Modeling Risk Emergence and Propagation in Buyer-Supplier-Customer Relationships

Abstract

The present study aims to identify and formalize the structural and relational patterns, which account for risk emergence and propagation in buyer-supplier-customer service triads. Following the guidelines of the design science research approach and based on the existing literature, buyer-supplier-customer service triads are categorized into a coherent typology according to the role that each supply chain dyad plays in the emergence and propagation of risk within the triad it forms. In the context of this study, such triads are referred to as Risk-aware Service Triads (RaSTs). To explore all the feasible forms of RaSTs, including the ones that have not yet been addressed in the literature, this study adopts the formalism of weighted directed graphs. As a result, a typology based on thirty different types of RaSTs is suggested. This typology allows: (i) to systematize and formally represent a variety of hypothetical scenarios when each of the dyadic structures within buyer-supplier-customer service triads acts as risk trigger, risk taker or risk neutral component of the respective RaST; and (ii) to calculate the maximal and minimal risk index specific to each of the identified type of RaST, thereby facilitating the identification and assessment of risk exposures associated with buyer-supplier-customer service triads. An illustrative example of how the methodological approach underlying the suggested RaST typology facilitates risk assessment in service triads and service networks is presented.

Appendix A

Permanent Calculation Formula of the RaST Adjacency Matrix

$$ A = \left[ {\begin{array}{*{20}l} {r_{11} } \hfill & {r_{12} } \hfill & {r_{13} } \hfill \\ {r_{21} } \hfill & {r_{22} } \hfill & {r_{23} } \hfill \\ {r_{31} } \hfill & {r_{32} } \hfill & {r_{33} } \hfill \\ \end{array} } \right] $$

$$ \varvec{Per}\left( \varvec{A} \right) = r_{11} r_{22} r_{33} + r_{11} r_{23} r_{32} + r_{22} r_{13} r_{31} + r_{33} r_{12} r_{21} + r_{12} r_{23} r_{31} + r_{13} r_{21} r_{32} $$