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A Model for Measuring Supplier Risk: Do Operational Capability Indicators Enhance the Prediction Accuracy of Supplier Risk?
Author(s) -
Jung Kooyul,
Lim Youngdeok,
Oh Joongsan
Publication year - 2011
Publication title -
british journal of management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.407
H-Index - 108
eISSN - 1467-8551
pISSN - 1045-3172
DOI - 10.1111/j.1467-8551.2010.00697.x
Subject(s) - purchasing , profit margin , business , risk management , supplier relationship management , supply chain , operational risk , profit (economics) , risk analysis (engineering) , logit , key (lock) , supply chain management , operations management , computer science , econometrics , finance , economics , marketing , microeconomics , computer security
The purpose of this study was to develop a supplier risk assessment model for buyers to estimate supplier risk. It is one of the few empirical studies that considers both operational capability indicators and financial indicators; a standard logit model with five key variables (switching cost, operating profit margin, asset turnover ratio, quality capability and technological capability) was suggested as a practical tool. This model not only enhanced the accuracy of supplier risk assessment, but also served as a core element of a new supply chain management tool, ‘supplier management at risk’. More practically, the model enables purchasing firms to assess supplier risk and take proactive measures against the estimated risk.