Int. J.

Production Economics 134 (2011) 43–57

Contents lists available at ScienceDirect

Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Supply chain risk management in financial crises—A multiple

case-study approach$
Constantin Blome a,1, Tobias Schoenherr b,n
a
European Business School (EBS), Rheingaustr. 1, 65375 Oestrich-Winkel, Germany
b
Department of Supply Chain Management, The Eli Broad Graduate School of Management, N370 North Business Complex, Michigan State University, East Lansing, MI 48824, USA

a r t i c l e i n f o abstract

Article history: Supply Chain Risk Management has become a key concern for organizations, which is even further
Received 11 January 2010 emphasized by the current economic and financial crisis. Against this background, this paper
Accepted 2 January 2011 investigates successful approaches and experiences by companies in dealing with this new reality,
Available online 6 January 2011
especially as it concerns the supply side. Using in-depth case studies conducted among eight European
Keywords: enterprises, we develop a set of propositions about how companies manage supply risks in financial
Supply chain risk management crises, highlight how their risk management approaches have shifted, and illustrate how they are
Financial crisis related to Enterprise Risk Management. Our framework is further differentiated based on whether firms
Transaction cost economics are predominantly engaged in manufacturing or services—a factor influencing how supply chain risk is
Case study
managed. Transaction cost economics serves as our main theoretical anchor. By rigorously grounding
our research in both theory and empirical evidence, we provide valuable insight for both academia and
practice.
& 2011 Elsevier B.V. All rights reserved.

1. Introduction (Wagner et al., 2009). Due to these developments and realities,

The financial crisis led to a steep increase of corporate insol-
vencies in 2008 and 2009, with an unprecedented large number
of high-profile insolvencies and bankruptcies (e.g., Lehman Broth-
ers, Washington Mutual, General Motors, CIT, Chrysler, Thornburg
Mortgage, Indymac). Almost every region and every industry has
been affected by the crisis in one way or the other, making the
management of risk associated with the crisis an absolute neces-
sity for firms. This is particularly emphasized for companies being
tightly interlinked in a supply chain network comprised of multi-
ple entities (most notably customers and suppliers) who them-
selves may severely suffer under the financial crisis. In addition,
with the trend towards outsourcing and companies increasingly
focusing on their core competencies, effective and efficient supply
chain management has become a key component of corporate
strategy, competitive advantage, and success (Narasimhan and
Talluri, 2009); due to the scarcity of resources and the strained
environment, this importance is even heighted during economic
crises. Within this setting, the sourcing of products, services
and capabilities can thus be endangered by supplier defaults
$
Both authors contributed equally and are listed in alphabetical order.
n
Corresponding author. Tel.: +1 517 432 6437; fax: + 1 517 432 1112.
E-mail addresses: constantin.blome@ebs.edu (C. Blome),
Schoenherr@bus.msu.edu (T. Schoenherr).
1
Tel.: +49 611 36018 800; fax: + 49 611 36018 802.
supply chain risk management (SCRM) has become a key concern
for industry to be better able to detect, predict, avoid or reduce
the effects of supplier disruptions and defaults. The negative
effect of supplier defaults has been shown by Hendricks and
Singhal (2005), who reported a median decrease in operating
income of 31.28% for firms that had experienced a supply chain
glitch caused by suppliers. Overall, supply disruption costs today are
higher than ever before (Aydin et al., 2009), necessitating the further
investigation of SCRM.
Even without the financial crisis, SCRM has become a necessity
for many firms. Globalization, improved infrastructure and infor-
mation technology has led supply chains to become longer and
more complex, resulting in higher supply chain vulnerability
(Tang, 2006a, 2006b; Aydin et al., 2009). The importance of SCRM
was for example illustrated by the results of a recent survey,
which revealed that 90% of firms felt threatened by supply-side
risks (Snell, 2010). However, at the same time, respondents in 60%
of the firms noted that they were not confident or knowledgeable
enough about supply risk issues (Snell, 2010). The further study of
this topic, especially with the focus on the financial crisis, is
therefore warranted and crucial.
While enterprise risk management (ERM) has been an impor-
tant component of all facets of business (Wu and Olson, 2009a,
2009b, 2010a), its criticality is stressed for supply chain manage-
ment. Since this aspect is outside the internal control of the
enterprise, selecting and managing suppliers, while at the same

0925-5273/$ - see front matter & 2011 Elsevier B.V. All rights reserved.
doi:10.1016/j.ijpe.2011.01.002
44 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
time managing its associated risks, becomes crucial (Wu et al.,
2010; Wu and Olson, 2008, 2010b; Tang, 2006a). The criticality
and assurance of supply is even more emphasized in some
industries with their increasing reliance on just-in-time deliveries
and minimal inventories (cf. Tang, 2006b; Kelle and Miller, 2001),
providing a heightened level of supply risk. For example, while
the global automotive industry faced approximately 70 major
insolvencies in 2007, the financial crisis made this number rise to
225 insolvencies in 2009 (Roland Berger, 2010). These develop-
ments, together with the heavy dependence on suppliers (Wagner
et al., 2009), create major challenges for the entire industry. Even
though it may be impossible to assess how well risk management
systems would have been able to prevent these problems
stemming from the financial crisis, we are interested in how the
financial crisis has altered SCRM approaches applied by manufac-
turing and service firms. While it was prudent to conduct
SCRM all along, the importance of it has certainly been propelled
due to the financial crisis (Ariba, 2009). In addition, the crisis
may have shifted how SCRM is approached, warranting further
investigation.
While empirical research in SCRM and ERM is at an early stage,
it is at the same time faced with an unprecedented environment
of economic and financial turmoil. Within this context this
research project is therefore one of the first to examine the effect
of the financial crisis on SCRM practices. We consider SCRM as a
crucial and fundamental element of the broader concept of ERM
addressing the supply side, even though SCRM and ERM are often
perceived as separate functions within the firm. We conduct this
more focused investigation (i.e. the focus on supply-side risk
management), since we believe that the complex area of ERM is
most effectively management by the units that are most directly
affected by it—these units are most likely to have detailed knowl-
edge of how to potentially mitigate these risks. Overall, our specific
research questions are as follows: How did the financial crisis affect
SCRM in business? How may these effects influence SCRM approaches of
manufacturing and service firms differently? How are ERM and SCRM
interrelated, both before and during the crisis?
To address these research questions we pursue a multiple case
study approach with eight European multi-national corporations;
we specifically focused on industries that have been highly
affected by the financial crisis. Our explicit focus was on how
the current financial crisis may have forced these firms to alter
their approaches. We begin with the confirmation of the notion
that our current constrained environment has had an impact on
how enterprise risk is managed. We then proceed with the more
specific investigation of how the stages of risk identification, risk
analysis, risk mitigation, and risk monitoring (i.e. the risk manage-
ment process) may have changed. Using the theoretical anchor of
transaction cost economics (TCE) we suggest a set of propositions
that manifest themselves among our sample.
Within this context, our contributions are as follows. First, we
analyze SCRM’s adaptation to the unique present economic
situation characterized by financial turmoil and uproar, especially
as it relates to the supply side. We describe how firms react
to the financial crisis, with their risk management systems
mostly following a four-step SCRM process. Second, we portray
how manufacturing firms differ from service firms in their SCRM
approaches, also as a direct reaction to changes in the current
financial crisis. Third, we focus on the change of the relationship
between ERM and SCRM triggered by the financial crisis. And
fourth, we examine these issues with the lens of transaction cost
economics, grounding our empirical observations into this theo-
retical perspective. Overall, important contributions to both
theory and practice are made.
The paper proceeds as follows. In Section 2 we review related
literature, provide our theoretical foundation, and develop our
research framework. Section 3 describes the research methodology,
including the purposive selection of our cases, the data collection
process, and our data analysis approach. Elaborating on the results,
our analysis and interpretation in Section 4 establishes that SCRM is
impacted by the current financial crisis, and develops propositions
of how companies are reacting to this environment. Section 5
concludes, offering insights and implications for theory and practice,
and provides avenues for future research.
2. Literature review, theoretical foundation and research
framework
ERM has received considerable attention by both academic
researchers and practicing industry professionals, and numerous
action items and response strategies have been suggested (e.g.,
Wu et al., 2010; Wu and Olson, 2009a; Walker and Shenkir, 2008).
Equally multifarious have been its definitions. For example, one
frequently employed definition (e.g., Gordon et al., 2009; Makomaski,
2008; Moeller, 2007) is provided by COSO (2004, p. 2), who define
ERM as ‘‘a process [that is] effected by an entity’s board of directors,
management and other personnel, applied in strategy setting and across
the enterprise, designed to identify potential events that may affect the
entity, and manage risk to be within its risk appetite, to provide
reasonable assurance regarding the achievement of entity objectives.’’
Similarly, Wu et al. (2009, p. 1) define ERM as ‘‘the integrated process
of identification, analysis and either acceptance or mitigation of
uncertainty in investment decision making.’’
Among the many risks an enterprise faces, supply or supply
chain risks are especially important to manage, due to the increa-
sed importance of supply chain partners (Gottfredson et al., 2005;
Narasimhan and Talluri, 2009). In the present research we there-
fore focus on SCRM. SCRM has been investigated from a variety
of angles. For example, Li and Barnes (2008) developed proac-
tive SCRM methods when sourcing from emerging markets, and
Ellegaard (2008) looked at SCRM from the perspective of a small
company. In addition, Kull and Closs (2008) considered the risk of
second-tier supplier failures in serial supply chains, and Zsidisin
and Ellram (2003) provided an agency perspective of supply chain
risk. Additional illustrative recent research conducted in this area
is present in Table 1, which summarizes the main objectives of
the highlighted papers, their methodology, focus and perspective.
Even though the field of SCRM is relatively new, the overview is
not meant to be exhaustive rather, it is meant to provide an
illustrative snapshot of the field. For a recent literature review
of global SCRM the interested reader is referred to Manuj and
Mentzer (2008).
The International Journal of Production Economics has also had a
strong tradition of publishing research related to SCRM and its
mitigation. As such, Wu and Olson (2008) used simulation to assess
risk evaluation models within supply chains. Hallikas et al. (2004)
presented methods for risk management in a complex network
environment, and Tang and Tomlin (2008) illustrated the power of
flexibility in mitigating supply chain risks. A comprehensive review of
quantitative models for the management of supply chain risk was
offered by Tang (2006b), who also developed a unified framework for
their classification. Most recently, Lo Nigro and Abbate (in press)
looked at risk assessment and profit sharing in business networks,
and Trkman and McCormack (2009) developed a conceptual model
for managing supply chain network risks. Furthermore, Sarkar and
Mohapatra (2009) focused on the determination of the optimal
supply base while considering supply disruption risks, and Oke and
Gopalakrishnan (2009) provided a case study of managing disrup-
tions in a retail supply chain.
Overall, SCRM has been regarded as crucial for the overall
management of risks facing an enterprise (e.g., Beasley et al., 2008;
 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57 45

