Journal of Cleaner Production: Aineth Torres-Ruiz, A. Ravi Ravindran

Journal of Cleaner Production 172 (2018) 4478e4493
Contents lists available at ScienceDirect
Journal of Cleaner Production

journal homepage: www.elsevier.com/locate/jclepro
Multiple criteria framework for the sustainability risk assessment of a

supplier portfolio
Aineth Torres-Ruiz a, *, A. Ravi Ravindran b
a gico de Monterrey, Av. General Ramo
Tecnolo n Corona 2514, Col. Nuevo M n, Jalisco, Mexico
exico, 45201, Zapopa
b
The Pennsylvania State University, 352 Leonhard Bldg., University Park, PA, USA
a r t i c l e i n f o a b s t r a c t
Article history: In this study, we developed a decision making model that aligns sustainability goals with the corporate
Received 19 October 2016 goals from the perspective of the purchasing function. Our Supply Sustainability Risk Assessment
Received in revised form Framework (SSRAF) quantifies the potential risks to the sustainability of the supply chain for different
28 September 2017
supplier segments. The supplier segments are represented through a 2 4 matrix (8 quadrants) with the
Accepted 28 October 2017
Available online 4 November 2017
cost of products on the x-axis (Low/High), supply risk on the y-axis (Low/High) and sustainability impact
on the z-axis (Low/High). We assess sustainability risk for four supplier segments representing a High
impact on sustainability and allow the evaluation of economic, environmental and social risks internal
Keywords:
Supplier selection
and external to the supplier permitting the integration of multiple stakeholders. The framework sim-
Supplier development plifies the cognitive effort of decision makers when selecting a portfolio of suppliers. It provides an
Risk assessment assessment of the level of hazardousness, vulnerability and implementation of risk management prac-
Sustainability tices relevant to each supplier segment and enables long-term partnerships by the consideration of risk
Multi-criteria decision making monitoring and mitigation when necessary. The SSRAF was applied to real data collected from a global
Purchasing manufacturer of consumer products with operations in Mexico.
© 2017 Elsevier Ltd. All rights reserved.
1. Introduction terms is a key driver necessary to instill sustainability into pro-

curement business models. For this, the procurement function
Sustainable procurement means “making sure that the products needs to consider the different dimensions of sustainability and
and services an organization buys achieve value for money and integrate stakeholder opinion in order to achieve the alignment
generate benefits not only for the organization, but also for the planet” with sustainable competitive priorities. Although the integration of
(ICLEI-Europe, 2015). Companies excelling at sustainable procure- sustainability criteria in supply chain analysis in general has seen a
ment strive to ensure that their products meet or exceed environ- growing interest in the two past decades, most of the academic
mental and social expectations while, at the same time, their papers on the topic have focused on the qualitative side with very
actions contribute to grow revenues, reduce costs, manage risks few dedicated to build quantitative models (Genovese et al., 2013;
and build intangible assets (Bush, 2008). Among the reasons why Govindan et al., 2015; Seuring, 2013). Moreover, while most studies
companies are interested in estimating the sustainability perfor- have paid attention to the multiple criteria aspect of sustainability,
mance of their supply network are an increasing exposure to little consideration has been given to its dynamic nature. This im-
climate change, increasing accountability of businesses and new plies a greater emphasis on the evaluation of short-term supplier
perceived business benefits. In face of these challenges, procure- performance during supplier evaluation and selection processes
ment managers require to respond with realistic models and ap- and, fundamentally, no attention to the assessment of the supplier
proaches to decision making that promote an expanded view of capabilities, collaboration and development practices (Arroyo-
risks and a wide implementation of sustainability practices. Lopez et al., 2012), that support sustainable performance and are
The ability to express sustainability benefits in quantitative linked to supplier risk management (Agan et al., 2014; Seuring and
Muller, 2008).
Risk management is one of the most significant challenges faced
* Corresponding author. by nearly every supply chain in the 21st century. As information
E-mail addresses: atorresr@itesm.mx (A. Torres-Ruiz), axr32@engr.psu.edu and communication technologies have revolutionized the
(A.R. Ravindran).
https://doi.org/10.1016/j.jclepro.2017.10.304
0959-6526/© 2017 Elsevier Ltd. All rights reserved.
A. Torres-Ruiz, A.R. Ravindran / Journal of Cleaner Production 172 (2018) 4478e4493 4479
availability and exchange of information, global competition has evaluation and selection refers to the value assessment of suppliers
allowed companies to offer increased product variety and even the according to key sourcing requirements of the company. The stra-
outsourcing of core operational activities as manufacturing. These tegic sourcing process does not end when a contract is signed with
initiatives make supply chains more vulnerable to disruptions a supplier. Typically, one member of the purchasing team will
caused by multiple factors, such as uncertain economic cycles, continue to work with the supplier in the role of supplier rela-
consumer demands, and natural and man-made disasters. In tionship manager. This individual continuously monitors the per-
addition, supply chains are more exposed to stakeholder scrutiny, formance of the sourcing strategy, as well as the supplier, based on
which also create vulnerability to reputation damage, access to predetermined and agreed-upon criteria such as quality, delivery
capital and to regulatory compliance. performance, and continuous cost improvement. Companies can
In this paper we propose a quantitative framework for sus- use a variety of different strategies for supply management that
tainable procurement that allows managers to balance the opinion may be unique to each commodity, among them we have: supply
of multiple stakeholders in the identification of supply risks related base optimization, supply risk management, early supplier design
to economic, environmental and social hazards, while assessing involvement and supply development. Supplier management is
potential risks and risk management practices across different fundamental for achieving and sustaining competitive advantage.
supplier segments. Our framework considers short and long-term However, most studies focus on evaluating and monitoring those
supplier performance. It was tested using inputs provided by the supplier's attributes that involve the improvement of short term
purchasing team of a global manufacturer of consumer goods abilities to become a qualified supplier (e.g. cost reductions and
located in Mexico. delivery time), and tend to ignore attributes that promote the
advancement of more long-term capabilities like product innova-
tion, collaboration and continuous process improvement (Arroyo-
2. Background and literature review
Lopez et al., 2012).
Supply Management has taken a central role for companies

