Developing visibility to mitigate supplier risk: the role of power-dependence structure

The purpose of this paper is to develop a model to build visibility for mitigating supplier risk. The model has shown that visibility can be an important information-based capability for a buying firm to mitigate supplier risk. Such an importance, however, may not hold in all settings but is contingent on the power-dependence structure between a buyer and its supplier. In particular, under high dependence of buyer on supplier, visibility is more needed to mitigate risk. In reverse, the importance of visibility is reduced if buyer is not dependent on its supplier. Two sides of antecedents to visibility are also posited and tested.

Seafood processing firms in Vietnam are surveyed to test the model. Reliabilities and validities of measures are tested before the structured analysis. To test the model, partial least square (variance-based structural equation modeling) with 500 boostrapping samples is used.

For the samples of seafood processing firms in Vietnam, visibility into their suppliers are found to be the key in mitigating supplier risks when the firms depend highly on their suppliers. In the reverse cases, the importance of visibility is reduced. Visibility is also found to be anteceded by information technology integration between buying firms and their suppliers.

The model helps develop and empirically test an important approach in proactively mitigating supplier risk. That is to develop buying firm’s visibility into a key supplier. Further, the model is developed to test the ways that visibility can be built. Those include both soft and hard sides of facilitating information exchange from supplier to its buyer. Thus the model is contributed to both the literature of supplier risk and power-dependence.