Table 1
Illustrative literature.

Study Primary Focus Perspective Summary Focus on

methodology economic
crisis?

Babich et al. (2007) Modeling Supplier Supply chain Investigates the effects of disruption risks in supply chains with one No
default risk retailer and competing risky suppliers considering the correlation of
supply risks
Braunscheidel and Survey Disruption risk Supply chain Investigates the impact of two cultural antecedents, market orientation No
Suresh (2009) and learning orientation, and three organizational practices, all aimed at
augmenting the supply chain agility of a firm
Choi et al. (2008) Modeling Supply chain risk Supply chain Investigates the issues of channel coordination in a supply chain when No
the individual supply chain decision makers take mean-variance (MV)
objectives
Craighead et al. (2007) Case studies Supply chain Supply chain Derives six propositions relating the severity of supply chain disruptions No
disruptions to the supply chain design characteristics of density, complexity, and
node criticality, and to the supply chain mitigation capabilities of
recovery and warning
Deane et al. (2009) Modeling IT security risk in Supply chain Develops a generalizable mathematical model that quantifies No
the supply chain information technology (IT) Security risk in the supply chain
Ellegaard (2008) Case studies Supply risk Small company Determines how owners of small manufacturing companies manage No
owners supply risk and identifies the practices constituting their approach
Ellis et al. (2010) Survey Supply disruption Purchasing Operationalizes and explores the relationship between three No
risk representations of supply disruption risk: magnitude of supply
disruption, probability of supply disruption, and overall supply
disruption risk
Foerstl et al. (2010) Case studies Supplier risks Purchasing Derives propositions on supplier sustainability risk management based No
on the dynamic capabilities view
Faisal et al. (2006) Modeling Supply chain risk Supply chain Presents the enablers of supply chain risk mitigation and the No
classification into driver and dependent categories
Hendricks and Singhal Secondary Supply chain Supply chain Investigates the association between supply chain glitches and
(2005) Data glitches operating performance based on an event study
Hertzel et al. (2008) Modeling Financial distress Supply chain Examines the wealth effects of distress and bankruptcy filing for No
suppliers and customers of filing firms
Kull and Closs (2008) Simulation Supply risk Supply chain Examines the supply risk issue within the context of a second-tier No
supply failure, and is grounded in inventory and resource dependency
theories
Neiger et al. (2009) Conceptual Supply chain risk Supply chain Develops a value-focused process engineering methodology for process- No
development based supply chain risk identification
Ritchie and Brindley Conceptual Supply chain risk Supply chain Presents a framework integrating the dimensions of risk and No
(2007) development performance in supply chains, provision of a categorization of risk
drivers
Schoenherr et al. Modeling Supply chain risk Purchasing Presents a process to assess supply chain risks within an offshore No
(2008) context based on the analytical hierarchy process methodology
Sinha et al. (2004) Conceptual Supplier risk Purchasing Proposes a methodology for mitigating risks in the aerospace supply No
development chain
Smeltzer and Siferd Case studies Supply risk Purchasing Argues that proactive purchasing management is risk management No
(1998)
Swinney and Netessine Modeling Supplier default Purchasing Demonstrates preference of buyers for long-term contracts over short- No
(2009) term contracts when supplier failure is feasible
Trkman and Conceptual Supply chain risk Purchasing Presents a method for the assessment and classification of suppliers Yes
McCormack (2009) development based on their characteristics, performance, and the environment of the
industry
Wagner and Bode Survey Supply chain risk Logistics and Finds that supply chain characteristics (a firm’s dependence on certain No
(2006) supply chain customers and suppliers, the degree of single sourcing, reliance on
management global supply sources) are relevant for a firm’s exposure to supply chain
risk
Wagner et al. (2009) Modeling Supplier default Supply chain Demonstrates that based on default dependencies among suppliers No
significant consequences exist
Zsidisin (2003a) Case studies Supply risk Purchasing Provides definitions for supply risk and outcomes of supply risk events No
Zsidisin (2003b) Case studies Supply risk Purchasing Describes characteristics of inbound supply that affect managerial No
perceptions of supply risk and provides a classification of supply risk
sources