particularly since the 1980's. Portfolio management, supplier se- 2.2. Portfolio management
lection and development and supplier risk management are key
elements necessary for the effective management of suppliers. The In the context of sustainability, it is important to develop
next sub-sections present a review on past studies related to these comprehensive approaches to decision making given that “a com-
topics, as well as to quantitative models developed for the man- pany genuinely interested in sustainability works in all fronts of its
agement of suppliers that incorporate sustainability criteria. Our operations in which it has an economic, environmental and societal
findings indicate that no previous study has focused in providing a impact” (Haake and Seuring, 2009). Considering that purchasing
framework that considers the different phases of Supply Manage- strategies can vary considerably across different purchasing cate-
ment, and that includes sustainability criteria. We reviewed the gories, segmenting the “supply side” can be very valuable allowing
evolution of portfolio management from having a transactional, performance improvement when a purchasing department allo-
then a strategic and, finally, an integrative approach. We present an cates its limited resources in the proper manner (Monczka et al.,
overview of ranking methods used for supplier selection and 2008). Under this view, portfolio management is the driving force
analyze the literature on supplier development, which shows a behind subsequent activities associated with supplier management
growing number of papers with a quantitative approach. We and supplier development. The difference between the main ap-
analyze definitions given to Supplier Risk Management by various proaches to supplier segmentation identified in the literature is
authors and briefly describe some attempts to translate this greatly explained by the evolution of the role of purchasing within
concept into quantitative measures. Finally, we review papers the firm, which went from a passive role around the 19700 s, to a
integrating sustainability criteria for supplier management. Our strategic role in the 19800 s and to an integrative role after the
literature review indicates a great emphasis on individual phases of 19900 s (Rezaei and Ortt, 2012). However, the most representative
the supply management process, on short term performance form of a supply portfolio approach was introduced by Kraljic
assessment and on the environmental aspect of sustainability. The (1983) being widely adopted by American and European com-
challenge consists on providing a framework that effectively in- panies (Pagell et al., 2010) such as Shell, Philips and Siemens (Razmi
tegrates the assessment of economic, environmental and social and Keramati, 2011). It helps to draw a parallel between the type of
criteria with the different phases of the supply management commodity and the levels of profit impact and supply risk that may
process. exist in the sourcing process. In the Kraljic (1983)'s portfolio, the
types of purchasing decisions are classified as strategic, bottleneck,
2.1. Supply management leverage and tactical. These categories are defined as follows:
Tactical (non-critical or routine) items have standard configura-
In order to contribute to corporate strategy, the procurement tions that can be delivered by many suppliers. They add little value
function must be able to translate corporate objectives into specific to the final product and require little attention since they have an
supply management goals. Once the decision has been made to established quality level and the switching costs between suppliers
outsource a product or service, firms use a process known as are usually quite low. The goal of the purchasing department
Strategic Sourcing to decide to whom to outsource the product or should be to minimize the resources spent on these parts and
service, as well as the structure and type of relationship that should consolidate them to minimize the transaction cost of procurement.
be established. The ultimate result of strategic sourcing is to make Leverage items generate more added value than routine items.
supplier recommendations, so the team can identify current and They are high dollar items that have a low supply risk. The buyer
potential suppliers. Fig. 1 illustrates the phases that are necessary generally prefers short term contracts and tries to proactively find
for supply management from the perspective of strategic sourcing. lower priced suppliers. These items are characterized by volume
A sourcing strategy is typically focused on a category of products buying, active sourcing and switching to low cost suppliers. The
or services, and for that reason, the strategy is sometimes called a main target here is to reduce the total purchasing cost.
category strategy. Portfolio analysis is a tool to structure and Bottleneck items do not add much value, but they imply a high
segment the supply base into several categories. Supplier supply risk. The commodity strategy for these materials should be
4480 A. Torres-Ruiz, A.R. Ravindran / Journal of Cleaner Production 172 (2018) 4478e4493
Definition of portfolio
Supplier evaluation
management strategy Supplier management
and selection
Fig. 1. The supply management process (Monckza et al., 2008).
Table 1 1960s when it was called vendor selection. The activities of supplier
Sourcing segmentation matrix (Kraljic, 1983). evaluation and selection are usually considered within a single
Profit Impact Supply Risk process in which both activities are implemented together as a one
Low High
time event with the purpose of incorporating the best suppliers to
the organization's supplier base. Ravindran and Wadhwa (2009),
Low Quadrant I Tactical Quadrant III
Ravindran and Warsing (2013a, b) and De Boer et al. (2001) pro-
(Non-critical or Routine) items Bottleneck (critical) items
High Quadrant II Quadrant IV vide a good discussion of the ranking methods used in the Multiple
Leverage Items Strategic items Criteria Decision Making (MCDM) literature for supplier selection.
Ho et al. (2010) presented a review of multiple criteria approaches
mentioned in 78 articles appearing in international journals be-
based on a relatively limited number of suppliers and long-term, tween 2000 and 2008. Agarwal et al. (2011) offered a different
cooperative relationships. The goal is to minimize the number of review based on 68 articles published between 2000 and 2011
items classified in this quadrant and to make an active effort to related to supplier evaluation and selection. The most common
move them to the tactical or the leverage quadrant. multiple criteria ranking methods mentioned are: Lp metric, linear
Strategic items have both high supply risk and high profit weighting methods (rating, Borda count, Analytical hierarchy pro-
impact. The products falling in this quadrant add competitive value cess (AHP), Analytical network process (ANP)), categorical
to a product. Hence, they require a long-term collaboration and methods, multi-attribute utility theory, cluster analysis, data
development of suppliers. In other words, strategic alliances should envelopment analyses (DEA) and case base reasoning.
be created with the suppliers.
Table 1 shows the segmentation of items following Kraljic's 2.4. Supplier development
(1983) approach:
Kraljic's model is still considered the standard, particularly by The research in supplier development dates back to the early
practitioners, due to the fact that it is intuitive, implicit and simple 1990s. Several articles (Handfield et al., 2005; Modi and Maberta,
to apply. Van Weele (2000) and Wadhwa (2008) present the only 2007; Wagner, 2006) have classified supplier development into
supplier management approaches using supplier segmentation direct (transaction-specific or internalized) and indirect (infra-
that we are aware of. However, a common criticism to this approach structure factor or externalized). A large body of research comes
is that companies in different industries tend to assign more from Krause (Krause, 1999, 1997) and co-authors (Krause et al. 1998,
importance to variables other than impact on profitability and on 2001, 2007; 2002), who have fundamentally focused on under-
supply risk (Pagell et al., 2010). Moreover, making recommenda- standing the supplier development practices and their benefits for
tions based on only two dimensions seems very simplistic for some both the suppliers and the buying firms. Among 33 articles on
(Arnold and Schmidt, 2010). In addition, Kraljic's portfolio, is supplier development reviewed, about 43% used mathematical
commonly perceived as a strategic, power-based, approach viewing modeling approaches. Two main lines of study were common in
suppliers as the firm's opponents or competitors rather than as this type of research. One is focused on the assessment of the
partners (Pagell et al., 2010; Rezaei and Ortt, 2012). Based on these supplier development orientation which could impact future
criticisms, Handfield et al. (2005) extended Kraljic's portfolio by business investment and, the second one is concerned with the
incorporating a third competitive priority related to environmental evaluation of benefits for the buying firm and/or the supplier
risk. According to this new portfolio, the four quadrants corre- resulting from particular supplier development practices. An
sponding to low environmental impact (strategic, bottleneck, additional observation is that only three articles assessed some
leverage and tactical items) represent the portfolio proposed by type of sustainability (i.e. environmental) attribute or practice. Of
Kraljic (1983) and four new quadrants are added related to high these, only two (Bai and Sarkis, 2010; Trapp and Sarkis, 2016) have a
environmental risk. Arnold and Schmidt (2010) has gone further to quantitative approach.
suggest that for evaluating sustainable performance a different
dimension is necessary. Such a dimension, called stakeholder
impact, integrates environmental and social targets in one axis so 2.5. Supplier risk assessment
that,
Commonly, business risks are understood as the product of two
Stakeholder Impact ¼ Environmental Impact þ Social Impact risk factors: the likelihood of a hazard occurring and the impact it
would have on business objectives; where impact represents the
In this way, all variables related to the triple bottom line are severity of the harm caused (Yang, 2007). However, there exist
considered and stakeholders' demands are integrated without more comprehensive definitions in the literature. For instance,
mixing ecological and social targets with the (economic) needs of Ayyub et al. (2007) define risk as the product of three terms:
shareholders’ in the same axis. consequence, vulnerability and threat; where consequence is the
maximum possible loss, vulnerability is total weakness of the sys-
2.3. Supplier selection tem over all hazard scenarios and threat is the rate of hazard
occurrence for period. Bilsel (2009) considers detection (the time it
The problem of supplier selection can be traced back to the early takes to identify the occurrence of a risk event) as another
component of risk. Vazquez-Brust et al. (2012) consider potential management framework which focuses on assessing disruption
risk dependent on the potential hazard, the system vulnerability risks due to natural and man-made disasters that may occur at
and its exposure (the degree to which a system could be materially facilities or transportation links. The main contributions of this
affected by a dangerous phenomenon), while managed risks result work relate to the assessment of vulnerability and availability of
from combining uncertainty and governability. Therefore, in its risk management practices as well as to the explicit assessment of
simplest form, risk is given by the hazard potential of something transportation disruptions. Robustness is addressed by first
under certain conditions. An extended view may consider not only applying a disruption risk assessment which considers hazard,
the conditions (causes) for risk but also the degree of harm (con- vulnerability and risk management practice. Hazard is the result of
sequences) on the specific group or system. aggregating predictability, occurrence and impact scores. Vulner-
On the other hand, the risk brought by outside suppliers, or ability aggregates factors related to both facilities and trans-
supply risk, can be grouped in two broad categories: internal risks portation. Risk Management Practice evaluates monitoring and
and external risks (Ravindran and Warsing, 2013b). Internal risks mitigation practices available to prevent disruptions.
are risks within the supply chain which arise from the interaction
between constituent organizations across the supply chain. They 2.6. Quantitative models for sustainable supply and supply risk
are caused by sub-optimal interaction and co-operation between management
