Modeling Supplier Risks Using Bayesian Networks

Purpose – To counteract the effects of global competition, many organizations have extended their enterprises by forming supply chain networks. However, as organizations increase their dependence on these networks, they become more vulnerable to their suppliers' risk profiles. The purpose of this paper is to present a methodology for modeling and evaluating risk profiles in supply chains via Bayesian networks.Design/methodology/approach – Empirical data from 15 casting suppliers to a major US automotive company are analyzed using Bayesian networks. The networks provide a methodological approach for determining a supplier's external, operational, and network risk probability, and the potential revenue impact a supplier can have on the company.Findings – Bayesian networks can be used to develop supplier risk profiles to determine the risk exposure of a company's revenue stream. The supplier risk profiles can be used to determine those risk events which have the largest potential impact on an organization's ...

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