Assessing the Efficiency of Risk Mitigation Strategies in Supply Chains

TLDR

Supply‑chain risk mitigation is essential, yet its effectiveness depends on internal and external contexts, and no comprehensive assessment of strategy efficiencies exists. The study aims to evaluate and propose efficient risk‑mitigation strategies to help managers select appropriate approaches for specific decision‑making environments. The authors use an empirically grounded simulation combined with data‑envelopment analysis and nonparametric statistics to evaluate and rank mitigation strategies across risk categories and supply‑chain configurations. The analysis shows that flexibility‑based strategies outperform redundancy‑based ones, offering actionable insights for managers across diverse contexts.

Abstract

Mitigating supply chain risk is a critical component of a company's overall risk management strategy. Drawing upon C ontingency T heory, we posit that the appropriateness and effectiveness of risk mitigation strategies are contingent on the internal and external environments and that there is no one‐size‐fits‐all strategy. While literature on risk management has proposed a variety of tools and techniques for effectively evaluating and managing supply chain risks, comprehensive assessment of the efficiencies of alternative risk mitigation strategies has not been addressed in the literature. Such an assessment will help managers select the appropriate mitigation strategy for a given decision‐making environment. To this end, this study is first of its kind in evaluating and proposing efficient supply chain risk mitigation strategies in the presence of a variety of risk categories, risk sources, and supply chain configurations. We combine an empirically grounded simulation methodology with data envelopment analysis and nonparametric statistical methods to analyze and rank alternative mitigation strategies. We find that the more efficient strategies focus on flexibility rather than on redundancy for supply chain failures. Our research presents several interesting and useful managerial insights for deciding what strategies are most capable of mitigating risks in a variety of contexts.