the entities along the chain. Such supply chain risks result from a
lack of visibility, lack of ‘ownership’, self-imposed ‘chaos’, just-in- In response to the observed increase in environmental and so-
time practices and inaccurate forecasts. External risks arise from cial awareness within the supply chain, several papers related to
interactions between the supply chain and its environment. Such sustainable supply chain management have been published in
interactions include disruptions caused by strikes, terrorism and recent times. Bloemhof-Rwaard et al. (2004) did a classification of
natural catastrophes. According to the University of Cranfield- operations research models targeting reverse and closed loop
School of Management (2002), internal (supply chain) risks and supply chain costs as well as Life Cycle Analysis (LCA). Srivastava
external risks impact the vulnerability of the supply chain. Thus, (2007) looked at papers written on green supply chain manage-
supply chain vulnerability can also be defined as “an exposure to ment in general and, specifically, at those studying the reverse
serious disturbance, arising from risks within the supply chain as well supply chain. Seuring et al. (2008) provided a state of the art of
as risks external to the supply chain”. Consequently, Supply Chain Risk Sustainable Supply Chain Management. The work of Seuring (2013)
Management aims at identifying the areas of potential risk and found that in the past twenty years most of the academic papers on
implementing appropriate actions to contain that risk. Therefore, it sustainable supply chains have focused on the management
may be defined as “the identification and management of risks within (qualitative) side and an almost insignificant number has dedicated
the supply chain and risks external to it through a coordinated to build quantitative models. In his study, only 36 out of 309 articles
approach amongst supply chain members to reduce supply chain surveyed between 1990 and 2010 followed a quantitative approach.
vulnerability as a whole.” The usual approach to risk management The study carried out by Genovese et al. (2013), which reviewed
consists of three steps (Ravindran and Warsing, 2013b): (1) Identify only papers on green supplier selection, found no more than 25
hazards; (2) Analyze the risk associated with that hazard; (3) articles dealing with applied approaches, most of which were
Mitigate risks or determine appropriate ways to eliminate or con- written in the period 2007e2010, the last three years considered
trol the hazard. Hazard identification is defining all potential risks, within the scope of the study. Govindan et al. (2015) identified 33
both internal and external, that organizations may face. Risk anal- papers written between 1996 and 2011 where a variety of multiple
ysis is narrowing the list of potential risks by assessing their criteria decision making approaches where used with the pre-
importance to the supply chain operations. Risk mitigation is taking ponderance of individual over integrated approaches frequently
appropriate actions to reduce risks once they are identified and applying fuzzy analyses, AHP, ANP and DEA. Noci (1997) considers
evaluated. that these approaches are generally better for these type of prob-
Translation of risk to quantitative terms has been challenging lems since they allow consideration of tangible and intangible
but it is a critical task for successful business applications. Tang criteria. Therefore, decision makers can represent the interaction of
(2006) reviewed various quantitative models for managing sup- multiple environmental factors in complex and unstructured situ-
ply chain risks. While most of the supplier selection models are ations and provide a rank order that indicates overall preference for
deterministic, there are few articles dealing with operational risk at each decision alternative. The most common environmental
this stage. Micheli (2008) uses a risk efficiency-based supplier se- criteria considered were environmental management system and
lection approach for critical items, which allows the consideration quality. They also observed that the opinion of various stakeholders
of procurement and investment related risks. Yang (2007) pro- and multi-functional influences needs to be integrated to address
posed methods for risk classification and quantification considering sensitive issues related to environmental supplier performance.
the manufacturer's hazard and exposure factors. The risk's severity Lu et al. (2007) applied AHP for the final process of selecting
of impact and the frequency of occurrence are modeled using two suppliers. Tuanying and Tianshan (2010) used AHP to select
different types of risks. Value-at-risk (VaR) type risks are used to appropriate reverse logistics provider for end-of-life vehicles. Hsu
model less frequent events which disrupt operations at suppliers and Hu (2007) in addition to describing important criteria for
and can bring severe impacts to buyers (e.g. labor strike, terrorist supplier selection and evaluation in hazardous substance manage-
attack, natural disaster, etc.). Miss-the-target (MtT) type risks, on ment (HSM), used Analytical Network Process (ANP) to represent
the other hand, are used to model events that might happen more and analyze the interdependencies and interactions between
frequently at suppliers with lesser damage to buyers (e.g. late de- components. They evaluated ANP in a Taiwanese OEM electronics
livery, missing quality requirements, etc.). Using these concepts, company. Kuo et al. (2010) used the Delphi method to identify
Ravindran et al. (2010) model the risk-adjusted supplier selection environmental criteria for evaluation. Then, they developed a green
model and solve it in two phases using real data. Bilsel and supplier selection model, called ANN-MADA hybrid method, which
Ravindran (2011) use analytical methods to model and quantify integrated artificial neural network (ANN) and two multi-attribute
disruption risks, which are broken down into four components: decision analysis (MADA) methods: data envelopment analysis
impact, occurrence, detectability and recovery. Kungwalsong and (DEA) and analytic network process (ANP). ANN was used to reduce
Ravindran (2014) present an alternative disruption risk the number of criteria based on the prediction of criteria with
Table 2
Summary of articles written about quantitative approaches in different phases of the supply management process.
Author Year Portfolio Management Supplier Selection Supplier Supplier Risk Inclusion of
Development Management Sustainability criteria
1 Krause 1997 ✓
2 Noci 1997 ✓ ✓
3 Krause et al. 1998 ✓
4 Krause 1999 ✓
5 Van Weele 2000 ✓ ✓
7 Krause and Scannell 2002 ✓
8 Cousins et al. 2004 ✓
9 Swarr et al. 2004 ✓
11 Yang 2007 ✓ ✓
12 Ayyub et al. 2007 ✓ ✓
13 Lu et al. 2007 ✓ ✓
14 Hsu & Hu 2007 ✓ ✓
15 Micheli 2008 ✓ ✓
16 Cruz and Wakolbinger 2008 ✓
17 Vijay Wadhwa 2008 ✓ ✓
18 Bilsel 2009 ✓ ✓
19 Bai and Sarkis 2010 ✓ ✓
20 Ravindran et al. 2010 ✓ ✓
21 Tuanying and Tianshan 2010 ✓ ✓
22 Kuo et al. 2010 ✓ ✓
23 Wen and Chi 2010 ✓ ✓
24 Lloyd et al. 2011 ✓
25 Vazquez-Brust et al. 2012 ✓
26 Bilsel and Ravindran 2012 ✓ ✓
27 Kungwalsong and Ravindran 2014 ✓ ✓
28 Trapp and Sarkis 2016 ✓ ✓
This study ✓ ✓ ✓ ✓ ✓
highest performance values. Thus, reducing the number of inputs et al. (2004) interpret environmental risk as “the associated envi-
required for an effective implementation of DEA. Analytic Network ronmental impacts in relation to the carrying capacity of the
Process (ANP) was used in the determination of criteria weights. environment”. The authors present a novel approach that in-
Their approach showed comparative advantages against more tegrates the sustainability target method (STM) and economic
simple models that integrated only ANN or ANP with DEA. Noci input-output life cycle analysis (EIO-LCA) to evaluate supply line
(1997) used a basic implementation of ANP. Wen and Chi (2010) sustainability and business environmental risk. The objective is to
reviewed the available literature and used the Delphi method to assess sustainability and risk associated with various classifications
identify environmental evaluation criteria. Then, they used the of supply line commodities. The STM links environmental impact
assurance DEA method to differentiate between efficient and non- with economic value by uniquely defining eco-efficiency and
efficient suppliers. Finally, AHP & ANP were applied to further resource productivity. Lloyd et al. (2012) translate environmental
compare efficient suppliers or only in cases when few suppliers risk management to a business risk perspective. Environmental
exist. business hazards are the stakeholder responses to environmental
Finally, the scholarly literature has overlooked the identification impacts with the potential to cause harm to business objectives.
of the type of risks caused by not addressing environmental and Environmental business risk is a product of the likelihood of an
social (E&S) hazards adequately. Examples of E&S hazards which environmental business hazard occurring and the impact it would
are directly-controllable by supply chains include: type of fuel in have on business objectives if it did. Risk can be assessed by con-
manufacturing and transportation, wastewater intensity and unfair necting one feature of the hazard with one feature of the product.
labor wages. Non-directly controllable E&S risks include natural Their approach is demonstrated with a particular focus on the
disasters (tornados, droughts, etc.), political unrest, famine, war, criticality of materials. Likelihood is measured based on supply risk
etc. Natural disasters have received by far more attention in aca- and impact is measured according to the economic importance of
demic literature as they have been included in the list of disruptive the material for meeting the business objectives. Cruz and
risks which present infrequently but which can bring considerable Wakolbinger (2008) developed an equilibrium multiperiod sup-
damages to the supply chain. Risks stemming from supplier irre- ply chain network model which considers the behavior of decision
sponsibility in terms of violation of ethical and environmental makers within the supply chain. Manufacturers and retailers are
standards have only recently become a prominent topic within the multicriteria decision makers who decide about their production
field of purchasing and supply management and global sourcing. and transaction quantities as well as the amount of social re-
Cousins et al. (2004) made an attempt to model the main exposures sponsibility activities they want to pursue to maximize net return,
in an environmentally sound supply chain. These exposures include minimize emissions and minimize risk over the multiperiod plan-
environmental impact exposures and institutional exposures. A firm ning horizon. Range values are assigned depending on the level of
has a direct impact on environmental exposures since these are social responsibility activities with the strongest possible level
rooted in the interaction of the firm with the bio-physical envi- indicated by a level of 1. The cost function is obtained as the product
ronment. However, institutional exposures (economic, political, of the social responsibility level and the amount of money spent in
and social) do not specifically address impacts on the bio-physical each time period to promote such activities. Table 2 summarizes
environment and can be affected indirectly through the manipu- the articles reviewed describing quantitative methodologies
lation of institutions (e.g. mounting a publicity campaign). Swarr applied to distinct phases of the supply management process.
3. Approach and solution methodology terms of the product of hazard, vulnerability and managed risk.
However, we also consider the evaluation of directly and non-
In this study, we propose the implementation of supply risk directly controllable disruption criteria related to the triple
management from the perspective of sustainability by making the bottom line.
following contributions: We integrate the assessment of risk mitigation and monitoring
practices considering criteria that supports supplier develop-
We implement a supply risk assessment using a portfolio ment in the long term.
approach, where suppliers are categorized according to the We present a simplified decision framework that allows the
segments proposed by Arnold and Schmidt (2010) but naming assessment of suppliers by multiple stakeholders.
sustainability impact to the dimension that integrates environ- Finally, we use an illustrative case study for the proposed sus-
mental and social impact. Based on this, the portfolio of refer- tainability risk assessment framework.
Table 3
Sourcing segmentation matrix after integrating sustainability impact.
Profit Impact Supply Risk (SR)/Sustainability Impact (SI)
Low/Low High/Low Low/High High/High
Low Quadrant I Quadrant III Quadrant V Quadrant VII

