A RISK ANALYSIS MODEL FOR TRANSPORTATION PARTNERING IN SUPPLY CHAIN MANAGEMENT

A RISK ANALYSIS MODEL FOR TRANSPORTATION PARTNERING IN SUPPLY CHAIN MANAGEMENT

Partnering is becoming a common practice in supply chain management (SCM). However, there has been very little systematic and in-depth examination of the nature, efficacy and feasibility of a partnering approach. Considering that risk is the core issue in partnering, this paper aims to establish a theoretical risk analysis model for transportation partnering where partnership types, partnering risk factors, and risk consequences are pertinently justified and quantitatively structured. Meanwhile, the express delivery (ED) service initiated by a hypothetical railway system is applied as a case study for demonstration purposes. Transportation partnership types are classified into three categories, termed as Types I, II and III, depending on the resources spent. Partnering risk is defined as the expected consequences, which is measured as the product of the probability and the consequences of a successful (or failed) partnering. The successful partnering is justified to be dependent on the core risk factor of commitment that are associated with four sub risk factors of interdependence, shared values, communications, and opportunistic behavior. The consequences of partnering involve revenues, relation costs and termination costs generated from partnering activity. Partnering risk models are designated to be stochastic processes and measured through simulations using the computer software of @RISK. The results in this case study demonstrate rational risk scenario analysis upon partnership type selection, based on the calculated partnering risks.