Journal of Retailing and Consumer Services: V.G. Venkatesh, Snehal Rathi, Sriyans Patwa

Journal of Retailing and Consumer Services 26 (2015) 153167
Contents lists available at ScienceDirect
Journal of Retailing and Consumer Services

journal homepage: www.elsevier.com/locate/jretconser
Analysis on supply chain risks in Indian apparel retail chains and

proposal of risk prioritization model using Interpretive structural
modeling
V.G. Venkatesh a,n, Snehal Rathi b, Sriyans Patwa b
a
Symbiosis Institute of Business Management, Symbiosis International University, Bengaluru Campus, #95/1, 95/2, Electronics City, Phase-1, Hosur Road,
Bengaluru 560100, Karnataka, India
b
Symbiosis Institute of Operations Management, Symbiosis International University, Nashik Campus, Plot No. A-23, Shravan Sector, New Cidco, Nasik
422008, Maharashtra, India
art ic l e i nf o
a b s t r a c t
Article history:
Received 8 December 2014
Received in revised form
6 June 2015
Accepted 7 June 2015
Available online 7 July 2015
Indian apparel retail industry is on a complete transformation journey and trying to evolve as an organized industry. It is very common to nd the disruption factors in every business and the ways to
mitigate and manage them is of current research interest. The paper discusses the selective risks associated with the apparel retail supply chains in India by structural analysis of the controllable risks that
are identied. The work also reveals the use of Interpretative Structural Modeling (ISM) to establish the
interdependencies between these risks spread across various supply chain functions of retail industry.
The relationships are established based on expert opinions using Delphi technique followed by ISM
modeling technique and Fuzzy MICMAC analysis. It also classies the risk factors based on their driving
and dependence power. ISM is proved to be a useful tool to help understand the impact of risks at stages
of retail supply chain. Globalization, labor issues and security and safety of resources turns out to be the
strong drivers of other supply chain uncertainties. The domino effect of these risks leads to nancial
crises for the organization.
The paper also proposes a new model for the Risk Priority Number (RPN) calculation using ISM and
Fuzzy MICMAC methodology for the applications in retail and various other domain risk studies. The
sample size of experts is small and to remove the biasness of opinion, the model can be further validated
using Structural Equation Modeling (SEM) in the future. The outcome would help practicing managers to
analyze and to take actions for managing the factors by improving the bottom line of the organization by
proper utilization of resources.
& 2015 Elsevier Ltd. All rights reserved.
Keywords:
ISM
Fuzzy MICMAC
Retail risks
Supply chain risk
Prioritization
Risk assessment
Risk Priority Number
1. Introduction
In the last two decades, supply chains of businesses have been
experiencing rapid globalization and emerging technological
changes especially in the manufacturing and retail business. Today,
supply chains across industries are being stretched the way it was
never done before. The most trusted brands do only the assembling of components which are outsourced for manufacturing.
Similarly, major apparel retailers do their business as well. They
do product development and outsource rest of their operations.
This has made supply chains more complex, fragile and prone to
many disruptions. It is an established fact that recent commercial
n
Corresponding author.
E-mail addresses: vgv1976@gmail.com (V.G. Venkatesh),
snehalrathi.sr@gmail.com (S. Rathi), sriyanspatwa@gmail.com (S. Patwa).
http://dx.doi.org/10.1016/j.jretconser.2015.06.001
0969-6989/& 2015 Elsevier Ltd. All rights reserved.
chains are dynamic networks of interconnected rms and industries (Hakansson and Snehorta, 2006). And, the search for
better markets and cheaper sources of raw materials have made
the supply chains more and more complex and retailers need to
sustain their business (Sahin and Robinson, 2002; Wu and Olson,
2008; Ganesan et al., 2009). Many disruptions and risk factors
have threatened production and retail distribution systems. They
directed a decline in the market share, cost escalation and dissatisfaction amongst customers. In the last decade, supply chain
risks are studied diligently and are categorized into inherent or
high frequent risks and disruption or infrequent risks (Kleindorfer
and Saad, 2005; Oke and Gopalakrishnan, 2009). These disruptions
could also be due to political, labor, market uncertainty, material,
nancial and information risk impacting supply chain performance (Shapira, 1995; Prater et al., 2001; Christopher and Lee,
2004; Quinn, 2006; Tang, 2006a, 2006b; Poirier et al., 2007; Tang
and Nurmaya Musa, 2011). How does one protect the business
154
V.G. Venkatesh et al. / Journal of Retailing and Consumer Services 26 (2015) 153167
from disruption? The answer lies in the integration of supply chain

risk management as a core component in the operations of the
business. This intuited the studies on supply chain risks and mitigating strategies, which are increasingly becoming popular (Wei
and Choi, 2010), eventually lead to the studies from the domain
specic risk mitigating strategies as well.
India, being a growing destination for the retail business, the
risk is to be analyzed from supply chain perspective, though the
sector is highly fragmented. Boston Consulting Group reports that
the organized retail industry will achieve $260 billion business by
2020 (BCG Report, 2011). In the last decade, Indian retail market
has shown the considerable growth in the Apparel business and so
as food business. With many foreign apparel players eyeing to
enter India through FDI, it has become a research destination. To
support that, though there are reports existing in this domain, the
focus on retail supply chain still attracts several problems to be
explored in the supply chain and its risk domain.
This paper will explore and analyze selective disruption factors
in the domain of study. The study also proposes a methodology to
prioritize risks by analyzing the interdependencies between them.
This contextual relationship is established through a technique
called Interpretive Structural Modeling (ISM) and followed by a
Matriced Impacts Cruoses Multiplication Applique a un Classement
(MICMAC) analysis for segregation of study variables. Thus, our
proposed model is based on a notion that each risk is associated
with multiple ones in a way that either it drives them or is dependent on them. To design the mitigation strategies, the rst step
is to identify and analyze the risk in terms of its frequency of occurrence, severity in terms of cost and what other disruptions it
could lead to. The focus is to propose a methodology based on
MICMAC analysis to analyze and prioritize the supply chain risks
so that appropriate strategies can be designed to improve the
business efciency. For prioritizing the risks, there is a new formula proposed based on the structural model, which is the unique
contribution of the model.
The paper has been structured as follows: It starts with the
introduction about the supply chain risk management, followed by
the literature review on supply chain risk and Indian retail industry. Then, the discussions on establishing the variables, ISM
model formulation and MICMAC analysis. It ends with the discussions on the new risk assessment framework, managerial implications and future scope.
2. Literature review
The literature review has been done through systematic literature review methodology proposed by Traneld et al. (2003).
The review process has followed the planning for the review,
conducting the review exercise and reporting/dissemination protocol in a systematic way. The review includes papers from various
journals like Business Process Management, International Journal of
Physical Distribution and Logistics Management, Journal of Operations Management, Supply Chain Management: An International
Journal, The International Journal of Logistics Management, Journal of
Manufacturing Technology Management, International Journal of
Operations and Production Management and etc. It also includes
articles and Reports from Harvard Business Review and reports on
Supply chain risk management published by various prominent
consulting companies like Deloitte, PwC, Accenture, Technopak,
etc. The second part covers the review on identifying the risks
variables and understanding the risk mitigating strategies from
2000 to 2014.
Supply chain risk is dened as any risk to material, product
and information ow from original supplier to the delivery of the
nal product (Christopher et al., 2003). There is a growing
importance to risks domain from supply chain perspective