Tactical Bottleneck (critical) Tactical Bottleneck (critical)
(Non-critical) (Non-critical) High SI
High SI
High Quadrant II Quadrant IV Quadrant VI Quadrant VIII
Leverage Strategic Leverage High SI Strategic High SI
ence for the proposed approach is shown in the 2 4 matrix 3.1. Supply sustainability risk assessment framework (SSRAF)
given in Table 3. In our study we focus on those suppliers
showing a high sustainability impact (Quadrants V-VIII). The total Supply Sustainability Risk Score (SSRS) for each po-
Following the model used by Kungwalsong and Ravindran tential hazard k at every supplier segment is determined from a
(2014), we measure the actual risk for sustainable supply in qualitative/subjective assessment of three factors: hazard, vulner-
ability, and risk management using Equation (1). The procedure
utilized to calculate the value (score) of each factor is described in
the following sections.
HAZARD SSRS k ¼ HSk x VSk x RMS (1)
3.1.1. Hazard assessment

IMPACT OCCURRENCE Industrial activities involve tasks that have the potential to
generate negative impacts. The magnitude of the greatest overall
negative impact that the firm may generate is termed its hazard-
Reputation Short-term ousness or perilousness (Vazquez-Brust et al., 2012). This hazard-
ousness will be greater the larger the firm, the more dangerous the
Access to capital Medium-term substances they process, the more waste they generate, etc. We
evaluate the level of hazardousness coming from specific supply
segments by taking into consideration impact and occurrence. The
Supply security Long-term hazard score (HS) for each k area of potential hazard is calculated
using Eq. (2). Fig. 2 represents the criteria used for Hazard
Assessment. More details about the estimation of impact and
Regulation occurrence follow.
Efficiency & HSk ¼ ðImpactk x Ocurrencek Þ1=2 (2)

productivity Impact: We evaluate this dimension by considering the
importance assigned to different business objectives by various
Fig. 2. Approach for the determination of hazard potential. stakeholders using the Rating method and the Analytic Hierarchy
Table 4
Levels used to evaluate Impact and Occurrence.
Impact on business objective Exposure Risk Level Time frame of Occurrence Exposure Risk Level
High 3 1-5 years (short) 3

Medium 2 6-10 years (medium) 2
Low 1 >10 years (long) 1
Fig. 3. Supplier level vulnerability indicator criteria.
Process (AHP). 1 to 10, where 10 is the most important and 1 is the least
important selection criteria). Using the selected scale, the de-
1. The Rating Method simply consists of each participant voting for cision maker provides a rating rj for each criterion, Cj. The same
his/her favorite alternative according to a rating scale (e.g. from rating can be given to more than one criterion. The ratings are
COUNTRY RISKS
Political &
Logistics Climate Change
Economic
1 Political Instability 1 Lack of capacity Regulatory framework
2 Financial Instability 2 High labor costs 1 for climate change
3 Low growth economy 3 Long lead-times 2 Precipitation extremes
4 Currency fluctuation Mismatch in 3 Hurricanes
5 Taxation manufacturing 4 Flooding
6 Tariffs and Customs 4 philosophy 5 Water shortages
5 Inflexible production
Trust Geographic Human Rights &
6 location/proximity Labor practice
Corruption and Management and
1 Child labor
1 brivery 7 organisation
2 Forced labor or slavery
2 Intellectual property 8 Communication system
Regulatory framework
Reputation and 3 for labor contracts
3 position in industry
4 Labour relations record
Fig. 4. Country level vulnerability indicator criteria.
Table 5 Table 7
Vulnerability scoring levels. Risk management practice assessment framework.
Exposure Level Risk Exposure Points Risk Monitoring Exposure Risk Level Risk Mitigation Exposure Risk Level
High 3 Not available 3 Not available 3

