Re-Thinking Supplier Risk Management With Case Studies and Agent-Based Simulation

This mixed method research uses a series of case studies and an agent based simulation to investigate how firms doand shouldacquire information to manage risks inherent in supplier processes. Managing this risk born from supplier non-compliance is important because it can not only threaten a firms reputation and bottom line, but it can also affect various stakeholders. Current literature on supplier risk management recommends that firms acquire comprehensive information on potential triggers of supplier non-compliance to mitigate this risk in an effective manner. Nevertheless, the literature fails to acknowledge that firms often choose not to obtain such information. In fact, the results from multiple case studies indicate that firms seek to acquire comprehensive information on potential triggers of supplier non-compliance only when they do not see other alternatives to address the risks of supplier non-compliance. The sampled firms reduce their need for comprehensive information on supplier processes because of close relational ties with suppliers or the presence of powerful external stakeholders, such as regulatory agencies, monitoring supplier processes. The agent-based simulation then reveals conditions under which firms should rely on the relational ties and powerful stakeholders to reduce the supplier risks they face.