(Harland et al., 2003; Zsidisin and Ellram, 2003; Zsidisin et al.,
2004; Khan et al., 2008; Wu and Olson, 2008; 2010; Wagner and
Bode, 2008; Tang and Tomlin, 2008; Rao and Schoenherr, 2008;
Rao and Goldsby, 2009; Colicchia and Strozzi, 2012; Sodhi et al.,
2012; Bandaly et al., 2013; Marley et al., 2014). Rao et al. (2006)
gives the complete typology of various risks in supply chain system. Further, it is being identied as a function of uncertainty level
and the impact of an event (Sinha et al., 2004). However, it is the
common belief that management within SC gathered more focus
and momentum only after the 9/11 attacks in USA (Ghadge et al.,
2012). This risk can be an internal element to the supply chain or
due to external factors (Goh et al., 2007). They can also be classied as operations and disruptions risk (Tang, 2006a). The former
are associated with uncertainties inherent in a SC which include
demand, supply, and cost uncertainties. Disruption risks, on the
other hand, are those caused by major natural and man-made
disasters such as ood, earthquake, tsunami, and major economic
crisis. Supply chains are vulnerable to disruptions due to a number
of variables. These disruptions or risks can also have signicant
impact on prot margins of the businesses and such failure occurs
due to one element which has an impact on both upstream and
downstream operations (Chopra and Meindl, 2001). It is not only
the protability, but also the reputation of rm at stake. With the
customers' expectations becoming more, and managing lead times
of products is becoming very challenging, unless due attention is
given to risk assessment exercise, the probability of supply chain
failure is high (Khan et al., 2008, 2012). Not only has this, but the
cost of break cascaded across the businesses also and it may impact the other end showing the ripple effect (Ritchie and Brindley,
2007a, 2007b; Braunscheidel and Suresh, 2009; Neiger et al.,
2009; Yang and Yang, 2010). On the other side, Cousins et al.
(2004) elucidate the consequences of failure to manage risks effectively. Several papers discuss on risk identication and assessment methodologies (Chopra and Sodhi, 2004; Lavastre et al.,
2012). Various models for supply chain risk management have
been proposed in the recent years (Olson and Wu, 2008, 2011;
Pfohl et al., 2011; Giannakis and Louis, 2011; Xia and Chen, 2011;
Manuj and Sahin, 2011; Cagliano et al., 2012; Kern et al., 2012;
Rossi and Pero, 2012; Zegordi and Davarzani, 2012; Klibi and
Martel, 2012; Chiu and Choi, 2013; Li and Womer, 2012). Table A2
gives summary of various modeling studies conducted in supply
chain management eld so far. Some of these models help businesses to identify their risks and give a direction for continuity
plan by evolving the mitigating strategies as well (Juttner, 2005).
The means of managing the risks is very unique to individual
business. To support that, Juttner et al. (2002, 2003) suggest investigating risk management in different supply chains and developing strategies based on their environments. Risk assessment
Table 1
Variables (risks) for ISM.
Risk no.
Risk
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
Globalization
Raw material and product quality standards
Scarcity of resources
Supplier uncertainty
Lack of co-ordination/alignment
Behavioral aspect of employees
Infrastructure risks
Delay in schedule/lead time
Demand uncertainty
Customer dissatisfaction
Financial risk
Security and safety
process is the most imperative step in risk management domain