Gordon et al., 2009). This importance has been significantly heigh-
tened especially by the current economic crisis (Simkins, 2008), again
due to the increased reliance on suppliers. While lessons can be
learned from previous crises (e.g., Scholes, 2000), the present strug-
gles, with one of the most severe financial downturns since the
Great Depression, demand a new approach to risk management
(Ariba, 2009; Power, 2009). The degree of an enterprise’s interconnec-
tion with its suppliers today is also unprecedented in business
history, presenting the supply side with a whole new host of
challenges. In the remainder of the paper we will therefore focus
on SCRM.
Despite this true significance of SCRM in economic crises,
research in this area has been scarce. For example, out of the
studies highlighted in Table 1, only one dealt specifically with the
issue of SCRM within the context of economic crisis (Trkman and
McCormack, 2009, p. 255). The authors illustrated in a case study
46 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
that car manufacturers have been suffering from ‘‘unplanned
supplier events such as shortages, declining quality or in some
cases even supplier bankruptcies on a frequent basis.’’ Our study
differentiates itself by the focus in its entirety on case examples,
as well as the derivation of testable propositions. Even though all
other listed contributions discuss supplier risk, supplier distress,
and the like, research is deplete of how such a severe develop-
ment like the financial crisis affects risk management. A financial
crisis is different from single suppliers defaulting in a supply
chain network, as the entire supply network, including the focal
firm, may be distressed. Furthermore, one could argue that the
financial crisis may not only negatively affect the focal firm; there
can also be positive repercussions. For example, suppliers may
have idle capacity and may thus be able to deliver with shorter
lead times, resulting in a positive impact on the buying firm. As
such, it is important to note that the financial crisis must be exp-
lained including both negative and potentially positive impacts
on the buying firm.
Our primary theoretical foundation rests on the literature in
transaction cost economics (TCE), which considers the expense
incurred in an economic exchange. Building on the work of Coase
(1960), Williamson (1981) developed this concept into a theory
explaining the behavior of business exchanges. Characterized as a
normative model, TCE can explain why some firms perform better
than others in regards to transaction costs (Noordewier et al.,
1990). TCE considers the three dimensions of asset specificity (i.e.,
transaction-specific investments), the frequency of transactions,
and the environmental uncertainty present in the exchange
(Williamson, 1979, 1985). From a supply chain perspective, TCE
has been used to investigate topics such as sourcing (Murray and
Kotabe, 1999) and outsourcing strategies (Williamson, 2008).
Most recently it was also applied to the issue of SCRM (Ellram
et al., 2008). Specifically, the authors noted that fixed set-up costs,
which oftentimes include expenses associated with risk manage-
ment activities, can outweigh the variable transaction costs in
certain sourcing arrangements. We build on these theoretical
foundations in the development of our propositions in a later
section.
Against this theoretical background, our research framework
rests on the definition of risk management provided by Wu et al.
(2009). As such, we analyze SCRM in the current economic crisis
in terms of the process steps that are followed. Specifically, we
investigate how the stages of risk identification, risk analysis, risk
acceptance/mitigation, and risk monitoring are impacted by the
current financial stress and economic downturn, and shed light
on the different reactions exhibited by manufacturing and service
firms. In addition to these phases, we also investigate the link of
SCRM and ERM, which has received very limited attention in
extant research. Our research model is graphically depicted in
Fig. 1. While we portray it as a one-dimensional process, it must
be emphasized that this process is continuous, i.e. once the risk
monitoring stage has been reached, the process of risk identification,
analysis, acceptance/mitigation, and monitoring should start all
over again.
- Risk Identification
Financial / - Risk Analysis
Economic Crisis - Risk Mitigation
- Risk Monitoring
Fig. 1. Research framework.
3. Research methodology
As the financial crisis is a recent phenomenon whose effects on
ERM, and more specifically on SCRM, are largely unknown yet, we
chose an inductive multiple case study approach based on Yin’s
(2009) principles. The benefits of case studies for this purpose
have been illustrated in prior research, stemming primarily from
their information richness and the ability to answer how and why
questions (Eisenhardt, 1989; Ellram, 1996; Yin, 2009). Further-
more, the case study approach was judged to be the most
appropriate due to the following reasons. First, ERM, and more
specifically SCRM are in an exploratory stage, and even less is
known on the effects of the financial crisis on procurement. Our
research on how a firm’s SCRM is affected by the financial crisis is
therefore in a nascent state, making case studies an ideal metho-
dology. Second, case study research is also well-suited for the
investigation of complex phenomena due to information-rich
cases, which would be too complex for surveys (Yin, 2009). And
third, the chance that respondents report SCRM efforts in a
socially desirable manner in the present financial crisis is high.
This is due to risk management being considered as being able to
mitigate the negative effects of the crisis and potential supply
chain disruptions. Case study research also enables the possibility
to check for validity of responses due to the nature of personal
communication and experienced interviewers. An overview of
measures, which were undertaken in each stage of the present
research to address the concerns regarding validity and reliability,
is provided in Table 2.
3.1. Case selection
After two exploratory interviews at a manufacturing and
at a service firm that were both impacted by the financial crisis,
the differences of SCRM approaches pursued by predominantly
service and manufacturing firms became apparent. These
interviews also showed that the differences stemmed primarily
from the dissimilar proportion of direct and indirect spend
handled. This is indicative of the differences in supply chain
structures, as well as the strategic importance of the procurement
department. We therefore considered two different types of
firms in our sampling, which differentiated themselves based
on the nature of their procurement activities: whether the
procurement function dealt predominantly with direct spend
(most often manufacturing firms) or indirect spend (most often
service firms). The procurement department served as the unit of
analysis.
Using the framework developed above we applied theoretical
sampling to select the case study sample (cf. Closs et al., 2008;
Eisenhardt, 1989; Glaser and Strauss, 1967). The companies were
purposefully selected in order to provide a wide range of
perspectives. As such, large European firms were chosen that
were judged to be especially affected by the current financial
Supply Chain Enterprise
Risk Management Risk Management
 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57 47

Table 2
Measures taken to ensure the validity and reliability of the research (based on Gibbert et al., 2008; Yin, 2009).

Reliability/validity criterion Research phase

Design Case selection Data gathering Data analysis.

Reliability (demonstrates that the  Develop case study  Selection based on  Provide the  Involve authors
operations of a study can be repeated, protocol theoretical sampling questionnaire to all who did not gather
with the same results) interviewees before data
the interview
 Develop and utilize a  Conduct coding
case study database checks for inter-
rater reliability

Internal validity (establishes a causal  Establish the  Record sampling  Record factors that  Pattern matching
relationship, whereby certain conditions theoretical framework criteria in case study might serve as
are shown to lead to other conditions, as prior to data analysis protocol alternative
distinguished by spurious relationships) explanations
 Triangulation of
multiple data
sources

Construct validity (establishes correct  Adapt constructs from  N/A  Use expert  Key informants
operational measures for the concepts previous empirical interviewers review the draft
being studied) works to the field of case study report
SCRM
 Provide chain of
evidence

External validity (establishes a domain in  Sampling within  Clearly describe case  N/A  N/A
which the study’s findings can be predominantly direct firms and contextual
generalized) and indirect spend factors
firms

Table 3
Case study demographic information for fiscal year 2009.

BankingCo InsuranceCo FashionCo EnergyCo LogisticsCo ElectronicsCo ManufacturingCo AutomotiveCo

Number of 50,001–100,000 10,001–50,000 10,001–50,000 50,001–100,000 more than 100,001– 50,001–100,000 More than
employees 200,000 200,000 200,000
at group level
Annual revenue 25bnh–50bnh 10bnh–25bnh Below 10bnh 50bnh–100bnh 50bnh–100bnh 10bnh–25bnh 10bnh–25bnh 50bnh-100bnh
Organizational Centralized De-centralized De-centralized Matrix-Hybrid Matrix-Hybrid Matrix-Hybrid Matrix-Hybrid Matrix-Hybrid
structure
Total headcount in Less than 100 100–500 100–500 500–2000 More than 2.000 100–500 100–500 More than 2000
purchasing
Purchasing Volume 1bnh–5bnh Less than 1bnh Less than 1bnh 5bnh–10bnh More than 5bnh–10bnh 5bnh–10bnh More than 10bnh
10bnh
Spend structure Indirect spend Indirect spend Direct spend Indirect spend Indirect spend Direct spend Direct spend Direct spend