Medium 2 In preparation 2 In preparation 2
Low 1 Available 1 Available 1
then normalized to determine the weights of the criteria j (Wj ). computed for the main criteria in two main steps (Ravindran and
Thus, for n criteria (Masud and Ravindran, 2008): Warsing, 2013a):
r Pn
Wj ¼ Pj¼n
j
, so that j¼1 Wj ¼1 1. Normalize each column of pairwise comparison matrix A:
r
j¼1 j
.
For multiple person decision making the Rating method uses rij ¼ aij Xn a
the average of the ratings for that particular criterion across all i¼1 ij
decision makers.
where aij represents the strenght of preference of criterion i over
2. The Analytic Hierarchy Process (AHP) is a structured technique criterion j; in a scale of 1 to 9
for organizing and analyzing complex decisions developed by
Thomas L. Saaty in the 1970s. In AHP the decision problem is 2. Average the normalized values across each row to get the
first decomposed into a hierarchy of more easily comprehended criteria weights
sub-problems, each of which is analyzed independently. Once Xn .
the hierarchy is built, the decision makers systematically eval- Wi ¼ r
j¼1 ij n
uate its various elements by comparing them to one another,
two at a time, with respect to their impact on an element above In a final step a consistency check is performed by using the
them in the hierarchy. In making the comparisons, the decision weights W ¼ ðW1 ; W2 ; …; Wn Þ and the pairwise comparison ma-
makers can use concrete data, but they typically use their trix A to compute the vector AW and by letting the vector
judgments about the elements' relative meaning and X ¼ ðX1 ; X2 ; X3 ; …Xn Þ denote the values of AW to compute:
importance.
X1 X2 X3 Xn
lmax ¼ Average ; ; ; …;
After pair-wise comparison is carried, normalized weights are W1 W2 W3 Wn
Table 6
Risk management practices recommended for each segment.
Supply Segment Monitoring Mitigation
Evaluation & certification Audits Absorptive capabilities Collaboration Development
Tactical ✓
Leverage ✓ ✓
Critical ✓ ✓ ✓ ✓ ✓
(some suppliers) (some suppliers) (some suppliers)
Strategic ✓ ✓ ✓ ✓ ✓
RISK MANAGEMENT PRACTICE
MONITORING MITIGATION
Bussiness Absorptive Partner

Collaboration
Performance capacities Development
Evaluation & Flexibility in Joint development Know-how
1 1 coordinating 1 1
certification of products transfer
2 Audits activities Joint development Process-oriented
Reliability and 2 2
2 of processes advice
consistency 3 Shared planning 3 Strategic advice
Openess and Support of
3 4
flexibility market entry
Ability and 5 Financial support
4
expertise 6 Transfer of staff
Fig. 5. Attributes to measure risk management practice.

Table 8
Supplier Segmentation used for the case study.
Category Number of suppliers % Supplier Distribution Number of commodities % Distribution of Commodities
Strategic 7 18% 102 12%

Critical 5 13% 18 2%
Leverage 10 26% 661 77%
Tactical 16 42% 76 9%
Total 38 100% 857 100%
Then, a Consistency Index (CI) is calculated by CI ¼ lmax n

n1 , fol-
for natural disasters such as droughts, hurricanes and others) and
lowed by a Consistency Ratio (CR), CR ¼ CI=RI, where RI is a issues related to human rights & labor practice (status of labor
Random Index estimated by Saaty (1990) for different matrix sizes. rights, child labor, etc.).
If multiple decision makers are involved, a common approach is to As in the case of the impact and occurrence evaluation, we
use the geometric mean of the aij values of the different decision propose using a 3-point scoring method (shown in Table 5) to
obtain the vulnerability score.
makers.
Finally, vulnerability scores are obtained at the hazard level for
In our study, the values obtained through the Rating and AHP
each supply segment as follows:
methods represent the weights given to different business objec-
If we let,
tives. The actual impact measurement is obtained by estimating the
product of such weights by the score resulting from the imple-
k ¼ the set of hazards
mentation of a 3 point scoring method that evaluates the impact of
each potential hazard on each business objective, where a score of 3 where k ¼ 1; 2; …; K
indicates a high level of impact on the business objective, a score of
2 a medium impact and a score of 1 a low impact (see Table 4). i ¼ the hazard vulnerability indicator criteria;
Occurrence: For a company, it is important to determine the
occurrence of risks so that adequate priority can be assigned to the where i ¼ 1; 2; …; N
risks that will need to be faced more promptly. In a recent survey
(Accenture, 2013) among suppliers of top multinational companies, Si ¼ the harm exposure caused by indicator i; where Si ¼ 1
70% of the respondents indicated that some level of impact related : low; 2 : medium; 3 : high
to climate risks would be felt within the next five years in three key
areas: reduction/disruption in production capacity, increased The Vulnerability Score (VS) for hazard k is obtained through the
operational costs and inability to do business. Here, we propose the geometric mean of N vulnerability indicator criteria related to each
use of a simple scoring method for the evaluation of occurrence hazard:
where risks faced in the short-term are assigned a score of 3 while
risks faced in the long-term are assigned a score of 1. Table 4 in- !1=N
Y
N
dicates the scores assigned depending on the time horizon. VSk ¼ Si (3)
i
3.1.2. Vulnerability assessment

Vulnerability is the exposure to serious disturbance, arising from
risks within the supply chain as well as risks external to the supply 3.1.3. Risk management assessment
chain. We identified vulnerability criteria commonly cited for risk Risk management practice represents the proactive approach
assessment covering the three dimensions of sustainability (eco- taken within a system to prevent and/or avoid potential risks.
nomic, environmental and social) at the country and firm level. The Different risk management practices are necessary for each supply
vulnerability indicator criteria selected were related to the main segment. The risk management score is a geometric mean of its
hazards identified by stakeholders in section 3.1.1. At the supplier attributes as shown in Equation (4).
level, vulnerability is based on eight potential sources of harm (i.e.
hazards) classified within two main areas of concern (shown in Risk Management Practice Score
Fig. 3). Business performance evaluates the exposure related to ¼ ðRisk Monitoring x Risk MitigationÞ1=2 (4)
supplier operations connected with: Management capabilities
(company financial stability, commitment to continuous improve- Risk Monitoring: Risk monitoring activities include the appli-
ment, etc.), procurement costs (purchase þ logistics cost), quality cation of periodic questionnaires, as well as the actual certification
(% of defects, quality assurance, quality management, etc.) and of working systems and the implementation of audits to corrobo-
delivery (on time deliveries, order frequency, etc.). Environmental rate the supplier practices and ensure a firm's dynamic capability to
and Social hazards evaluate the exposure related to: climate change learn from their environment. The risk level is the highest if no risk
issues (green house gas emissions), resource use (water, land, en- monitoring practices exist, and lower if these are being prepared or
ergy and materials use, recycling and disposal), human rights and already exist.
labor practice (worker diversity, fair wages, company use of child Risk Mitigation: Strategies for mitigating sustainability risks
labor, forced and compulsory work) and human health and safety include the implementation of adequate collaborative and devel-
(promotion of sustainable living, safe working conditions, etc.). At opment practices with the suppliers (practices that promote the
the country level (Fig. 4), vulnerability is determined using criteria transfer of know-how, joint development of products, etc.) as well
related to five main potential sources of harm: Political & economic as the identification of backup suppliers, backup transportation
situation, level of trust (on country regulatory environment, intel- links, flexible inventory, etc. The risk level is the highest if no risk
lectual property, etc.), logistic issues (geographical location, labor mitigation strategies exist or are being prepared.
costs, transportation routes, etc.), climate change issues (potential In order to evaluate risk management practices at each supply
Table 9 Pagell, 2011) as well as to the findings of our literature review