and it starts from product development stage (Ghadge et al., 2013).
Further, phases of managing these risks can vary from identication/analysis or estimation through risk assessment to various
ways of managing risks (Norrman and Jansson, 2004). Nevertheless, very few papers show orientation on the specic domain
concentration such as food business (Vorst et al., 1998; Diabat
et al., 2012; Wang et al., 2012), manufacturing (Farooq and OBrien
2010), electronics industry (Sodhi and Lee, 2007), toy industry
(Johnson, 2001), automotive and electronics domain (Craighead
et al., 2007; Blos et al., 2009; Wagner and Bode, 2009), aerospace
industry (Haywood and Peck 2004), chemical supply chains
(Kleindorfer et al., 2003, 2005), retail outsourcing (Tsai et al., 2008)
In addition, many risks are studied in detail in the research works
(Braithwaite, 2003; Fitzgerald, 2005; Trent and Monczka, 2005;
Choi and Krause, 2006). Ritchie and Brindley (2007a, 2007b)
analyzed further with respect to risk context drivers, decision
makers, risk management responses with performance outcomes
and inuencers for risk management decisions. It is established by
Hallikas et al. (2002, 2004) and Kern et al. (2012) that structured
research on risk management domain is to be established with
possibilities of identifying, controlling and monitoring the risk
factors. Moreover, the organizations are not aware about the vulnerability of their supply chain threats, irrespective of their domain of operations and though there are more variations exists in
the form of wrong usages and misconceptions, it is due to other
factors such as the absence of common specication, perception
and difference in needs (Mullai et al., 2008; Wieland and Wallenburg, 2012). Christopher et al. (2011) argue for a good scope in
studying from sourcing and design point of view. There are some
research reports from clothing industry evaluate risk from the
sourcing perspective (Masson et al., 2007; Kam et al., 2011; Vedel
and Ellegaard, 2013). Lendaris (1980) has dened a way to model
the risks and an integrated structural model has been proposed by
Hachicha and Elmsalmi (2014) using ISM approach. Our paper has
endorsed that methodology and tried to give a discrete approach
towards the risk factor modeling and calculations for the Indian
apparel industry, which is one of the complex networks. From the
above review, it can be established that analysis of the domain
specic risk management practices is of high interest and hence,
scope for researching apparel retail domain can be established.
Next part of the review details about the retail industry and followed by apparel domain in India.
2.1. Indian apparel retail industry
Indian retail industry is the second largest employer after
agriculture (around 8 percent of the population) and it has the
highest number of outlets in the world. Despite that advantage,
the industry is at the nascent stage (Garg, 2010). According to the
market research report study (2013), the retail market in India
grew at a CAGR of 12.47 percent during the period 20072012 and
will grow at a rate of 13.23 percent from 2012 to 2017. Increasing
urban demographics, rapid development of shopping malls, raising brand-conscious customers, and strong inuence from the
Western world are changing catalysts of Indian retail industry
(Halepete and Iyer, 2008). The paper also argues that low level of
organized retail penetration, coupled with an ineffective supply
chain, characterizes the infrastructure of the Indian retail industry.
Moreover, retail industry in India is becoming so adaptive and
anticipative, as they exible enough to meet the demand of
changing customer markets in (Ramesh et al., 2008). Further, Dabas et al. (2012), elucidate that Indian retail industry is dominated
by multi faceted tax systems and very poor infrastructure. In the
current scenario, studies on the current state of Indian retail along
with strategies for growth would have immense signicance for
155
international retailers vying to enter the Indian market (Batra and

Niehm, 2009). Also, Indian retail environment is dominated by the
apparel retailing through organized and unorganized formats of
retailing. Though the records for later does not exist, there are few
reports support the data for organized one (Technopak Report,
2014). Early studies in Indian retail industry such as Sahay and
Mohan (2003) conrm that almost one-third of the Indian companies had no supply chain strategy. But the inuence the western
rms on the supply chains, supply chain is clearly a visible element
across the business (Anbanandam et al., 2011). It varies from
product to product.
Apparel business in retail has a share of US$41 billion, which is
poised to grow around US$64 billion by 2018 (Technopak Report,
2014). Currently, online retail is also booming up in India. It constitutes merely 57 percent of the apparel market in India, but it is
expected to grow at a CAGR of more than 35 percent in the next 10
years (Market Research Report, 2012). Further, with FDI decision
pending in policy environment, no doubt that retail supply chain
gets focus in the research, as many players are very keen entering
India with their complete global experience (Mann and Byun,
2011). The main business points to be managed are: late deliveries,
poor quality and design issues (Khan et al., 2008). However, due to
the individualistic in nature, many of the strategies to be adopted
in Indian market should be niche and unique to manage regional
situations. Unless the companies assess the risks to be managed,
more damages can be predicted in the supply chains, and it is
becoming challenging in the clothing trade as product life cycles
are getting shortened (Khan et al., 2008).
There are positive signs that Indian apparel retailers are considering their supply chain management operations as a strategic
tool in their overall business strategy like their western counterparts, instead of viewing it as an operational one. The studies on
risk management in clothing supply chain are also at the beginning stage. Moreover, organized retail business in India is dominated by the apparel domain (Technopak Report, 2014). Further,
Indian apparel retail chains are moving through the professional
approach in their operations and because of that uncertainties are
implicitly built in. It is very much helpful to study these risks in
detail pertaining to the specic domain, as some of the supply
chain risk factors are highly inuential in the Indian scenario.
Thus, the literature review also gives the scope for new direction
for research on risk management focus in the Indian apparel retail
segment. It has been clearly established in the review that risk
studies exist in the other domains and current one in this paper is
pioneer for the Indian retail segment and possible extension of the
established framework can also be proposed in addition to that.
The next phase of the article gives overall research methodology
and ISM model building with the proposed risk prioritization
framework followed by the managerial explanations.
3. Research methodology
The main purpose of this paper is to develop contextual relationships to analyze the costs associated with risks and prioritize
them. The occurrence of one risk gives rise to multiple risks resulting into a domino effect which makes it very important for the
managers to control these risks before they occur. A group of
practitioners have been identied to develop the ISM model to
show the relationships between various risks involved in the
supply chain. The results of ISM are further extended using the
fuzzy MICMAC analysis to identify the driving and dependence
power of each of these variables. A risk calculation method has
been proposed further using the driving and dependence power to
priorities these risk to help managers decide on the most critical
risk to mitigate.
156
3.1. ISM why and how?

Interpretive structural modeling (ISM) is a process that transforms unclear and poorly articulated mental models of systems
into visible, well-dened models useful for many purposes (Sushil,
2012). It is a structural relationship diagram which makes it easy
to visualize the inter relationship between various elements. In
other words, it helps in presenting a complex system in a simplied format. It enables to make a mind map of elements which
depend on one another to form a complex relationship. The
method has some limitations and it has been subsequently discussed. The model development is described in step by step approach in the next section. ISM facilitates the identication of the
structure within a system. Following are the steps involved in the
ISM methodology (Sage, 1977; Jharkharia and Shankar, 2004; Faisal et al., 2006; Sushil, 2012):
(1) Identication of variables: The key variables of the system are
identied using literature study and brain storming sessions
with the industry experts and academicians.
(2) Contextual relationship: A contextual relationship is identied
among each variable (identied in step 1) with respect to
which the pairs of variables would be examined. The contextual relationship is in the form of a matrix called the
structural self-interaction matrix (SSIM).
Notations used to develop the SSIM:
V: Risk variable i leads to variable j
A: Risk variable j leads to variable i
X: Risk variable i leads to variable j and vice versa
O: No relationship between the variables
(3) Initial Reachability Matrix: The SSIM is then converted into a
binary matrix, called initial reachability matrix by substituting
V, A, X and O by 1 and 0 as per the following rules:
Rule 1: If the (i, j) entry in the SSIM is V, then the (i, j) entry in
the reachability matrix
becomes 1 and the (j, i) entry is 0.
Rule 2: If the (i, j) entry in the SSIM is A, then the (i, j) entry in
is 0 and the (j, i) entry becomes 1.
Rule 3: If the (i, j) entry in the SSIM is X, then the (i, j) entry in
becomes 1 and the (j, i) entry also becomes 1.
Rule 4: If the (i, j) entry in the SSIM is O, then the (i, j) entry in
becomes 0 and the (j, i) entry also becomes 0.
(4) Transitivity check: The reachability matrix is developed from
the SSIM and the matrix is checked for transitivity. The transitivity of the contextual relation is a basic assumption made in
ISM. It states that if variable A is related to B and B is related to
C, then A is necessarily related to C.
(5) Levels: The transitivity matrix obtained in step (4) is converted
into the canonical matrix format by arranging the elements
according to their levels.
(6) Building the ISM model: Variables in each level are then
connected based on their relationships as dened in the
structural self-interaction matrix.
3.2. Identication of the variables