crisis. We also paid attention that these firms were regarded as
exhibiting best practices in supply chain management overall, as
based on anecdotal evidence and reports in practitioner journals.
An initial list of 15 firms was identified by an examination of the
average decline in stock market value between November 2008
and April 2009. These firms, all exhibiting a significant decline,
were then contacted in a stratified sampling approach to ensure
the presence of a wide variety of industries. In selecting the initial
15 firms we sought to find extreme cases in several industries,
since the financial crisis had a different impact on SCRM in
different industries (Gerring, 2007). The following industries were
selected: banking, logistics, and insurance for the predominantly
indirect spend driven procurement departments, and automotive,
consumer products and manufacturing for the procurement
departments driven by primarily direct spend. In order to avoid
differences according to firm size, we chose a set of the largest
firms in each industry. Furthermore, we restricted our sample
to European firms that are publicly listed and that operate in
global markets. Overall, these firms were judged to offer suffi-
cient cross-case variance. A total of eight companies agreed to
participate.
In order to ensure theoretical saturation we collected two
additional cases in the energy and fashion industry (Glaser and
Strauss, 1967; Yin, 2009). An analysis of these two cases did not
add significant insight on top of what had already been discov-
ered, yielding it unlikely to derive new major insights from the
conduct of further case studies. Table 3 provides overall demo-
graphic information of the eight firms. For reasons of confidenti-
ality we will refer to these firms by generic monikers (e.g.,
BankingCo) instead of their real name.
3.2. Data collection
Data collection took place in two waves to investigate how the
SCRM process evolved during times of financial crisis. The first
wave took place between April and September 2009 and the
second wave between August and November 2010. The inter-
views were conducted with at least one high-level purchasing
executive, and up to two purchasing managers responsible for
SCRM (see Table 4 for an overview of the interview partners).
The interviews were conducted by two experienced case study
48 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57

Table 4
Key informants for interviews.

Company Function of respondent Interview number and duration Interview mode

BankingCo Chief Purchasing Officer 1/90 min Personal

Head of Supply Risk Management 3/150 min Personal and telephone
InsuranceCo Chief Purchasing Officer 3/120 min Personal and telephone
Head of Standards & Tools in Procurement 2/90 min Personal and telephone
Head of Strategic Procurement 2/90 min Personal and telephone
FashionCo Manager for Quality in Vendor Management 2/150 min Personal and telephone
Manager for Standard and Tools in Procurement 1/90 min Personal
Head of Vendor Sustainability Compliance 1/45 min Telephone
EnergyCo Chief Purchasing Officer 1/30 min Personal
Head of Strategic Sourcing 3/150 min Personal and telephone
LogisticsCo Chief Purchasing Officer 3/120 min Personal
Head of Purchasing Region A 2/60 min Personal
Head of Standards and Tools in Purchasing 4/300 min Personal and telephone
Category Manager A 1/60 min Personal
Category Manager B 1/60 min Personal
ElectronicsCo Strategic Sourcing 3/150 min Personal and telephone
Head of SCRM 1/45 min Telephone
ManufacturingCo Chief Purchasing Officer 3/150 min Personal and telephone
Head of SCRM 3/180 min Personal and telephone
AutomotiveCo Head of Compliance 3/150 min Personal and telephone
Head of SCRM 3/90 min Personal and telephone
SCRM Manager 2/240 min Personal and telephone
Category Manager A 1/60 min Personal
Category Manager B 1/60 min Personal
Category Manager 1/60 min Personal

