on profit targets. Themanagerial implications of this finding parallels theresearch of Hallikas et al. (2002), who discovered‘‘vicious circles’’ of supply network risk due to factorssuch as pricing, forecasting, delivery performance, andfinancial implications. Therefore, it is imperative forsupply management professionals to understand boththe sources as well as outcomes that incorporate supplyrisk because the effects of detrimental supply events canhave ramifications throughout a firm’s supply chains ornetworks. The insights for understanding what supplyrisk means provides a starting point for managing thatrisk.

In defining supply risk, most of the researchparticipants went beyond viewing risk inherent in dyadicinterorganizational relationships with suppliers. Thiswas reflected in the findings that supply managementprofessionals understand the effects of risk on meetingtheir customer requirements. In addition, several exam-ples of supply risk provided by the research participantsinvolved supply failures from second and third tiersuppliers, such as the negative ramifications of theTaiwan earthquake in 1999 and tantalum capacitorshortage of 2000. This view of supply risk becomes acornerstone for understanding supply chain or supply

network risk, which would involve defining and studyingrisk at numerous inter- and intra-organizational levels.Future research would be necessary for providingacademicians and practitioners alike insight for defining,and eventually assessing and managing, supply chain orsupply network risk. These studies can investigate risk inadditional industry areas as well, such as automotive,telecommunication, and pharmaceutical firms, to deter-mine if additional nuances for defining supply andsupply chain risk exist.

8. Conclusion

Risk exists in virtually all firms, and has beenextensively studied in various business contexts. How-ever, a gap exists in studying risk within purchasing andsupply management. This study has investigated,through the use of case study data, how risk is definedwithin a supply management context. Supply risk wasperceived by purchasing organizations to incorporate itssources and outcomes. In addition, industry differenceswere found in the case study data, where suppliers in theaerospace industry focus on the threats to customer lifeand safety. From the case study data, an empiricallygrounded definition of supply risk was provided.


Theoretical and managerial implications were alsodiscussed. By establishing a grounded definition ofsupply risk, purchasing professionals have a startingpoint for creating strategies, which include assessing andmanaging supply risk, to better meet customer firm andconsumer requirements.

Acknowledgements

The author wishes to acknowledge the Institute forSupply Management for the doctoral grant that helpedfund the study described in this article, and ProfessorLisa M. Ellram for her contributions to this research.

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