3.2.1. Delphi methodology
Delphi process is an effective empirical tool to get a consensus
from a group of experts (Linstone and Turoff, 1975; Buckley, 1995;
Schmidt, 1997). The technique has been used systematically by
involving practicing professionals to conclude opinion on the
subject to be researched. It has been used in the different areas
such as for strategic decision making, policy formulation and to

draw the conclusions based on convergence in the multifaceted
complex ideas (Czinkota and Ronkainen, 2005; Grisham, 2009).
Although the survey methodology could be performed in the
current study, Delphi technique has been used as a tool to initiate
research direction in the selected domain. It is because, the
structured study on Indian apparel retail supply chain is currently
at a nascent stage. The technique aims to gather study and nalize
the facts on various barriers from in-depth query of experts and
stakeholders with the practical context. The method has been
executed at steps; (1) Constitution of members for the expert
panel; (2) identication of the barriers and formulation of the
feedback system; (3) execution in the two rounds. In the rst step,
20 supply chain executives/managers having diversied backgrounds participating in the business decisions at the senior level
are chosen. This selection process was done through a structured
approach proposed by Okoli and Pawlowski (2004) and also local
popularity in Indian apparel business environment and their
willingness to participate in this research study. Out of 20 participants, 14 people have participated in the two round Delphi
process. In the second step, the possible list of factors of risks was
prepared. We have nalized 12 factors based on the ranking as
well as the concurrence from the participants (from the practice
point of view) and well supported by literature as well. The next
section describes the factors for the present study and their literature support.
A supply chain is susceptible to many types of risk. We identied and categorized risks into 12 distinct types that can be
controlled and mitigated if proper steps are taken. With increase
in globalization, complexity and dynamism of supply chains are
leading to greater exposure to risk from political and economic
events (Ghoshal, 1987; Harland et al., 2003; Manuj and Mentzer,
2008; Holweg et al., 2011). Globalization increases the number of
cross country transaction in shipping goods from one place to
other with Customs and regulation risk (Manuj and Mentzer,
2008), Security and International Terrorism (Shef, 2001; Williams
et al., 2008) change in cost of resource acquisition due to frequent
uctuation in currency rates. Next category of risk to an organization is the awareness of Raw material and Product quality
requirements of the products. Supply chain can be at risk due to
regulatory compliance, quality requirements and product environments (Cucchiella and Gastaldi, 2006; Tse et al., 2011; Li and
Womer, 2012). At present, section of customers are becoming
aware about the product quality and its raw material contents
such as residuals of hazardous chemicals in the fabric processing
especially (such as dyeing and printing) and other unfriendly
contents in the various accessories (such as lead content in the
shank buttons). For example, Increase in carbon foot print and
pollution by the organization impacts society and this creates
negative perception among the common masses about the company's image (Bickerstaff, 2004). Risk of scarcity of resources is a
major concern for an organization. A supply chain is dependent on
the resource for its functioning (Newman et al., 1993; Jones et al.,
2000; Carter and Rogers, 2008). Unavailability of skilled man
power and the right technology to perform the task can prevent an
organization from functioning better. Information scarcity is a key
facet of uncertainty in terms of the existence (Baird and Thomas,
1990). Scarcity in availability of cotton can put the apparel industry at risk by loss of customer due to increase the price of the
nish goods. Also, it will force the organization to search alternate
resource or supplier. Supplier uncertainty to deliver goods at the
right time is the next category of risk. Suppliers' uncertainty to
respond to changes in demand leads to the decline in the market
share. Stakeholders' bankruptcy or mishap increases the uncertainty of supplier in fullling the demand (Krause and Handeld, 1999; Chopra and Sodhi, 2004; Cousins et al., 2004;
Nembhard et al., 2005; Simangunsong et al., 2012; Vedel and Ellegaard, 2013). Lack of Alignment/co-ordination among the
players of supply chain is categorized as a risk in the supply chain.
Misalignment, resulting from lack of transparency among the
players or lack of communication co-ordination or interaction
leads to supply chain breakdown (Cucchiella and Gastaldi, 2006;
Shen et al., 2013). Information sharing among the members of the
supply chain is vital and lack of information leads to uncertainty,
chaotic behavior and unnecessary costs (Childerhouse et al., 2003).
Behavioral aspect of employee is a risk to an organization. The
occurrence of frequent labor turnover affect both nancial and
reputation of the organization. Resistance to change and misuse of
organization's assets and employee disputes are common behaviors observed in most industries and these behaviors can act as a
bottleneck to an organization. Next category of risk is due to improper support services and can be categorized as Infrastructure
risk. It affects the operational activity and can cause the supply
chain to standstill. Lack of sufcient equipment, transportation
breakdown, warehouse or IT Breakdown (Pfohl et al., 2011) can
prevent the supply chain from function smoothly. Also, Delay in
schedule/lead time, next factor of risk, can prevent a supply chain
in putting the product into the market at the right time. The risk of
delay in production (Pfohl et al., 2011) or information or execution
can affect the supply chain severely. Lead time in case of innovative products like fashion apparel should be as low as possible, slight delay can increase the risk of failure for an organization
(Cucchiella and Gastaldi, 2006; Pujawan and Geraldin, 2009) Delay
in return process impacts the reverse supply chain of an organization. Demand uncertainty due to frequent uctuation in consumer demand or inaccurate forecasting can be a cause of bullwhip effect in the Supply chain. Risk due to demand uncertainty
can impact its reputation and even take it out of business (Christopher and Lee, 2004; Cucchiella and Gastaldi, 2006; Manuj and
Mentzer, 2008; Simangunsong et al., 2012). Satisfying customer's
need is one of the goals of a supply chain and customer dissatisfaction can be a major risk to an organization. Frequent stockout, poor quality of product causes customer dissatisfaction leading to customer complaints and product return. Delay in return
process (Pujawan and Geraldin, 2009), non-availability of product
(Meulbrook, 2000) or less degree of customer interaction (Mitchell, 1995) increases the risk due to customer dissatisfaction. In
order to keep customer happy, the assets and resources of the
organization must be protected from the misuse, mishaps and
theft (Pfohl et al., 2011). The risk due to security and safety can be
fatal to an organization. Security risk relates to adverse events that
threaten human resources, operations integrity, and information
systems; and lead to outcomes such as freight breaches, data
stealing, vandalism, crime, and sabotage (Manuj and Mentzer,
2008). Not only asset protection, keeping the employee safe and
secure should be a concern of the organization. Security needs of
both core supply chain entity and outsourcing organizations are
creators of risk (Guinipero and Eltantawy, 2004). Further, Khan
and Creazza (2009) advocate the new dimension of the risks with
the product design and supply chain interface which is controlled
by prominently by the irregularities in product quality supply as
well. The last category of risk is the nancial risk. One of the
objectives of the organization is to make prot. To stay protable,
the cash ow should be managed properly. Managing nancials for
an organization is the biggest challenge and risk of nancial mismanagement can lead to downfall of the organization. In many
business sectors, an industry or an organization delivers the goods
or service to its customer on credit. Debtors default (Meulbrook,
2000) affects the cash ow severely thereby increasing the nancial risk of the organization. Mitigating nancial risk leads to
smooth ow of cash and keep organizations protable (Kleindorfer
and Saad, 2001; Hendricks and Singhal, 2005; Arcelus et al., 2012).
157
3.3. Interpretive structural modeling (ISM)