25 interviewees 51/46.5 h

researchers, who had done similar studies in the field of procure-
ment before (Foerstl et al., 2010; Reuter et al., 2010). Typically,
the first interviews were done in person at the site of the
case firm; subsequent interviews were conducted via telephone
for logistical reasons. Since a personal contact was established
in our initial meetings, we felt the validity of the results as
not being affected by utilizing phone interviews in subsequent
interviews.
Detailed notes were taken during the interviews. Additional
material, such as presentation slides and other documents (e.g.,
supplier self-assessment questionnaires, action-plans for subse-
quent supplier development), were used for triangulation. Imme-
diately after the interviews, further notes were compiled about
the overall impression of the interviewer. Overall, a thorough case
study protocol and a semi-structured interview guide led this
investigation (Appendix A provides illustrative questions utilized
in this process). This structured approach facilitated the record-
ing of data and ensured a consistent interview structure across
the companies. A case study database was developed in NVivo to
store and structure relevant information and supplemental mate-
rial. Such material included also information from the com-
panies’ websites, from their sustainability and annual reports, as
well as data retrieved from third parties (Gibbert et al., 2008;
Yin, 2009).
3.3. Data analysis
Data analysis started with open coding of the collected infor-
mation from the available sources; this provided a first structure.
An iterative process was then used to identify key categories. As
such, we first developed case profiles in order to carry out within-
case analyses. After the interviewer had coded the cases, two
scholars experienced in SCRM compared the classification results.
In case of discrepancy, the case was jointly analyzed and coded
to ensure consistency. This iterative approach improved our
analysis and inter-rater reliability (Pagell and Krause, 2005).
Having finalized the within-case analysis, cross-case analysis
was conducted to detect communalities and differences in pat-
terns of SCRM across the studied cases (Eisenhardt and Graebner,
2007; Yin, 2009). In the following we present these findings along
the research framework introduced above, and develop appro-
priate propositions. Our primary theoretical anchor is transaction
cost economics.
4. SCRM and its link to ERM in financial crises
Following our research framework outlined in Fig. 1, we utilize
our case study insight in the following sections to develop a set
of propositions. While these sections focus on the interpretation
of the data and the development of propositions, an overview of
some of our raw data and how our case study firms pursued each
stage is provided in Appendix B. These data nicely illustrate and
establish that SCRM is indeed impacted by the current financial
crisis.
Examples of how the crisis impacted SCRM are numerous:
Most obvious are the changes in the automotive industry where
new teams, processes, information technology (IT) tools, etc. have
been developed to deal with SCRM. The high number of supplier
insolvencies had dramatic impact especially within the automo-
tive industry. In the fashion industry, the crisis increased the need
for SCRM dramatically, as suppliers are mainly located in Asia.
Basing SCRM solely on monitoring financial data is therefore
extremely risky; much more is needed in our increasingly com-
plex environment. Sustainability-related issues on the supply side
can serve as an illustrative example (e.g., the risk of suppliers
using child labor, which is a very relevant topic in the fashion
industry); these risks are not assessable based on the mere
reactive monitoring of financial statements.
 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
4.1. The impact of the financial crisis on SCRM
In our first propositions we suggest how the financial crisis has
impacted the way firms are pursuing the four enterprise risk
process stages of risk identification, risk analysis, risk acceptance/
mitigation, and risk monitoring.
The first step, risk identification in supply chain risk manage-
ment, is concerned with the comprehensive and structured reco-
gnition, determination, and collection of potential supply risks
associated with a certain supply chain aspect (cf. Tummala and
Schoenherr, forthcoming). This step establishes visibility of
the potential risks and builds the foundation for the ensuing
SCRM process. An examination of our data revealed that
these motivations differ significantly among our sample firms
(see Appendix B).
Overall, however, we observed that in the current constrained
environment the focus of the supply risk identification phase is
changing, which seems to be due to the shifting risk awareness
based on the growing number of insolvencies. For example, a
manager of EnergyCo stated: ‘‘Our firm has established a very
‘constricted corset’ of risk management measures to avoid supplier
insolvencies due to the high risk awareness of the firm as a whole.’’
Risk awareness is essential for risk management (Power, 2009),
and one can only be aware of and subsequently manage and try to
mitigate these risks once one has identified these. All of our
sample firms stated that the awareness of supply chain risks has
increased especially due to supplier insolvencies. AutomotiveCo,
ManufacturingCo, InsuranceCo as well as ElectronicCo reported
supplier insolvencies in the financial crisis as one of the major or
the most important corporate risks. Consequently, some firms
(ElectronicsCo, AutomotiveCo, and ManufacturingCo) decided to
adapt the list of potential risks they track, especially for the
financial dimension. Others, like EnergyCo and BankingCo, did not
adjust, because they felt that their list of potential risks had
already been complete. AutomotiveCo introduced a new cross-
functional process to better identify supply chain risks, which
is illustrated by the following statement of a category manager:
‘‘We are now several players in a team assessing supplier risks:
internal clients, risk management and procurement. And sometimes
we get the help of finance to provide financial supplier ratings.’’
Other firms use a similar cross-functional process, but had esta-
blished this process already before the financial crisis (e.g.,
FashionCo, ElectronicsCo). Risk identification efforts and compre-
hensiveness, thus, have increased in the financial crisis across
firms.
Once risks have been identified, the necessary next step is to
analyze each risk individually and to determine its potential
consequences. In the risk analysis stage, the severity and like-
lihood of each risk is assessed, in order to provide more detailed
input to the subsequent decision as to which risks to mitigate
(Tummala and Schoenherr, forthcoming; Zsidisin et al., 2005).
Even though the sample firms chose different approaches to
assess the risks in detail, all reflected this concept. When analyz-
ing the potential impact of risks, some firms in our sample
explicitly determined the potential impact directly by using
different scales (e.g., the value in h for BankingCo or a nominal
scale for LogisticsCo) or indicators (e.g., EBIT effect for FashionCo,
procurement volume for AutomotiveCo and LogisticsCo). When
assessing the likelihood of supply risks, our sample firms used
multiple criteria, like quality or delivery performance, to assess
the probability indirectly (AutomotiveCo, ElectronicsCo), or used
a direct probability rating based on equidistant scales (EnergyCo,
ManufacturingCo, AutomotiveCo, LogisticsCo, and BankingCo).
What changed during the financial crisis is the depth of analysis
and the use of a multitude of indicators to predict supplier
disruptions. Among all of our sample firms we found a heightened
49
emphasis on the gathering of additional information and intelli-
gence due to external threats, such as supplier disruptions. While
some firms consulted external rating services, such as indexes
from Dun & Bradstreet (e.g., AutomotiveCo, FashionCo, EnergyCo),
others relied only on internal financial evaluations (e.g., Electro-
nicsCo used the z-score (Altman, 1968)). Yet others used a
combination of both (especially our companies in or related to
the automotive industry).
In any case, the proficiency of using financial indicators to
examine the financial status of suppliers has increased signifi-
cantly during the financial crisis. For example, a manager at
EnergyCo noted: ‘‘Before the financial crisis we didn’t have a very
professional assessment of our suppliers’ financials; now we have a
very good system working.’’ The resources spent on risk assessment
increased drastically for all our sample firms. Even though all
firms made use of supplier financial analysis, especially Auto-
motiveCo, FashionCo, and ManufacturingCo doubted the useful-
ness of external and especially balance-sheet related indicators,
since they are considered as ‘‘lagging instead of leading indicators’’
(AutomotiveCo). The overall consensus derived from our case
studies confirmed again our a priori notion that the risk analysis
stage of SCRM has achieved a higher level of comprehensiveness
in the current economic crisis.
Once risks have been indentified and analyzed, acceptable
levels of risk need to be established (risk acceptance) (Tummala
and Schoenherr, forthcoming). In addition, risk mitigation plans
need to be developed, should a risk be evaluated above the
determined threshold value. Our case study observations revealed
some interesting developments and a shift in company behaviors. In
general, the firms in our study allowed the decentralized units in
procurement – sometimes in combination with the internal clients –
to decide on the appropriate risk measures and their acceptable
levels (e.g., LogisticsCo, ElectronicsCo). Some firms, however, posited
some upfront normed strategies depending on the outcome of the
risk analysis. For example, ManufacturingCo required a mandatory
response plan including a report to executive or line management in
case of a major and severe risk. The financial crisis had, due to the
cash restrictions of the focal firms, a disciplining effect on the risk
mitigation strategies. As such, managers ‘‘were much more compliant
with existing risk mitigation processes’’ (FashionCo) and risk mitiga-
tion measures were determined jointly with top management (e.g.,
AutomotiveCo, ManufacturingCo). Overall, the general risk treat-
ment strategies were similar for the firms in our sample, and
depended mainly on the importance of the supplier, as well as on
the potential magnitude of the risk and the cash situation of the
focal firm. Overall, the financial crisis encouraged firms to be more
aware of their level of risk acceptance, as well as to plan their risk
mitigation strategies.
Risk monitoring includes ‘‘monitoring developments in the
supply chain that may increase or decrease risks on an on-going
basis’’ (Zsidisin et al., 2005, p. 3413). In order to control risks,
most of our sample firms incorporated risk monitoring into their
regular supplier monitoring activities, shortened the assessment
cycle, and increased the monitoring depth during the financial crises.
Furthermore, we found the automotive and electronics indus-
tries being very careful in monitoring suppliers: AutomotiveCo redu-
ced its monitoring cycle form a half-yearly cycle to a weekly basis for
all first-tier and also some second-tier suppliers. The following
statements illustrate well why so many resources are used for moni-
toring purposes: ‘‘Supplier disruptions are now corporate risk number 1.
[y] Risk management in the financial crisis is all about being very fast in
reacting, since we lose millions of Euro if a strategic supplier goes out of
business. The faster we know that the supplier defaults, the less money we
will lose.’’ Overall, six firms in our sample increased their monitoring
frequency; only EnergyCo and BankingCo kept the same monitoring
frequency as before the crisis.
50 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
These notions are also supported from the transaction cost
perspective (Williamson, 1979, 1985). As such, the environmental
uncertainty inherent in every exchange can be alleviated or at
least mitigated by the identification and subsequent management
of risk. The risk identification phase is however the most crucial,
since risks that are not identified cannot be managed. Due to the
multitude of supply chain failures in the recent past, primarily
based on the current economic downturn, the investment in risk
identification processes may therefore be prudent and outweigh
the imposed burden. Doing business has become more complex
and risky, primarily due to increased dependency on suppliers;
this risk needs to be managed carefully. In addition, transaction
cost economics can provide a useful theoretical anchor to explain
the heightened importance placed on supply risk analysis within
SCRM. Higher transaction costs may very well be warranted in
order to make sense of the collected risk information in the prior
stage, and analyzed in the current one. Since the threat of supply
disruptions has become even more real, it seems wise to invest in
these initiatives necessary to ensure the successful transaction.
Our observations related to risk mitigation and monitoring can
also be explained from a transaction cost perspective: Risk
mitigation mainly addresses safeguarding of the transaction to
achieve the lowest overall transaction costs. Especially in times of
crisis the cost for safeguarding the transaction (e.g., investing in a
distressed supplier) can be substantial, and hence transaction cost
analysis not only has to incorporate risk management costs, but
also the cost of damages in case of disruptions. In a similar way,
the increased costs for monitoring suppliers can lead to decreased
overall transaction costs, as early detection of supply chain risks
can enable risk mitigation, and hence lower overall transaction
costs, especially as the likelihood of supply chain disruptions has
been increasing in the financial crisis. Based on our empiri-
cal observations and theoretical contemplations we propose the
following.
P1. The current financial crisis increases the comprehensiveness of
SCRM in each step of the SCRM process: (a) risk identification, (b) risk
analysis, (c) risk mitigation, and (d) risk monitoring.
4.2. The impact on risk mitigation versus risk acceptance
Firms have different strategic options in SCRM. Two of these
options are especially dominant in the financial crisis and seem to
be central in the risk mitigation plans of firms. As such, companies
can either try to avoid supply chain disruptions proactively, or
they can accept the supply chain risk and suffer the negative
impact if the risk materializes.
For some firms in our sample, their risk mitigation strategies
have shifted more dramatically due to the financial crisis than for
others. As such, on the one hand, EnergyCo and BankingCo stated
that their general risk mitigation strategies and countermeasures
have not shifted due to the financial crises. For example, a
manager of EnergyCo noted: ‘‘Helping the supplier out financially
is an extreme exception, before and during the crisis. As a conserva-
tive firm we just don’t do it.’’ Conversely, on the other hand,
ManufacturingCo, AutomotiveCo and ElectronicsCo had to help
several suppliers financially to keep the supply chain functioning.
Even though less money is available to help suppliers, as
explained by the supply risk manager of AutomotiveCo, the need
to help distressed strategic suppliers is crucial. An expert of
FashionCo stressed that helping suppliers must be more focused
than before the financial crisis, since the possibility to help has
decreased. However, for firms dealing primarily with indirect
spend, it is still quite unusual to help suppliers financially;
this has also not changed during the financial crisis. EnergyCo,
AutomotiveCo, FashionCo and LogisticsCo even admitted that the
financial crisis was used to consolidate suppliers. At the end, the
SCRM methods are very much based on the dependency level
with the supplier. Overall, our case study observations suggest
that buying firms primarily rely on monitoring suppliers instead
of proactively avoiding supplier insolvencies, and hope that
the suppliers will solve their problems independently.
Specifically, buyers try to be very reactive when a supplier
becomes insolvent. As a case in point, AutomotiveCo established
a new team in SCRM which solely focuses on reactive risk
management. This team travels to suppliers and mainly concen-
trates on shifting tools and materials from the insolvent supplier
to a new supplier.
In business, the most efficient and effective markets are used
to conduct transactions. In the unexpected crisis that the world
economy is struggling with at the moment, it may thus be more
prudent for a buyer to accept the potential risk posed by finan-
cially weak suppliers. Rather than helping them out in the crisis,
buyers tend to shift their production reactively to a secondary
supplier. We have seen this shift especially among firms that
focus on direct spend. It was less apparent among our firms
with primarily indirect spend, since they were usually already
focusing on the more reactive and less strategic approach of risk
acceptance (due to the often low significance or importance of
indirect items). We therefore suggest the following proposition.
P2. The current financial crisis fosters especially a risk acceptance
(as opposed to mitigation) approach in direct spend firms. Indirect
spend firms are already more focused on risk acceptance approaches
and have not changed their behavior.
4.3. The contingency of manufacturing versus service firms
Besides having detected a greater focus on the four risk
management process steps throughout, as postulated in proposi-
tion 1, a further pattern that emerged out of the data analysis
was the difference in SCRM approaches taken by manufacturing
versus service firms. Overall, we found that the emphasis on the
four risk management processes was greater among firms procur-
ing predominantly direct materials (manufacturing firms) than
for firms producing primarily indirect items (service firms).
As such, risk identification was of particular importance to our
manufacturing firms dealing with primarily direct spend, due to
the usually more immediate impact on the firm’s operations
in case of faulty direct supply. This is very much in line with
our discussion leading to proposition 1, as mainly manufacturing
firms (ElectronicsCo, AutomotiveCo, and ManufacturingCo) had
adapted the list of potential risks they track in their respective
risk management process.
Similarly, risk analysis was pursued more rigorously by some
of our direct spend (manufacturing) firms. Especially, Automoti-
veCo, ManufacturingCo and ElectronicsCo extended their prob-
ability rating as part of their risk analysis to almost every single
possible factor that can be used to predict supplier insolvencies,
mirroring the importance of this risk. In contrast, FinanceCo –
which had historically used a comprehensive set of indicators –
and InsuranceCo had not changed the level of detail in analyzing
supplier insolvency risk in the financial crisis.
We also observed in our sample that our direct-spend firms
changed their supply chain risk monitoring to a larger extent as
our service firms. For instance, FashionCo assessed suppliers at
least half-yearly in workshops, in addition to separate audits.
ElectronicsCo used predominantly a semi-annual approach; how-
ever, depending on the ‘value at risk’, also quarterly assessments
were possible. Only two of the indirect spend firms (InsuranceCo
and BankingCo) used a quarterly or semi-annual approach. This
lack of supplier criticality for the business was illustrated in the
following quote by a manager of InsuranceCo: ‘‘We don’t have any
 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
raw material suppliers or other really non-substitutable suppli-
ers; there is always plenty backup available.’’
These observations are also in line with transaction cost econom-
ics, which suggest that additional costs are especially then warranted
when direct materials are involved, due to their increased potential to
impact the proper operations of the company. We therefore forward
the following proposition.
P3. The additional focus on supply chain risk identification, risk
analysis, risk mitigation, and risk monitoring is especially prevalent
for manufacturing firms as opposed to service firms.
4.4. The link between SCRM and ERM
ERM has gained importance over the last years and has been
implemented in all of our case firms, even though in different
organizational setups and with varying responsibilities. In all
cases, a separate ERM unit existed in the finance department of
the firm, with AutomotiveCo serving as an exception, in which
ERM was part of the general planning process and hence was
mainly triggered by the managerial accounting department.
We found in our sample two different approaches for the
introduction of the SCRM process. In some instances, ERM req-
uested the procurement/supply chain department to implement
such a process (e.g., ManufacturingCo, ElectronicsCo, EnergyCo,
InsuranceCo), and in other cases (e.g, BankingCo, FashionCo,
LogisticsCo) the procurement/supply chain department initiated
the SCRM process, which was later aligned with the ERM
process. Interestingly, neither the origin of SCRM implementation
nor the nature of the firm (manufacturing versus service firm)
seemed to have an effect on the relationship between ERM
and SCRM.
The alignment of SCRM with the rules of ERM and its process
compliance were assessed, on average, on a yearly basis in all of
our sample firms. A manager of InsuranceCo explained it in the
following way: ‘‘We have a comprehensive ERM policy and procure-
ment is part of that. Procurement has – like every other function – to
prove that it complies with this ERM process.’’ This compliance is
ensured by a variety of measures. Whereas AutomotiveCo,
BankingCo, and EnergyCo are audited on a yearly basis, other
firms like InsuranceCo and ElectronicsCo have to report in
more frequent intervals their assessments. In other instances,
procurement is using its own methodology, to also include non-
financial measures (financial measures have been the primary
domain of ERM in our sample), since SCRM suffers from unavail-
able or difficult-to-estimate data related to risk likelihood
and severity. AutomotiveCo serves as an exception, not having
a separate ERM function and SCRM being fully integrated
into ERM.
Our sample firms do not possess common thresholds for risk
reporting, an observation also prevalent for procurement. As a
manager in ManufacturingCo noted: ‘‘Only the risks above this
threshold level are of interest to ERM and will be reported.’’ Three of
our sample firms reported that procurement almost never reaches
these threshold levels and hence is of limited interest to ERM
(BankingCo, ManufacturingCo, and EnergyCo). Overall, SCRM and
ERM are aligned in most of our firms, even though, like one of the
interviewees of EnergyCo mentioned: ‘‘SCRM and ERM are two
completely different events.’’ Changes in the relationship between
SCRM and ERM have been observed among our sample firms, in
addition to the general increased level of risk awareness for
firms that are more severely affected by supplier insolvencies.
Based on these empirical observations we posit the following
propositions.
P4a. The existence of an ERM system is a major antecedent for the
implementation of a SCRM process.
51
P4b. The financial crisis has not influenced the relationship
between ERM and SCRM.
5. Conclusion
SCRM and ERM have become a key concern for organizations,
which is even further emphasized by the current economic and
financial crisis. The present paper analyzed this issue based on
eight in-depth case studies. Our empirical findings were corrobo-
rated by theoretical insight from transaction cost economics to
develop a set of propositions characterizing the current state of
SCRM in the ongoing financial crisis.
Within this context the contributions of this paper are mani-
fold. First, we provided a general overview and assessment of the
current state of SCRM in business. Second, more specifically, we
analyzed SCRM’s adaptation to the present dire economic situa-
tion. We described how firms reacted to the financial crisis with
the adaptation of their risk management systems. Third, we
portrayed how manufacturing and service firms differed in their
approaches toward SCRM in the current financial crisis with a
special focus on the crucial part of risk mitigation. Fourth, we
elaborated on the relationship between SCRM and ERM, which
has not been addressed extensively in extant empirical research.
And fifth, we examined these issues with the lens of transaction
cost economics, grounding our empirical observations into this
theoretical perspective.
Overall, based on eight in-depth case studies, we showed that
manufacturing firms have adjusted their SCRM to a larger extent
in the financial crisis. Even though both manufacturing and
service firms are affected by supplier insolvencies due to the
financial crisis, service firms seem to have a higher strategic
flexibility due to the lower level of dependence on a single
supplier. Hence, one can observe that service firms are mainly
influenced by the financial crisis on the demand side, whereas
manufacturing firms are affected by the demand and the supply
side. Following this line of thought establishes SCRM as a strategic
capability in manufacturing firms. As such, manufacturing firms
should develop different SCRM capabilities for strategic and non-
strategic suppliers. One could further argue that a SCRM approach
focusing on proactive risk mitigation might not be plausible for
service firms in case of existing sufficient substitutes. In general,
the financial crisis had also a positive effect on firms in that SCRM
capabilities had been further developed, which may help firms to
be better prepared for a future crisis, but also for ‘usual’ supply
disruptions. A systematic SCRM approach is thus crucial for the
effective prevention of disruptions on the supply side. Further-
more, our case study illustrations suggested that changes in the
different steps of SCRM are interlinked, since all steps have been
affected by the financial crisis in a similar fashion. Hence it seems
to be necessary to carry out all SCRM process steps rigorously,
otherwise risk management cannot be successful (e.g., when an
important risk has not been identified, or no appropriate mea-
sures have been taken to prevent such major risk). Interestingly,
even though ERM is a major antecedent for the introduction of
SCRM, it seems that SCRM is reinventing the wheel of risk mana-
gement, as we found only very limited integration and knowledge
transfer between SCRM and ERM. Even a major exogenous shock
like the financial crisis seems to have no effect on the relationship
between SCRM and ERM, perhaps showing that these processes
possess a nature that is too distinct, or that they have not found a
common basis to profit from each other. As both are relatively
new disciplines, these insights provide exciting avenues for future
research.
Our research has also important implications for practice.
As such, we confirmed that SCRM and ERM approaches must be
52 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57

