Building a Natural Disaster Risk Index for Supply Chain Operations

Risk for an organization is associated with uncertainties in all areas of its operations. As firms move toward global sourcing, supply chain risk increases dramatically, which is linked to lower financial performance and market value. One major type of supply chain risk is disruptions caused by natural or man-made disasters. In this paper, major factors causing supply chain disruptions are identified based on resource dependency theory and contingency theory. As a result of the study, a comprehensive supply chain risk index for natural disasters is proposed by including two major factors (i.e. location and single source). Actions are suggested for supply chain managers to lower disruption risks within a supply chain when they use the risk index as a measure.