This section presents and defines all the variables used in this study and which items constitutes a particular latent construct. This study includes the use of both multi-item and single item variables, for the most part measured by a scale ranging from 1 (low) to 7 (high).
All variables are operationalized on a reflective scale. This study includes one dependent variable; supply chain risk management (SCRM), and five independent variables; supplier performance (SUPPER), supply risk perception (SUPRISKPERC), disruptive risk focus (DISRISK), agile supply chain (ASC) and regional production (REGPROD). and Regional
Distribution (REGDIST) and three control variables; firm size (LN_REV2016), regional distribution (REGDIST) and risk identification (SUPRISKID). The variables used in this study are based on previous research literature, as discussed in chapter 3.
5.4.1 The Dependent Variable
Supply Chain Risk Management (SCRM):
This construct consists of six items, concerning to which extent the respondent and their most important supplier collaborate to mitigate supply risk. Because supply risk is the focus of this study, the customer side of SCRM, i.e. downstream supply chain members, are excluded from this construct. The items are measured by a Likert scale ranging from 1 = strongly disagree to 7 = strongly agree. The items are derived from previous research and literature (Manuij and Mentzer 2008); (Miller 1992); (Jüttner 2005); (Zsidisin 2003)
SCRMsup1: Do your firm collaborate with your most important supplier on a regular basis in order to mitigate risk by sharing risk.
SCRMsup2: Do your firm collaborate with your most important supplier on a regular basis in order to mitigate risk by preparing contingency plans.
SCRMsup3: Do your firm collaborate with your most important supplier on a regular basis in order to mitigate risk by improving bottlenecks.
SCRMsup4: Do your firm collaborate with your most important supplier on a regular basis in order to mitigate risk by implementing strategically placed safety stocks.
SCRMsup5: Do your firm collaborate with your most important supplier on a regular basis in order to mitigate risk by postponing commitment of resources until the demand is certain.
SCRMsup6: Do your firm collaborate with your most important supplier on a regular basis in order to mitigate risk by ensuring good information flow.
5.4.2 The Independent Variables
Supplier performance (SUPPER):
This construct consists of five items, concerning the performance of the respondents most important supplier are measured by a Likert scale ranging from 1 = strongly disagree to 7 = strongly agree. (Thun and Hoenig 2011); (Stand 2001).
SUPPER1: We rarely experience any delay on our incoming shipments.
SUPPER3: We rarely experience any quality problems on our incoming shipments.
SUPPER4: We rarely experience any damages on our incoming shipments.
SUPPER5: We rarely experience any deficits in the amount of items ordered and the amount of items delivered on our incoming shipments.
SUPPER6: We rarely experience any picking errors on our incoming shipments.
Supply Risk Perception (SRP):
This construct is the mean product of two variables concerning supply risk (probability and consequence), thus it is the respondents total risk perception associated with the particular risk, following (Norrman and Jansson 2004) definition of measurable risk “Risk = probability x consequence”. The construct consists of four items, as presented below.
SUPRISKPERC1 𝑚𝑒𝑎𝑛(𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝑃1 𝑥 𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝐶1) SUPRISKPERC2 𝑚𝑒𝑎𝑛(𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝑃2 𝑥 𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝐶2) SUPRISKPERC3 𝑚𝑒𝑎𝑛(𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝑃3 𝑥 𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝐶3) SUPRISKPERC4 𝑚𝑒𝑎𝑛(𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝑃4 𝑥 𝑠𝑢𝑝𝑅𝐼𝑆𝐾𝐶4)
Where the respondents have been asked to evaluate the probability of a risk occurring (supRISKP), and the consequences this risk have for the respondent’s firm should it occur (supRISKC) based on the work of (Thun and Hoenig 2011); (Miller 1992); (Zsidisin 2003);
(Chopra and Sodhi 2004).
supRISKP1/C1 Supplier bankruptcy
supRISKP2/C2 Quality issues on components from supplier
supRISKP3/C3 Delays on incoming shipments from supplier supRISKP4/C4 Workforce disputes in supplier’s organization (e.g. strike)
Supply Chain Agility (SCA)
This variable consists of a single item concerning to which extent the respondent’s firm implemented agility in their supply chain. Agility is a strategy, which increases a firm’s
ability to sustain disruptions (Christopher 2000); (Christopher and Towill 2000); (Qrunfleh and Tarafdar 2013); (Lee 2004). The variable was measured on a scale ranging from 1 = small degree to 7 = large degree.
Regional Production (REGPROD)
This variable consists of a single item concerning whether the respondent’s firm utilize several geographically separate production facilities, based on the work of (Chopra and Sodhi 2014). The items data is captured by multiple choice with the options no/yes, i.e. it is a dummy variable, representing whether the respondent implement a centralized or a decentralized approach to production.
Disruptive Risk (DISRISK)
This variable consists of a single item concerning to which extent the respondent’s firm focus on mitigating disruptive risks, based on the work of (Chopra and Sodhi 2014) and (Elahi 2013). The item is measured on a scale ranging from 1 = small degree to 7 = large degree.
5.4.3 Control Variables
There are three control variables included in this study, as described below.
Firm Size (LN_REV2016)
This is an independent variable describing the revenue the respondent’s firm achieved during the fiscal year of 2016. The data is extracted from the database presented in the previous chapter and calculated into a logarithmic function. It serves an indication on the respondent firm’s size, as it is argued that firms with a higher level of revenue implement more risk management (Hoffmann, Schiele and Krabbendam 2013). Furthermore, (Hoffmann, Schiele and Krabbendam 2013) argue that bigger firms build risk management experience faster, because of a higher frequency of operations.
Risk identification (SUPRISKID)
This variable consists of a single item concerning to which extent the respondent’s firm collaborates with its most important supplier to identify upstream risks for the supply chain
(Manuij and Mentzer 2008); (Miller 1992); (Jüttner 2005); (Zsidisin 2003). The item is measured by a scale ranging from 1 = small degree to 7 = large degree.
Regional Distribution (REGDIST)
This variable consists of a single item concerning whether the respondent’s firm utilize several geographically separate distribution centers, based on the work of (Chopra and Sodhi 2014). The items data is captured by multiple choice with the options no/yes, i.e. it is a dummy variable, representing whether the respondent’s frim implement a centralized or a decentralized approach to distribution.
5.5 Chapter Summary
This study uses a structural equation model (SEM) with reflective scales, i.e. the direction of causality is from the construct to the measure. Further, the variables presented in the conceptual model, see figure 4.1, was defined and operationalized according to previous research and literature.