The technique, ISM, proposed by Wareld (1974) is qualitative
in its approach. Many researchers used this methodology to direct
order and decompose the complexity of relationships among elements (Sage, 1977; Mandal and Deshmukh, 1994; Ravi and Shankar, 2005; Sahney et al., 2006; Faisal et al., 2006; Faisal et al.,
2007). The model uses judgment from group members and establishes the connection amongst the elements (Mandal and
Deshmukh, 1994; Gorane and Kant, 2013). There are other applications of ISM in other areas as well. Some representative applications are: world-class manufacturing (Haleem et al., 2012), decision making (Lee and Rhee, 2011), Value chain management
(Mohammed et al., 2008), Product design (Lin et al., 2006), Waste
management (Sharma and Sushil, 1995), Vendor selection (Mandal
and Deshmukh, 1994), Supply chain management (Agarwal et al.,
2007), and so on. It is used to explore contextual relationship
where they are mutually related. Following are the representative
works of ISM model including Analysis on agile factors for the
product launch (Chang et al., 2013), Barriers of Eco-friendly manufacturing adoption (Mittal and Sangwan, 2011, 2013), Analyzing
the barriers for Six Sigma program implementation (Soti et al.,
2011), Analyzing the barriers for energy saving in China (Wang et
al., 2008), Critical factors of ERP implementation (Jharkharia and
Shankar, 2004).
The model is built using the industry experts' practical experience and the knowledge base of academicians to decompose a
complicated system into several sub-systems and construct a
multilevel structural model. The variables of the structural selfinteraction matrix in this paper are the types of risks involved in
the supply chain of an organization. The risks are identied from
literature review and expert interactions. More than 100 different
types of risks were identied which can have an impact on the
business. We include only the most common and general type of
risks which generally occur in almost every industry. The developed model would be a generic one and can be modied as per the
specic objectives of the company. Two academicians and six industry experts were consulted to develop the SSIM. Table 1 shows
the various risks considered to develop the ISM.
The structural self-relationship matrix and initial reachability
matrix are developed as per the steps and rules discussed in ISM
methodology section. The SSIM, initial reachability matrix and
transitivity matrix for our model are as shown in Tables 2, 3, and 4
respectively.
Through the Structural Self Relationship Matrix, we can have
following relationships established. The risk factor globalization
leads to various other risks such as supplier uncertainty, increase
in the product quality standards (R2), and infrastructure risks (R7)
such as the organized retailing including the technology up
Table 2
Structural self relationship matrix.
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
R12
R11
R10
R9
R8
R7
R6
R5
R4
R3
R2
V
O
O
O
X
V
A
A
O
A
A
V
O
V
V
V
V
V
V
V
V
O
V
O
O
O
O
V
V
O
O
O
O
O
O
O
O
A
V
O
V
V
V
V
X
V
V
O
O
V
V
O
O
O
O
A
O
O
V
A
V
O
V
A
A
158
Table 3
Initial reachability matrix.
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
Table 5
Level 1 of risk variables.
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
Variables
Reachability set
Antecedent set
Intersection
1
0
1
0
0
0
0
0
0
0
0
0
1
1
1
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
1
0
1
1
1
0
0
0
0
0
0
0
0
0
1
0
1
1
0
0
0
0
0
1
0
0
0
0
0
1
0
0
0
0
0
0
1
1
0
0
1
1
1
0
0
0
0
1
1
0
1
1
1
1
1
1
1
0
0
1
0
0
0
0
0
0
0
0
1
0
0
0
0
1
0
0
0
0
1
1
0
1
0
0
1
0
1
1
1
1
1
1
1
1
1
1
1
0
0
0
1
1
0
0
0
0
0
1
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
1,2,4,5,7,8,10,11,12
2,7,8,10,11
1,2,3,4,5,7,8,10,11,12
4,7,8,10,11
4,5,7,8,10,11,12
5,6,7,8,10,11,12
7,8,10,11
7,8,10,11
7,8,9,10,11
10,11
11,
4,5,7,8,10,11,12
1,3
1,2,3
3,
1,3,4,5,12
1,3,5,6,12
6
1,2,3,4,5,6,7,8,9,12
1,2,3,4,5,6,7,8,9,12
9
1,2,3,4,5,6,7,8,9,10,12
1,2,3,4,5,6,7,8,9,10,11,12
1,3,5,6,12
1
2
3
4
5,12
6
7,8
7,8
9
10
11
5,12
Level
Table 6
Table 4
Transitivity matrix.
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
1
0
1
0
0