Ranking of business objectives by decision maker 1 using the rating method. (Arnold and Schmidt, 2010; Gelderman and Van Weele, 2003;
Business Objective Rating Method Handfield et al., 2005; Kraljic, 1983; Trapp and Sarkis, 2016). Ac-
Ranking Points Weight Rank
cording to these, monitoring practices should be the main focus for
Tactical and Leverage suppliers, while both monitoring and miti-
Reputation 10 0.23 1
gation practices should be applied to Critical and Strategic products.
Access to capital 5 0.12 3
Supply security 10 0.23 1 For monitoring of Tactical items it is sufficient to verify certifica-
Regulation 8 0.19 2 tions obtained through third party organizations. For Leverage
Efficiency & Productivity 10 0.23 1 items, in addition to third party certifications, self-declared ques-
Total points 43 1.00 e
tionnaires are used as the basis to perform an eco-efficiency
assessment. Critical items need to meet minimum certification
levels and may be audited if there are concerns regarding the real
segment, it is necessary, first, to determine the most adequate performance of suppliers. Also, close collaboration and develop-
practices for each segment (summarized in Table 6). For this, we ment programs must be implemented with critical suppliers hav-
may go back to the recommendations made by several authors ing difficulties to meet expectations. Finally, audits and
regarding portfolio management (Arroyo-Lo pez et al., 2012; Krause certifications are necessary for all strategic suppliers, as well as
et al., 2007, 2001; Pagell et al., 2010; Rezaei and Ortt, 2012; Wu and mitigation practices, as these suppliers represent the highest
Table 10
Pairwise comparison matrix by decision maker 1 for AHP
Criteria Reputation Access to capital Supply security Regulation Efficiency & Productivity
Reputation 1 7 1 3 1
Access to capital 1/7 1 1/7 1/3 1/9
Supply security 1 7 1 1 1
Regulation 1/3 3 1 1 1
Efficiency & Productivity 1 9 1 1 1
Table 11
AHP normalized weights for decision maker 1.
Criteria Reputation Access to capital Supply security Regulation Efficiency & Productivity
Reputation 0.29 0.26 0.24 0.47 0.24

Access to capital 0.04 0.04 0.03 0.05 0.03
Supply security 0.29 0.26 0.24 0.16 0.24
Regulation 0.10 0.11 0.24 0.16 0.24
Efficiency & Productivity 0.29 0.33 0.24 0.16 0.24
Table 12
Individual and average weights obtained for business objectives.
Business Objective (BO) Rating AHP
DM1 DM2 DM3 Average DM1 DM2 DM3 Average
Reputation 0.23 0.24 0.19 0.22 0.3 0.24 0.43 0.31

Access to capital 0.12 0.05 0.1 0.09 0.04 0.05 0.04 0.04
Supply security 0.23 0.24 0.24 0.24 0.24 0.24 0.22 0.23
Regulation 0.19 0.24 0.24 0.22 0.17 0.24 0.22 0.21
Efficiency & Productivity 0.23 0.24 0.24 0.24 0.25 0.24 0.17 0.22
Table 13
Impact scores obtained for strategic suppliers.
Hazard Indicators Reputation Access to capital Supply security Regulation E&P Score Rank
Country Political & Economic 2 3 2 3 1 0.34 6

Trust 2 2 3 3 2 0.4 4
Logistics 2 2 3 2 3 0.4 4
Climate Change 2 2 2 2 1 0.29 8
Human Rights & Labor Practice 3 2 1 2 2 0.32 7
Supplier business Performance Management 3 2 3 1 3 0.37 5
Quality 3 3 3 2 3 0.47 1
Procurement Cost 2 2 3 1 2 0.32 7
Delivery 3 3 3 1 3 0.41 3
Supplier E&S Climate Change 1 2 2 3 1 0.28 9
Resource Use 2 2 3 3 3 0.43 2
Human Rights & Labor Practices 3 3 1 2 2 0.34 6
Human Health & Safety 3 3 1 2 2 0.34 6
exposure to harm. In addition, the monitoring of basic absorptive practice:

capacities for Leverage, Critical and Strategic suppliers is necessary,
!1=K
although not always considered. Absorptive capacity has been Y
K
defined as a firm's dynamic capability to learn from their envi- RMSg ¼ RMSkg (6)
ronment (Berghman et al., 2012). The term “dynamic” refers to the k
capacity to renew competences so as to achieve congruence with Finally, the RMS is obtained using Eq. (7):
the changing business environment. Dynamic capabilities, thus,
reflect an organization's ability to achieve new and innovative RMS ¼ ðRisk Monitoring x Risk MitigationÞ1=2 (7)
forms of competitive advantage, given path dependencies and
market positions (Leonard-Barton, 1992). They are particular sup-
plier attributes that provide resilience and adaptation to supply
chains and these capabilities should be diagnosed before estab- 4. Case study
lishing any supplier partnership.
Fig. 5 details the attributes used to evaluate monitoring and To implement the proposed framework we collected data from a
mitigation practices. consumer goods manufacturer with operations in central Mexico
Here again, to assess the level of managed risk, we use a three having a total of 857 items supplied by 38 different vendors located
point scale for each risk management factor indicator criteria in Brazil, France, Mexico and the USA. 29% of the total purchase
(where 3 indicates no availability of management practice) as value is spent locally with suppliers in Mexico, 45% is spent with
shown in Table 7. suppliers located in the USA, and about 19% with suppliers located
The score for Risk Management Practice evaluates the buyer in France. Table 8 summarizes the supplier portfolio identified
performance in relation to the implementation of specific moni- through a quick diagnoses conducted in collaboration with some
toring and management practices. Therefore, we obtain a score for members of the company's purchasing team. We demonstrate how
each supplier segment as follows: to obtain a SSRS for each of the four supplier segments representing
a high impact on the company's sustainability.
If we let; k ¼ the Risk Management factor
4.1. Hazard score assessment
where k ¼ 1 : Bussiness performance and 2 : Apsorbtive capacities;
3 : Collaboration and 4 : Partner development; etc: Impact Evaluation: In this step, three people representing top
management are asked to rank the importance of business objec-
i ¼ the Risk Management factor indicator criteria; tives. Rating and AHP methods are applied. For the rating method,
the decision maker (DM) is allowed to assign any value between
where i ¼ 1; 2; …; N 0 and 10, where 10 is given to the best possible option. The result of
applying AHP is a list of criteria ranked according to the combined
Mi ¼ Risk management score for criterion i; where Mi ¼ 1 importance assigned by all decision makers. In this section, we
combine the decision makers’ ratings using the weighted arith-
: low; 2 : medium; 3 : high
metic mean method. As an illustration of the Rating method,
The Risk Management Score (RMS) for factor is obtained Table 9 gives the rating values assigned by DM-1 for the business
through the geometric mean of N criteria related to each hazard k: objectives and his corresponding weights. Table 10 gives the pair-
wise comparison matrix by DM-1 for AHP, while Table 11 shows the
!1=N Normalized weights obtained. Finally, the consistency check was
Y
N
RMSk ¼ Mi (5) positive as it showed that CR ¼ 0.04/1.11 ¼ 0.04 < 0.15.
i Table 12 shows the individual weights representing three de-
cision makers and the group weights obtained by both the Rating
If ; g ¼ the Risk Management practice; and AHP methods. The group weights were obtained through
arithmetic mean for the Rating method and through geometric
where g ¼ 1 : Risk Monitoring; 2 : Risk Mitigation mean for the AHP method. According to both methods, access to
The Risk Management Score (RMS) for practice is obtained capital is the objective with the lowest weight.
through the geometric mean of factors related to each main The weights obtained can be interpreted as the value assigned
Table 14
Impact scores of all the supplier segments.
Areas of Potential Hazards Impact Score (the higher the worse)
Strategic Critical Leverage Tactical
Country Political & Economic 0.34 0.51 0.28 0.17

