Assessment of supply chain risk: scale development and  validation

AbstractPurpose – The purpose of this paper is to providea reliable and accurate instrumentto assess the supply chain risk of similar comparable industries. This enables the firms which fall in this categoryof industry to identifyand incorporate suitablerisk sources under various risk constructs. This paper alsoprovides a frameworkto the top management to prioritize the various risk constructs.Design/methodology/approach – A  systematic  approach  is  used  to  develop and  validate  an instrument  forassessing  overall risk  of supply  chain.This  includes specifying the domainand dimensionality of a construct,generation of initial pool of items, refinement of the initial items by the expertgroup, assessment of content validity, evaluation of reliability and construct validityof the scale items. Also a higher order measurement model of structural  equation modeling is used to prioritize the various risk constructs.Findings – The processyielded a robust instrument  to assess overall risk of the supply chain. Through  empirical verification, this instrument is shownto exhibit high levels of reliability and validity. The framework for prioritization of risk constructs revealed the importance of various supply chain risk constructs.Practical implications – The frameworkis intended to be usefulin practice for assessment of overall risk  of heavy engineering industries  supply  chain. The  procedure will be extended for development of risk assessment instrument for other industries which shares a common risk profile.Prioritization of variousrisk constructs with respect to the overallrisk enables the top management to focus their attentionto plan and manage the supply chain risks based on their relative importance.Originality/value – This  paper fulfils an identified need for the development of an empirically validated instrument  by identifying the significant supply chain risk sources undermajor supply chain risk constructs for assessing the supply chain risk of industries which are similarin their risk profiles. Also provides a higher order model to identify the most influential risk constructs.Keywords Supply chain, Risk constructs, Risk sources, Risk assessment, Instrument validity, Risk prioritization, Risk management, Supply chain managementPaper type Research paper