0
0
0
0
0
0
0
1
1
1
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
1
0
1
1
1
0
0
0
0
0
0
1n
1n
0
1
0
1
1
0
0
0
0
0
1
0
0
0
0
0
1
0
0
0
0
0
0
1
1
1n
1n
1
1
1
1
1n
0
0
1
1n
1n
1
1
1
1
1
1
1
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
1n
1
1n
1n
1n
1n
1
1
1n
1
0
1
1
1n
1
1
1
1
1
1
1
1
1
1
1
0
1n
0
1
1
0
0
0
0
0
1
gradation in the supply chain system. Again, this must lead to the
nancial risks in the form nding the new investments to cope up
the pressure. Further, globalization (R1) leads to the increase in the
risks of security and safety of the cargo (R12), as the material pass
through various layers in the supply chains. But the scarcity of
resources (R3) triggered the material to be sourced through the
globalized partner and increased the standard of the material,
which is also a potential risk for the supply chains which work on
the strict lead time basis. Further, uncertainty in suppliers and lack
of alignment amongst are the potential risks which lead to scarcity
of resources as well (R3). An organization facing the supply disturbance risk due to non alignment may delay the shipments and
gives nancial risk as well. Lack of coordination (R5) may lead to
the organization to look for additional technology (like tracking),
space requirement (warehousing) which are potential infrastructure risks in the apparel supply chains. Behavior aspects (R6)
such as unexplained absence in the retail selling oor and distribution environments may lead to develop new systems in the
infrastructure such as monitoring the movements of staff and
products within supply chain environments and they also delay
the delivery of the order which is very prominent in the Indian
retail business. People do see no prominent relationship between
the infrastructure and delay in the shipments (R8) as it would lead
to the customer dissatisfaction indirectly and eventually lead to
the nancial risks by locking the investments in the retail chain. It
has been observed that layers of security and safety (R12) to the
products in the supply chains impact the delay of the delivery in
the system (R8). However, there is no clear linkage established
between demand uncertainty (R9) and security and safety of the
material (R12) and also customer dissatisfaction as it has been
prominently indicating the fulllment of the orders and experiencing the products (R10). Customer dissatisfaction risk and
Variables
Reachability set
Antecedent set
Intersection
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R12
1,2,4,5,7,8,10,12
2,7,8,10
1,2,3,4,5,7,8,10,12
4,7,8,10
4,5,7,8,10,12
5,6,7,8,10,12
7,8,10
7,8,10
7,8,9,10
10,
4,5,7,8,10,12
1,3
1,2,3
3
1,3,4,5,12
1,3,5,6,12
6
1,2,3,4,5,6,7,8.9.12
1,2,3,4,5,6,7,8,9,12
9
1,2,3,4,5,6,7,8,9,10,12
1,3,5,6,12
1
2
3
4
5,12
6
7,8
7,8
9
10
5,12
Level
II
Table 7
Variables
Reachability set
Antecedent set
Intersection
R1
R2
R3
R4
R5
R6
R7
R8
R9
R12
1,2,4,5,7,8,12
2,7,8
1,2,3,4,5,7,8,12
4,8,7
4,5,7,8,12
5,6,7,8,12
7,8
7,8
8,9,7
4,5,7,8,12
1,3
1,2,3
3
1,3,4,5,12
1,3,5,6,12
6
1,2,3,4,5,6,7,8,9,12
1,2,3,4,5,6,7,8,9,12
9
1,3,5,6,12
1
2
3
4
5,12
6
7,8
7,8
9
5,12
Level
III
III
Table 8
Variables
Reachability set
Antecedent set
Intersection
R1
R2
R3
R4
R5
R6
R9
R12
1,2,4,5,12
2
1,2,3,4,5,12
4
4,5,12
5,6,12
9
4,5,12
1,3
1,2,3
3
1,3,4,5,12
1,3,5,6,12
6
9
1,3,5,6,12
1
2
3
4,
5,12
6
9
5,12
Level
IV
IV
IV
Table 9
Variables
Reachability set
Antecedent set
Intersection
Level
R1
R3
R5
R6
R12
1,5,12
1,3,5,12
5,12
5,6,12
5,12
1,3
3
1,3,5,6,12
6
1,3,5,6,12
1
3
5,12
6
5,12
V
V
Table 10
159
Table 12
Fuzzy direct relationship matrix.
Variables
Reachability set
Antecedent set
Intersection
Level
R1
R3
R6
1
3
6
1,3
3
6
1
3
6
VI
VI
VI
Financial Risk (R11)
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
0
0
0.5
0
0
0
0
0
0
0
0
0
0.7
0
0.1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.5
0
0.7
0
0.5
0
0
0
0
0
0
0
0
0
0.3
0
0
0.3
0
0
0
0
0
0.3
0
0
0
0
0
0
0
0
0
0
0
0
0.3
0.5
0
0
0.3
0.7
0
0.3
0
0
0
0.5
0.5
0
0.7
0.7
0.5
0.7
0.7
0
0.5
0
0
0.3
0
0
0
0
0
0
0
0
0
0
0
0
0
0.5
0
0
0
0
0.5
0.7
0
0
0
0.3
0.5
0
0.7
0.7
0.3
0.5
0.5
0.5
0.5
0.7
0
0.7
0.3
0
0
0
0.3
0.7
0
0
0
0
0
0
Customer Dissatisfaction
(R10)
Delay in schedule / lead