adapted to the environment, in this case the financial crisis; if
there is no fit to the context, SCRM is likely to fail. It seems that
SCRM and ERM require dynamic capabilities in order to be able to
be managed in appropriate ways, hence firms must invest in their
human resources to enable employees to recognize changing
environments and adapt quickly to trends. Therefore, it is not
only a question of developing the capability of reacting quickly to
single risk incidents, but also on a larger scale, of adapting the
entire risk management process to serve as a foundation for
SCRM; this will lead the latter to be most effective. For manu-
facturing firms, the criticality of this point for their long-term
sustainability was especially stressed. Overall, developing a
SCRM process is not an easy task, and significant resources are
required. In addition, developing a business case can pose a
challenge, as severities of avoided risks are difficult to estimate.
Our cases also make it obvious that a proficient SCRM is not
only achieved by tools and resources, but mainly by capabilities
that must be dynamically adjusted. In addition, while the
current crisis puts an emphasis on SCRM, such monitoring and
management must constantly be conducted, even in times of
no crisis.
Another important contribution to practice is that while SCRM
and ERM are, to a large extent, well-aligned, they are not really
profiting from each others’ expertise. It seems that a similar
conflict of thoughts exist as one may envision for the integration
between finance and purchasing/supply chain management
departments. A missing common language and different assump-
tions and value propositions appear to be complicating the
knowledge exchange. However, due to the increased importance
of purchasing and supply chain management for the firm, as
illustrated above, both functions should work toward a better
integration with ERM. This integration could enable more effec-
tive risk mitigation, ensuring the long-term sustainability of
the firm.
As with any research, the present study has limitations, which
however – at the same time – provide some exciting future
research opportunities. As such, although a structured and thor-
ough approach was utilized to select case study firms, the results
may only be applicable to the type of companies studied. There-
fore, for further generalizability, future research is encouraged to
replicate our study in different industries, as well as in different
countries (our firms were solely based in Europe). As additional
future research our propositions should be tested via a large-scale
survey, not only in Europe, but also across other regions of the
world. Further insight is also needed on the link between ERM
and SCRM. While our study provided initial insight, additional
research remains to be conducted, since companies are likely still
going to increase their reliance on suppliers. And lastly, an
insightful investigation will be the look at ERM and SCRM once
the current financial crisis has ended. Are firms reverting to their
old practices of SCRM, loosing newly developed capabilities, or
are valuable lessons learned in the crisis carried forward? It is our
hope that the present research provides a starting point for these
investigations.
Acknowledgement
We appreciate the help of Kai Förstl for helping with the data
collection in the initial round of the interviews.
Appendix A. Sample questions of the semi-structured
interview guide
See Table A1.
Appendix B. Overview of cross-case comparison
See Table B1.