Trust 0.4 0.43 0.32 0.17
Logistics 0.4 0.43 0.22 0.19
Climate Change 0.29 0.26 0.17 0.17
Human Rights & Labor Practice 0.32 0.40 0.22 0.17
Supplier Business Performance Management 0.37 0.43 0.26 0.24
Quality 0.47 0.43 0.34 0.30
Procurement Cost 0.32 0.37 0.26 0.33
Delivery 0.41 0.47 0.30 0.30
Supplier E&S Climate Change 0.28 0.32 0.19 0.17
Resource Use 0.43 0.40 0.37 0.19
Human Rights & Labor Practices 0.34 0.40 0.26 0.26
Human Health & Safety 0.34 0.37 0.26 0.26
Table 15
Occurrence evaluation for all supply segments by decision maker 1.
Areas of Potential Hazards Decision Maker 1
Country Political & Economic 1 3 3 1

Trust 2 1 2 3
Logistics 3 3 1 2
Climate Change 2 2 3 1
Human Rights & Labor Practice 3 3 2 1
Supplier Business Performance Management 3 3 2 1
Quality 3 3 2 1
Procurement Cost 3 3 3 3
Delivery 3 3 1 1
Supplier E&S Climate Change 2 3 2 1
Resource Use 3 3 3 2
Human Rights & Labor Practices 3 3 2 1
Human Health & Safety 3 3 2 1
by the buying firm to different business objectives. However, the indicates a high level of impact on the business objective, a score of
firm also needs to integrate the opinion of multiple stakeholders to 2 a medium impact and a score of 1 a low impact on the business
ensure that risk sources related to each objective are being objective (Table 4). After multiplying these scores by the corre-
considered. For this, several decision makers are invited to partic- sponding weights of each objective, we use the geometric mean of
ipate. Each decision maker is matched to a different business the scores to obtain the final impact score for each hazard. Table 13
objective based on his work area. For instance, someone from the illustrates the impact scores obtained for strategic items with
legal department is asked to assess the impact on regulatory respect to different business objectives and their rankings when
business objectives. Someone from the purchasing department is using the AHP weights shown in Table 12. Table 14 contains the
asked to assess impacts related to supply security. Someone from impact scores obtained for all the supplier segments.
the environmental and safety department is asked to assess the Table 14 shows that, for the tactical segment, supplier business
impact on reputation. Someone from the finance department is performance was assigned more importance, followed by human
asked to assess the impact on access to capital. Someone from the labor practices, health & safety. All the other criteria obtained low
manufacturing department is asked to assess the impact on effi- scores. It is interesting to note that climate change obtained low
ciency and productivity. The purpose of this is: (i) To incorporate scores in all supplier segments. One reason for this is that the
expert opinion for the evaluation of impact on each business countries, where the suppliers operate, are relatively safe from
objective and (ii) To minimize the cognitive burden of the partici- climate change issues. Brazil is the country with more problems in
pants. Each participant is asked to evaluate the hazards in the this respect but the level of purchase volume is so small that its
category corresponding to each supply segment. In this way the impact on the business objectives is very low. Moreover, the only
cognitive burden for each participant evaluating the country cate- country where regulations are more stringent for climate change is
gory totals 5 hazards to evaluate with respect to one business France, but this does not affect all business objectives.
objective within each of the 4 supply segments, which results in a Evaluation of Occurrence: Here, each of the decision makers that
Cognitive Burden Score (CBS) of 5 1 4 ¼ 20. The CBS for each of participate in the impact assessment are asked to make their
the other two hazard categories (supplier business and environ- judgments on the likelihood of occurrence of the potential hazards.
mental & social performance) is 4 1 4 ¼ 16. For a total of In this step the time occurrence of risk issues are evaluated ac-
20 þ 16þ16 ¼ 52 assessments per participant which is far less than cording to the three point scale rating shown in Table 4. According
the effort it will imply for one participant to make the evaluation to Table 15, for decision maker 1 the hazards originating from
with respect to all business objectives and individual suppliers. A 3- business performance and supplier environmental & social issues
point scoring method is used to evaluate the impact of each po- are more likely to occur in the short term for critical and strategic
tential hazard on each business objective, where a score of 3 suppliers than for leverage and tactical suppliers, except for the cost
Table 16
Occurrence evaluation for all supply segments by all the decision makers.
Areas of Potential Hazards Average Occurrence Score
Country Political & Economic 1.32 2.77 2.35 1.00

Trust 2.35 1.43 2.00 1.78
Logistics 3.00 3.00 1.32 2.00
Climate Change 1.89 2.17 1.43 1.00
Human Rights & Labor Practice 3.00 2.55 1.52 1.15
Quality 2.77 3.00 2.35 1.52
Delivery 3.00 3.00 1.74 1.32
Supplier E&S Climate Change 2.05 2.35 1.15 1.00
Resource Use 3.00 2.77 2.55 1.89
Human Rights & Labor Practices 2.55 2.77 1.74 1.15
Human Health & Safety 2.55 2.77 1.74 1.15
Table 17
Hazard scores determined for each supply segment.
Areas of Potential Hazards Hazard Score (the higher the worse)
Score Rank Score Rank Score Rank Score Rank
Country Political & Economic 0.67 9 1.18 1 0.81 4 0.41 10

Trust 0.97 5 0.78 8 0.80 4 0.55 7
Logistics 1.10 3 1.14 2 0.54 8 0.62 4
Climate Change 0.74 8 0.74 3 0.49 9 0.41 10
Human Rights & Labor Practice 0.98 4 1.01 6 0.58 7 0.44 9
Supplier Business Performance Management 0.97 5 1.09 3 0.74 4 0.56 6
Quality 1.14 1 1.14 2 0.90 2 0.67 2
Procurement Cost 0.98 4 1.02 5 0.89 3 0.95 1
Delivery 1.11 2 1.18 1 0.72 5 0.63 3
Supplier E&S Climate Change 0.76 7 0.86 7 0.47 10 0.41 10
Resource Use 1.14 1 1.05 4 0.97 1 0.60 5
Human Rights & Labor Practices 0.93 6 1.05 4 0.67 6 0.54 8
Human Health & Safety 0.93 6 1.01 6 0.67 6 0.54 8
of procurement which has high likelihood across all segments. A business performance criteria. Therefore, any effort invested in
geometric mean of all the decision maker's scores is used to collecting data for the other criteria will be fruitless as it will not
determine the occurrence scores for each supply segment. Table 16 affect much the hazardous level for the buying firm. Therefore, for
lists the results of this calculation. the vulnerability assessment, a list of indicators are jointly devel-
In the final step, the hazard score is obtained as the product of oped with the purchasing team for each key hazard in each
impact and occurrence scores. Table 17 lists the final hazard scores segment level. Table 18 lists the total number of indicators identi-
obtained for each supply segment. The lower scores are high- fied for the hazard categories. According to this, the number of
lighted. We observe that Tactical suppliers have low scores for most criteria used for critical and strategic items is nearly the same,
hazards except for business performance, trust and logistics. On the while the number of indicators is much smaller for leverage and
other hand, strategic and critical suppliers have low hazard scores tactical items.
for climate change at the country and supplier level. Next, data is collected regarding each indicator. A qualitative
assessment of vulnerability is carried out through group consensus
using the three level point scale shown in Table 5 where the highest
4.2. Vulnerability assessment number of points (i.e. 3) corresponds to a high risk related to the
specific indicator. For example, regarding quality certification, a
After performing the hazard assessment it should be easier to high risk level is assigned if suppliers within the evaluated segment
determine the vulnerability indicator criteria used to measure typically do not have any type of quality certifications. Once the
different hazards. For instance, from Table 17 it is evident that the points for each hazard vulnerability indicator are obtained, the
major source of hazards for Tactical items is related to supplier
Table 18
Hazard Vulnerability indicator criteria identified for each supply segment.
Risk Criteria Strategic Critical Leverage Tactical
Country Indicators 26 24 13 10
Supplier Indicators: Business Performance 26 26 18 5
Supplier Indicators: 26 23 8 2
E&S Performance
Total 78 73 39 17
Table 19
List of vulnerability scores (vs) obtained for each supply segment.
Areas of Potential Hazards Vulnerability Scores
Country Political & Economic 2.04 1.82 1.41 e

