Valuing and Risk Analysis for Supply Chain Management: A Fusion Approach

Valuing And Risk Analysis For Supply Chain Management—A Fusion Approach: Valuing And Risk Analysis For Scm

Each corporate that is embedded into its supply chain network is susceptible to disruption risks (Knemeyer et al., 2009), and its troubles/failures could propagate to other firms, collapsing the whole supply chain. Such disruption not only could destroy the basic function of commodity markets and paralyze several industries but could also negatively impact an entire society and affect economic growth at domestic and global levels (Ivanov, 2020; Garcia et al., 2023). Realizing how firms can smoothly deal with disruptions is an essential and urgent topic for both academia and practitioners (Blackhurst et al., 2011; Yang et al., 2023). El Baz and Ruel (2021) indicated that a corporate with a solid risk management system can eliminate losses caused by disruptions. Rinaldi et al. (2022) stated that good risk management allows a firm to handle a substantial degree of inherent uncertainty and fluctuations. Ivanov and Dolgui (2020) also called for more empirical studies on supply chain risk management to elucidate how firms confront unseen risks.

Supply chain risk management is the ability to maintain planned schedules and recover profitability after having encountered severe disturbances (Hosseini et al., 2019). Resource-based view (RBV) is a theoretical method that responds to disturbances in the business environment caused by globalization, technological advancements, and economic crises (Wernerfelt, 1984; Barney, 1991). Grounded on RBV, a firm has a competitive edge mostly due to having inimitable, value-generating, and non-replaceable resources (Barney, 1991) that are categorized into physical capital, human capital, and organizational capital. These resources are like success triggers for strengthening a firm’s performance and competitiveness (Hart & Dowell, 2011; Kauppi & Hannibal, 2017). If firms can deploy and restructure their resources to suitable places and quickly react to fulfill customers’ needs, then they are capable of developing capabilities that eliminate the impact of disturbances and reach the goal of sustainable development.

Supply chain management (SCM) performance and its link to corporate financial performance are emerging issues in the SCM domain (Gelsomino et al., 2016; Hahn et al., 2021). Balanced scorecard (BSC), introduced by Kaplan and Norton (1992), is one of the most comprehensive and overarching performance measurements that emphasizes both financial and non-financial, long-term, and short-term strategies, as well as internal and external businesses. Although BSC suggests embracing multi-dimensional natures of performance measurement, the financial perspective still dominates the other three (i.e., customer, internal business process, and learning and growth perspectives) (Banker et al., 2004). Economic value-added (EVA) and return on capital employed (ROCE), which emphasize profitability and asset utilization, are widely adopted to determine corporate financial performance within SCM (Christopher & Ryals, 1999; Akyuz & Erkan, 2010). The value-driver tree of Lambert and Pohlen (2001) follows a similar structure to determine corporate financial performance via accounting information. For shareholder value creation, its appraisal needs to consider a more complex interplay of financial messages.