time (R8)
Demand Uncertainty
(R9)
Infrastructure Risk (R7)
Supplier Uncertainty (R4)
Scarcity of Resources (R3)
Globalization (R1)
Product quality and raw

materials standards (R2)
Lack of coordination/Alignment(R5)
Behavioral aspect of
Employees (R6)
Security and Safety (R12)
Fig. 1. Interpretive Structural Model for risk relationship in apparel retail

companies.
nancial risks (the fear of losing the amount in the supply chains
due to theft) together may lead to the safety and security of the
goods in the supply chains. The next step is to create the reachability matrix as per the procedure.
The next step is to convert the transitivity matrix to the canonical matrix format by arranging the elements according to
their levels. Tables 510 divide the variables into ISM levels.
Based on the six levels derived, a structural model is designed.
A relationship between two variables (here risks) is shown by an
arrow which points from a higher level variable to a lower level
variable. It implies that the higher level variable leads to the lower
level variables. Lower level variables are at a higher level in the
ISM hierarchy and are driven by the higher level variables. The ISM
model for the interrelationships between the risks is shown in
Fig. 1.
The ISM uses SSIM to dene the relationship among risks. The
Initial Reachability Matrix is a binary matrix with 0 and 1. A 1
denotes a relationship between the two risks and a 0 denotes no
relationship. It implies that we have considered only extreme
Table 11
Fuzzy relationship scale.
No.
Very weak
Weak
Moderate
Strong
Very strong
Perfect
0.1
0.3
0.5
0.7
0.9
levels of relationships between the risks. To be more precise with

the strength of relation between the any two variables, we need to
consider the gray area between 0 and 1. We therefore analyze the
risk for their driving and dependence power using fuzzy MICMAC
analysis. The fuzzy direct relationship matrix is formed using expert opinion on the strength of relationship between the variables.
The following scale is used to dene the strength of relationship
(Table 11).
Here, 0 denotes no relationship and 1 denotes perfect relationship. Other times the variables may or may not be strongly
related. Sometimes a risk may lead to the other and sometimes it
may not. This gray area is dened by the above mentioned scale.
The fuzzy direct relationship matrix is shown in Table 12.
The sum of all the row elements gives driving power of corresponding risk variables and sum of all the column elements
gives the dependence power of corresponding risk variables. The
fuzzy direct relationship matrix is recursively multiplied by the
binary direct reachability matrix until a Fuzzy MICMAC stabilized
matrix is obtained. A stabilized matrix is one for which the driving
and dependence power is constant for at least last two iterations.
The binary direct reachability matrix is obtained by replacing right
diagonal elements in the initial reachability matrix by 0. In this
particular model, the two matrices are given in Tables 13 and 14
along with the driving and dependence powers of risk variables in
stabilized form. The variables are further divided into autonomous
and linkage variables along with driving and dependent ones.
4. Findings and discussions

ISM model establishes interactions amongst 12 risk variables.
The graph in Fig. 2 derived using the results of fuzzy MICMAC. The
rst quarter consists of 5 (R3, R6, R1, R12 and R5) risks as Independent variables or driving ones. The ISM endorses the increase in globalization (R1) the complexities of the apparel supply
chain would lead to various other risks in retail business. It is
expected to play a key role as Indian customers used to see the
only two seasons normally in the fashion life cycle such as either
SpringSummer (SS) or AutumnWinter (AW). Due to the
awareness of customers, retail companies are in turnaround phase
to introduce more number of seasons to reduce the lifecycle of
their merchandise. Moreover, the transfer of global designs to Indian retail environments is also a perceived risk as Indian customers are having varied demands in the market. Safety and security
(R12) in the supply chains from Indian context is always a concern
for supply chain managers as Indian retail chains are prone to
pilferages and shrinkages across various steps in the order execution. It is appropriate by having it as a high driving power along
with behavioral risk from the labor, as both of them will form the
160
Table 13
Binary reachability matrix.
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
0
1
0
0
1
0
1
0
1
0
1
1
1
0
0
0
0
0
0
0
0
1
0
0
1
1
0
0
1
0
0
1
0
0
1
0
1
0
1
0
0
0
0
1
0
0
1
0
0
0
0
1
0
0
1
1
0
0
1
1
0
0
0
0
1
0
1
1
0
0
1
1
0
0
0
0
0
0
0
1
0
1
1
1
0
0
0
0
0
0
0
0
0
1
1
0
0
0
0
0
0
0
0
1
0
0
1
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
Table 14
Fuzzy MICMAC stabilized matrix.
Variable
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
Driving power
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
Dependence Power
0
0
0.5
0
0
0
0
0
0
0
0
0
0.5
0.7
0
0.5
0
0
0
0
0
0
0
0
0
1.2
0
0
0
0
0
0
0
0
0
0
0
0
0
0.5
0
0.7
0
0.5
0.7
0
0
0
0
0
0.3
2.7
0.3
0
0.5
0
0.3
0.7
0
0
0
0
0
0.3
2.1
0
0
0
0
0
0
0
0
0
0
0
0
0
0.7
0.5
0.7
0.7
0.5
0.7
0.7
0.3
0.5
0
0
0.5
5.8
0.7
0.5
0.7
0.7
0.5
0.7
0.7
0.3
0.5
0
0
0.5
5.8
0
0
0
0
0
0
0
0
0
0
0
0
0
0.7
0.5
0.7
0.7
0.5
0.7
0.7
0.7
0.5
0
0
0.5
6.2
0.7
0.5
0.7
0.7
0.5
0.7
0.7
0.7
0.5
0.7
0
0.7
7.1
0.3
0
0.5
0
0.3
0.7
0
0
0
0
0
0.3
2.1
4.6
2
5.5
2.8
3.1
4.9
2.8
2
2
0.7
0
3.1
risks at the bottom level. The model also positions the scarcity of
resources in the driving quadrant as Indian retail industry still
suffers with trained manpower and technology adoption due to
the unavailability. It may be due to untrained manpower to understand the complexity of the business. The study also shows that
there is a lack of coordination and alignment problems within
apparel industry itself. One of the participants in the study who
heads the Product Development function in the leading retail
chain supports this with her quote This problem is a perennial
one for the Indian industry and it needs some maturity to adapt
and to compete with the Global retail chain. Further, alignment
problem starts at product development stage, where we need to
6
R3
5
R6
Linkage
Variable
Independent
Variable
R1
Driving Power
4
R12, R5
R4
R7
R2
R9
R8
Dependent
Variable
Autonomous
Variable
R10
R11
0
0
Dependence Power
Fig. 2. Cluster of risks.
convert the consumer taste and participate in designing the supply