Trust 2.00 e 2.29 2.29
Logistics 1.86 1.86 e 1.35
Climate Change 2.55 e e e
Human Rights & Labor Practice 1.68 e 1.19 e
Quality 2.00 2.18 2.17 2.45
Delivery 1.74 2.25 2.00 3.00
Supplier E&S Climate Change 2.00 2.00 e e
Resource Use 3.00 2.85 2.00 3.00
Human Rights & Labor Practices 1.86 2.00 e e
Human Health & Safety 2.28 1.74 e e
Table 20
Risk management scores for each supply segment and factor.
Risk management practice Strategic Critical Leverage Tactical
Monitoring Business Performance 1.26 1.44 1.41 1.41

Absorptive Capacity 1.82 2.06 1.57 e
Mitigation Collaboration 2.29 2.00 2.45 e
Partner Development 2.85 e e e
Table 21
Risk management scores for each supply segment and main practice.
Risk management practice Strategic Critical Leverage Tactical
Monitoring 1.19 1.70 1.49 1.41

Mitigation 2.45 2.71 2.45 e
RMS 1.71 2.15 1.91 1.41
Vulnerability Scores (VS) for each main hazard are calculated using but also in social and economic aspects.
Equation (3). Table 19 shows the results of VS scores. The cells with Once the purchasing team has assessed its risk for sustainable
no score imply that the given hazard was not evaluated because its procurement with respect to different potential hazards, they can
HS was low and the procurement team considered irrelevant. define specific action paths. From the assessment, the decision
Procurement cost and resource use are areas having high vulner- makers arrived to the following conclusions:
ability scores across the four segments.
- Strategic suppliers require more attention to all potential hazard
4.3. Risk management practice assessment areas but especially to the risk to procurement costs and
resource use.
In the next step, we ask the purchasing team to evaluate the - Critical suppliers require special attention to supplier business
type of risk management practices used with each supplier performance, resource use and labor practices. To a lesser
segment. The evaluation is performed through group consensus extent, attention also needs to be given to logistics, political and
and the results for each practice factor are shown in Table 20. economic risks at the country level and to the other E&S risks at
According to the above assessment, the lack of implementation the supplier level.
of management practices that should be in place at each segment - Leverage suppliers require special attention to risks coming
level, are generating some risk for the buying company. Higher from business performance, resource use and, at the country
risks come from collaboration and supplier development practices, level, to trust, political and economic risks.
which apparently are not well established. Table 21 shows the - Tactical suppliers also require more attention to risks coming
aggregated results for Monitoring and Mitigation as well as the Risk from business performance and, to a lesser extent, to those
Management Practice Score (RMS) for each segment. generated at the country level with respect to logistics and trust.
4.4. Supply risk score estimation 5. Conclusions
Finally, the risk scores are obtained according to Equation (1). While the introduction of sustainability as an additional
We show them in Table 22. Hazards generated from resource use, dimension of focus increases complexity in supply chains, in many
quality and procurement costs pose the greatest risks for Strategic, organizations the amount of resources allocated to the imple-
Critical and Leverage suppliers. These results are interesting as they mentation of Sustainable Procurement is very limited. Chief Pro-
indicate that resource use seems to be the type of E&S hazard curement Officers struggle to implement these initiatives on a large
where the interests of all stakeholders intersect and this is probably scale, as they need to justify them to top management. A 2009
due to the impact this factor may have not only in the environment survey, conducted by Accenture (2009) among Heads of
Table 22
Supplier sustainability risk scores (SSRS) for each supply segment and hazard.
Areas of Potential Hazards Supply Sustainability Risk Score (SSRS)
Country Political & Economic 1.33 1.66 1.30 e

Trust 1.49 e 1.52 1.21
Logistics 1.52 1.66 e 1.06
Climate Change 1.48 e e e
Human Rights & Labor Practice 1.41 e 1.10 e
Quality 1.57 1.75 1.55 1.33
Delivery 1.49 1.79 1.40 1.39
Supplier E&S Climate Change 1.37 1.55 e e
Resource Use 1.80 1.86 1.54 1.37
Human Rights & Labor Practices 1.44 1.65 e e
Human Health & Safety 1.54 1.55 e e
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Journal of Cleaner Production 172 (2018) 4478e4493

Contents lists available at ScienceDirect

Journal of Cleaner Production

Multiple criteria framework for the sustainability risk assessment of a

1. Introduction terms is a key driver necessary to instill sustainability into pro-

Supply Management has taken a central role for companies

Fig. 1. The supply management process (Monckza et al., 2008).

Proﬁt Impact Supply Risk (SR)/Sustainability Impact (SI)

Low/Low High/Low Low/High High/High

Low Quadrant I Quadrant III Quadrant V Quadrant VII

3.1.1. Hazard assessment

Efficiency & HSk ¼ ðImpactk x Ocurrencek Þ1=2 (2)

High 3 1-5 years (short) 3

Fig. 3. Supplier level vulnerability indicator criteria.

High 3 Not available 3 Not available 3

Supply Segment Monitoring Mitigation

Evaluation & certiﬁcation Audits Absorptive capabilities Collaboration Development

RISK MANAGEMENT PRACTICE

Bussiness Absorptive Partner

Fig. 5. Attributes to measure risk management practice.

Category Number of suppliers % Supplier Distribution Number of commodities % Distribution of Commodities

Strategic 7 18% 102 12%

Then, a Consistency Index (CI) is calculated by CI ¼ lmax n

3.1.2. Vulnerability assessment

Table 9 Pagell, 2011) as well as to the ﬁndings of our literature review

Reputation 0.29 0.26 0.24 0.47 0.24

Business Objective (BO) Rating AHP

DM1 DM2 DM3 Average DM1 DM2 DM3 Average

Reputation 0.23 0.24 0.19 0.22 0.3 0.24 0.43 0.31

Country Political & Economic 2 3 2 3 1 0.34 6

exposure to harm. In addition, the monitoring of basic absorptive practice:

Areas of Potential Hazards Impact Score (the higher the worse)

Strategic Critical Leverage Tactical

Country Political & Economic 0.34 0.51 0.28 0.17

Areas of Potential Hazards Decision Maker 1

Strategic Critical Leverage Tactical

Country Political & Economic 1 3 3 1

Areas of Potential Hazards Average Occurrence Score

Strategic Critical Leverage Tactical

Country Political & Economic 1.32 2.77 2.35 1.00

Areas of Potential Hazards Hazard Score (the higher the worse)

Strategic Critical Leverage Tactical

Score Rank Score Rank Score Rank Score Rank

Country Political & Economic 0.67 9 1.18 1 0.81 4 0.41 10

Risk Criteria Strategic Critical Leverage Tactical

Areas of Potential Hazards Vulnerability Scores

Strategic Critical Leverage Tactical

Country Political & Economic 2.04 1.82 1.41 e

Risk management practice Strategic Critical Leverage Tactical

Monitoring Business Performance 1.26 1.44 1.41 1.41

Risk management practice Strategic Critical Leverage Tactical

Monitoring 1.19 1.70 1.49 1.41

4.4. Supply risk score estimation 5. Conclusions

Areas of Potential Hazards Supply Sustainability Risk Score (SSRS)

Strategic Critical Leverage Tactical

Country Political & Economic 1.33 1.66 1.30 e

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