Service Supply Chain Risk Management


Author

Jyri Vilko
School of Business, Lappeenranta University of Technology P.O. Box 20, FI-53851, Lappeenranta, Finland

Paavo Ritala
School of Business, Lappeenranta University of Technology P.O. Box 20, FI-53851, Lappeenranta, Finland


Content

Services are increasing in importance in international business and understanding the characteristics of services in the supply chain context can provide crucial information for enabling efficient and effective implementation of risk management. Service literature has in general suggested that the distinctive nature of services—in contrast to products—can be connected to the so-called IHIP attributes (intangibility, heterogeneity, inseparability of production and consumption, and perishability). In this study, we utilize these attributes in the task of identifying the distinctive features and dynamics of service supply chains in a risk management context. The study provides an important, yet sparsely addressed, viewpoint of the supply chain risk management literature by illustrating the special characteristics of services in this context. We develop a conceptual framework and a set of propositions to highlight our arguments. The findings of the study suggest that service supply chain risk management requires special attention in terms of the IHIP attributes, which include issues the traditional supply chain risk management tools can easily miss. The presented viewpoint is a novel one and provides a new perspective to supply chain risk management theory by linking the service theories to supply chain risk management.

Keywords: services, supply chain, risk management, IHIP attributes, nature

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Despite the extensive attention received by traditional manufacturing supply chains, service supply chains remain less explored (e.g., Sampson & Spring, 2012; Niranjan & Weaver, 2011; Sengupta et al., 2006). Lately, some scholars have become aware of the situation and have called for more contributions in this area (e.g., Ellram et al., 2004; Demirkan & Cheng, 2008). The importance of services has increased during the last few decades, and the transfer from production-based to service-dominant value creation has emphasized the role of services in the global economy. For example, Spohrer (2010) estimates that the value produced by services will increase to close to 90% of the total value production in the U.S. by 2050. Considering that the figures were 84% in 2001 and less than 40% in 1950, this illustrates the growing importance of services to international trade. An understanding of how vulnerable the long and complex international service supply chains can be suggests the importance of proper risk management.

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In their study, de Waart and Kemper (2004) highlight the lack of understanding about service supply chains as one of the key issues to master to be able to successfully manage service supply chains. To this end, understanding the core processes‘ effects on the overall service supply chain performance is essential (de Waart & Kemper, 2004). Indeed, without understanding the processes, it is practically impossible to understand the risks involved. However, most of the studies focus on the service-oriented manufacturing supply chain, where the nature of services is typically not fully taken into account. Thus, in order to better distinguish the key features regarding the sources and nature of risks in service supply chains we will develop a framework combining the specific features of service production and supply chain risk management (Table 2). To this end, we utilize the discussion in the earlier section about the IHIP attributes of services.

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Services are becoming an increasing proportion of supply chain operations. The aim of service supply chain risk management is to holistically mitigate the risks to the supply chain. Although it has been acknowledged that the traditional supply chain management literature has not been able to answer the challenges regarding service supply chain management, the current literature still lacks clear definitions of the special attributes that distinguish service supply chains from traditional manufacturing supply chains. In fact, there is very little research focused explicitly on this area, as the literature has mainly discussed supply chain risk management from the product- or provider-oriented perspective (e.g., de Waart & Kemper, 2004; Ellram, 2007; Arlbjørn et al., 2011). Thus, the aim of this paper was to instigate a conceptual discussion for the development of service supply chain risk management. We argue that as services are different from products, the approach to risk management should differ as well.

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About Author

Jyri Vilko (D.Sc. Econ. & Bus. Adm., M.Sc., Tech.) is a Post-Doctoral Researcher in the School of Business at Lappeenranta University of Technology, Finland. His recent research interests are in the areas of supply chain risk management, inter-firm relations, service supply chains and value creation. He has published on these topics in high-quality academic journals such as International Journal of Production Economics, International Journal of Logistics Management and International Journal of Shipping and Transport Logistics. He has also been involved in business practice with regard to these topics through his research, and in speaker and advisory roles. Currently, his research is focused on studying determinants of value vulnerability in service networks.

Paavo Ritala, D.Sc. (Econ. & Bus. Adm.) is a Professor of strategy and innovation at the School of Business at Lappeenranta University of Technology (LUT). His research interests are in the areas of sustainable value creation, innovation, inter-organizational networks, coopetition, and business models. He has published over 100 research papers on these topics, including top-tier academic journals such as Journal of Product Innovation Management, Industrial Marketing Management, British Journal of Management & Technovation. He is also involved in business practice with regard to these topics through company-funded research projects, executive and professional education programs, and in speaker and advisory roles.