Table A1

Questions related to the firm’s SCRM approach

 Risk identification: How does your organization become aware of new supply chain risks? Which functions are involved in this process? How is ERM involved in this
process?
 Risk analysis: How is the assessment of supply chain risks integrated in the supplier management process? Which supporting tools are in place for risk analysis?
Which functions are involved in the analysis process? Which scales do you use to assess supply risks (e.g., likelihood and severity)? Do corporate guidelines for risk
assessment exist?
 Risk mitigation: How do you incorporate supply chain risk mitigation measures, or does your company not incorporate any measures? Who decides on different risk
mitigation actions? How is this done? Which factors strongly influence the decision if and which risk mitigation actions will be pursued?
 Risk monitoring: Who is monitoring supply chain risks? Do you have a formal process for risk monitoring? How often does this process take place?
 Enablers and motivation: Which general SCRM guidelines do exist? How is SCRM integrated in your daily job? How and why did your firm start a SCRM
process?
 Link between SCRM and ERM: Which reporting mechanisms and communication channels do exist? Which role does SCRM play in ERM? Which role does ERM play in
SCRM? How is the alignment between SCRM and ERM in your company achieved? Does a separate ERM and SCRM function exist?

Questions on the effect of the financial crisis on SCRM, and the link to ERM
 General effect: Has your firm been affected by an increasing number of supplier insolvencies? How have resources for the risk management process and for potential
risk mitigation activities changed?
 Risk identification: Which additional risks has your firm identified in the financial crisis? How did the increasing number of supplier insolvencies affect the risk
analysis process?
 Risk analysis: How did the growing importance of financial risks change your risk assessment processes? Are new functions involved in the assessment process?
Which new information do you use to assess these risks?
 Risk mitigation: Has your firm changed its policy of supply chain risk mitigation because of the financial crisis? Why did your firm change its risk mitigation actions?
Which effect did this change have on your firm and the supplier base?
 Risk monitoring: How did the financial crisis and its associated risks change your supply chain risk monitoring behavior? Are new policies in place? What effect does
this change in monitoring behavior have?
 Link between SCRM and ERM: How did the financial crisis affect the general perception of SCRM in your firm, and especially within ERM? How did the communication
and information exchange between ERM and SCRM change in the last two years? Were new interfaces or communication channels between SCRM and ERM
established?
Table B1

BankingCo InsuranceCo FashionCo EnergyCo LogisticsCo ElectronicsCo ManufacturingCo AutomotiveCo

Risk identification  Risk identification  Risks identified by  Risk identification is  Risks identified in  Risks identified by  List of potential risks  List of potential risks  Potential risks
based on risks regularly held part of a detailed workshops, ERM and top-down process provided by ERM provided by derived from
derived from Basel II workshops three-step supplier legal regulations (lead by the CPO) corporate risk historical
selection process with possibility to management, developments and
include additional additional risks are supplier
risks per purchasing included in a assessments
category decentralized
fashion
 Different risk  Different risk
priorities assigned to priorities assigned
different purchasing to different
categories purchasing
categories
Changes due to  Increased risk  Increased risk  Increased risk  Increased risk  Increased risk  Increased risk  Increased risk  Increased risk

C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57

financial crisis awareness
 Enhanced focus on
financial stability of
suppliers in risk
identification
Degree of change 3 2
awareness; also: awareness
additional quick
check of supplier
risks at the
beginning of the
crisis
 Supplier insolvency
risks gained
importance in risk
identification,
additional risks have
been identified
4 1
awareness, but no awareness, but no awareness awareness awareness
change in risk change in risk
identification identification
 Insolvency risk has  List of potential  Insolvency became
now highest priority supply chain risk has corporate priority
in risk identification been adapted number 1
 List of potential  List of potential
supply chain risks supply chain risks
was modified has been adapted
and audited
1 4 4 5

Risk analysis  Based on risk  IT tool-based risk  Risk analysis is  Cross-functional risk  Cross-functional risk  Different weighting  IT tool-based risk  Risk analysis is
indicator analysis analysis integrated into analysis based on an analysis based on an schemes dependent analysis using a multiple
(ex-ante warning supplier evaluation IT tool IT tool on the (sub-) step portfolio
indicators) and system category procured approach being
scenario analysis comprised of
(both required by likelihood and
Basel II); purchasing severity, but also
risk assessment incorporating the
dependency on the
supplier
 Cross-functional risk  Probability  impact  No IT tool-based risk  Financial checks of  Probability  impac-  Supply chain risks as  Insolvency risks  No explicit
analysis based on matrix for risk analysis suppliers based on t  mean time to an important part of assessed based on a probabil-
Excel templates analysis secondary data repair matrix for risk company risk mix of internal and ity  impact logic,
providers, plus an analysis exposure external financial rather: integration
internal assessment and non-financial into supplier
for strategic indicators management
suppliers
 Probability  impact  No  Probability  impact  Probability  impac-  Probability  impac-
matrix for risk probability  impact matrix for risk t  mean time to t  mean time to
analysis matrix for risk analysis repair matrix for risk repair matrix for risk
analysis analysis analysis

53
 54
Table B1 (continued )

BankingCo InsuranceCo FashionCo EnergyCo LogisticsCo ElectronicsCo ManufacturingCo AutomotiveCo

Changes due to  Only limited change,  Comprehensiveness  Comprehensiveness  No change, only a  No change, only a  Comprehensiveness  Comprehensiveness  New risk analysis
financial crisis as financial rating of of risk analysis of risk analysis financial ‘‘quick financial ‘‘quick of risk analysis of risk analysis process initiated:
supplier has already increased, especially increased, especially check’’ of suppliers check’’ of suppliers increased, especially increased, especially continuous and
been extensive in regards to the relating to the at the onset of the at the onset of the relating to the relating to the cross-functional
assessment of assessment of crisis crisis assessment of assessment of
suppliers’ financial suppliers’ financial suppliers’ financial suppliers’ financial
stability stability stability stability
 Short supplier ‘‘quick  A larger range of  Combination of  A new tool for risk  Financial risks are
check’’ at the onset internal and external internal and external assessment has been assessed by a
of the crisis indicators are indicators (e.g., introduced to make separate financial
analyzed Dun& Bradstreet) for the rating more audit team with
the assessment of efficient, since the the help of an
suppliers’ financial workload for risk exhaustive list of
situation assessments in the internal and

C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57

financial crisis has external indicators
been high
 Extra financial data  No systematic risk  No systematic risk
for Asian suppliers analysis of financial analysis of
are gathered as supplier risks before financial supplier
Western databases the financial crisis, risks before the
lack information now an intensive financial crisis
approach based on
almost all available
information
 No systematic risk
analysis of financial
supplier risks before
the financial crisis,
now an elaborated
approach exists
Degree of change 2 3 4 2 2 4 4 5

Risk acceptance/  Follow-up actions  Risk management is  Every purchasing  Risk mitigation is  Risk mitigation is  Proactive SCRM with  For non-strategic  The portfolio of
mitigation are predefined mainly reactive manager decides risk mainly based on a based on four suppliers with more suppliers, the goal is risk mitigation
according to the risk mitigation strategy broadening of the general measures: than 100,000h a reduction in their approaches is
assessment on their own supplier structure risk prevention, risk purchasing volume total number significant
reduction, risk
transfer, and risk
bearing
 Main strategies  Financial help for  Main risk mitigation  Financial help for  Measures are  A wide range of risk  Helping out  The predominant
include the building suppliers does not strategies are audits, suppliers is unusual determined by a mitigation strategies suppliers with cash focus has
of secondary exist phase–out and global category team from currency is possible, even historically been
sources, as well as continuous and are derived from hedging to though it is the last on risk acceptance
supplier relationship improvement of the risk assessment collaboration resort (reacting to
management supplier stage problems very
depending on the performance quickly)
importance of the
product
 Proactive risk  Financial support
mitigation for to supplier, if
strategic suppliers insolvency is
looming, is
inevitable in the
short term
 Multi-sourcing
used as a means to
reduce risk impact
 Changes due to  Only small changes,  Only a small number  The crises is used to  Financial risks of
financial crisis as the crises is used
to consolidate the
supply base
 Partly changed
Degree of change 2 2
Risk monitoring  Risks are grouped  Risk monitoring is
according to ‘‘traffic
light principles’’: the
higher the potential
impact, the shorter
the monitoring
cycles
 Follow-up control is  Monitoring includes
compulsory
 Supplier risk
evaluation
conducted twice a
year
Changes due to  Only limited change,  No changes in depth  Monitoring of risks
financial crisis as the financial
distress is more
immediate
Degree of change 2 1
Score for degree of change: 1 ¼no change; 2¼ minimal change; 3¼ average change; 4¼ substantial change; 5 ¼radical change.
of suppliers affected decrease the number
by insolvencies of suppliers and to
pool spend volume
with strategic
suppliers
 Helping supplier  Fewer measures for
payment terms for with problems
smaller strategic became even more
suppliers seldom in the crisis
 Risk mitigation  Less resources for
mainly means the
building of
secondary sources in
cases of high
dependence
3 3
 Integrated in half-  Risk monitoring is
integrated in regular yearly supplier
quarterly or semi- assessments
annually supplier
assessments
 Yearly assessment,
performance
trending
 Identified risk-prone
 No changes in depth  As more suppliers
of monitoring or its and suppliers is done
cycle time within shorter cycle
times, especially as it
relates to payment
terms obtained from
suppliers
4 1
 Due to own financial  The focus has  Strong growth of  The portfolio of
suppliers are not situation, only a changed; financial efforts and resources risk measures
relevant reactive risk support has been to prevent the stayed the same,
management utilized to a greater negative effects of but the focus has
possible extent before the insolvencies, since shifted
crisis the number of
insolvencies has
increased
 Helping suppliers  Negative impacts of  Additional human  The firm tries to
risk mitigation have with cash is not risks can oftentimes resources have been establish a
been taken in the possible, but was only be reduced by necessary proactive risk
crisis also unusual before reacting very quickly management
approach, but
follows it only in
some cases due to
its own cash
restrictions
 Risk is mainly  A lot reactive  The crisis is used
risk mitigation are accepted and reacted countermeasures for a consolidation
C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
used in the crisis upon have been of the supply base
introduced
 The crisis is used to
consolidate the
supply base for non-
strategic suppliers
2 4 4 5
 Quarterly, semi-  Supplier evaluation  Monitoring is linked  Continuous
triggered by the annual, or annual and monitoring to the status of the supplier
acceptance levels of review of risks leads to continuous risk: the higher the evaluation in order
the risk criteria depending on the risk reporting of impact the more to monitor
value-at-risk procurement risks often the supply risk whether the risk
is assessed treatment pays off
 Quarterly report to
additionally the board if
assessment of necessary
strategic suppliers
on a quarterly basis
categories are
monitored and
reported quarterly to
the division CFO
 Monitoring cycle  More involved and  Depth of risk
and cycle time of are getting into times have been more expeditious monitoring has
monitoring, same financial distress, reduced significantly monitoring, increased
structure of risk- more suppliers had (up to monthly especially for
prone suppliers as to be monitored on a supplier checks) commodities, MRO
before the crisis regular basis material and single
sources; particular
emphasis on the
assessment of
financial distress
 Monthly monitoring  Weekly
of suppliers financial monitoring
distress
2 4 4 5
55
56 C. Blome, T. Schoenherr / Int. J. Production Economics 134 (2011) 43–57
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