chains. This is really impacting the business performance of Indian retail chains.
Supplier uncertainty (R4) remains as the transient variable
between autonomous and driving quadrant. The risk involved here
is that suppliers for apparel retailers are not consistent in handling
low volumes and also not responding quickly to the customers due
to their innate operating conditions. Their performance also can
also be driven by various other factors. The second cluster maps
autonomous variables that have weak dependence and driving
powers. These barriers are highly disconnected from the system
and can lead individual effects. Raw material/product quality
standards (R2) and uncertainty in demand management (R9) are
the members of this cluster. It really endorses the statement from
the Delphi participants that Indian retail industry is still at the
nascent stage to implement scientically designed demand management program. Moreover, this poor demand management
could be due to many reasons such as: No evidence of early supplier involvement (ESI) and vendor managed inventory (VMI) in
the retail operations citing them as the sophisticated techniques.
(Quote from One of the Delphi participants, working with Leading
Retailer in India). Indian apparel retail professionals show little
reluctance in adopting those strategies due to their conservative
outlook. Further, they are not clear with the specication requirement and it is subjected to change in terms of quality. The
poor adoption of accepted standards like American Society of
Testing Materials (ASTM) and American Association of Textile Chemists and Colorists (AATCC) in the materials and delivery standards
also established as a risk in the supply chain system. Both the
above factors act as autonomous effect on the business. The impact
could obstruct the growth of Indian retail in the International
arena also. Moreover, Indian retailers get confused with the
standards to be followed. These risks are major from the customer
point of view, and new to them, as till now, they act as a manufacturing hub. The next quadrant, dependent variables, has
3 variables as full members (R8, R10 and R11) and R7 acts as the
transient variable between dependent and linkage quadrant. Infrastructure Risks (R7) exhibits strong dependence and driving
power and should be given more focus than the others. Infrastructure implies warehouse management, logistics network and
basic transport needs, regulatory compliance with respect to
transport and etc. India does not have the well established infrastructure and regulatory framework in terms of apparel retail industry with the absence of detailed standard operating procedures
from the controlling authorities. Though this risk is dependent on
many factors, it may cause the delay in the establishment process.
Financial risk (R11), which has high risk in cash conversion
cycle; low market share; low prot margins; decreasing revenues
and etc., is the result or effect of the risks all below in the hierarchy. This is the continuing problem in Indian retail environment,
as fellow industry respondents also agreed on clutching the price
at the supplier side, without knowing that slowly their efciency
of deriving the product at the low price to the customers is also
declining. It will result in many suppliers to go bankrupt and
disinterest in sustaining the business. And, it has high dependence
power along with the other risks like customer dissatisfaction
(R10) and delay in schedule lead time (R8). Lead time management
in apparel industry is always a challenging task as Indian design
industry does not enjoy recognized and an independent status,
still has huge inuence on the western and eastern counterparts
for following up trends and forecast. Further, similar to other industries, it has a close relationship with customer feedbacks.
However, the impact could be, Indian retail industry could enjoy
the benets from established supply base. Retail managers participated in the discussions concurred with the fact that retail
buyers are not taking the lead time analysis should be leveled as a
value adding activity in the system. But it does not support that
and it has the side way of analysis.
This methodology will also give a true picture of the criticality
of the risks when it is analyzed from the particular company point
of view. The trend may not be always the same and it is one of the
limitations of this analysis. This modeling exercise can also be
applied to other business areas where the interdependence between variables needs to be identied or the root cause of some
problem is analyzed. If the dependence power of the variable is
zero, it would signify that the variable is one of the root causes of
the problem. A higher dependence power may have to be explored
further to analyze for the root cause. On the other hand, a variable
with zero driving power is the effect of all other factors.
The traditional cause effect or shbone or Ishikawa diagram
which is being used by companies to nd the root cause of a
failure/problem can be replaced by Interpretative Structural
Modeling (ISM). Visually, ISM becomes easier to understand the
relationship between various interrelated factors leading to a
particular effect. Sometimes, those cause effect diagrams may
become very complicated and does not give the interdependencies
between the variables. Also, ISM model is analogous to one of the
new quality control tool i.e. the relations diagram used to explore
the cause and effect relationship where the causes are likely to be
mutually related. Further, this ISM model of risks and MICMAC
analysis are helping us to propose a new calculation method,
leading to be the unique contribution for ISM and Risk literature
from this research work.
5. Risk prioritization: proposed model

The prioritization of risk is essential for the managers to focus
on a few risks which act as drivers of other risks. Various models
161
like the Failure Mode Effect Analysis (FMEA), Risk Benet Analysis
(RBA), and Cost Benet Analysis (CBA) have been developed to
prioritize risk based on factors such as the probability of occurrence, severity, and the detection ease (Khan et al., 2008). These
models have been accepted by many and criticized by others for
removing the element of human judgment (White, 1995). Kraljic
(1983) proposes portfolio matrix using risk model as a base factor
and Caniels and Gelderman (2005) gives the dependence and
driving factors perspective. Further, there has been a debate between those who see risk as objective and those who argue that
risk is subjective (Yates and Stone, 1992; Bernstein, 1996; Moore,
1983; Frosdick, 1997; Spira and Page, 2003). Some of works on risk
calculation methodologies have been extensively done by Ritchie
and Brindley (2007a, 2007b) and Rao et al. (2011). Our paper endorses the view expressed by Lupton (2005) that risk ranges between the techno-scientic perspective, which sees risk as objective and measurable, to the social constructionist perspective,
and also sees it as being determined by the social, political and
historical viewpoints of those concerned. The models mentioned
above do not take into account the interdependence between the
various risks. Occurrence of any event is a chance that any event
will occur. But the events are not independent. ISM has shown a
particular risk is a driver of multiple other risks. It may also be
driven by other variables i.e. it may be dependent on various other
factors. This is one of the major advantages of ISM over Ishikawa
diagrams. In this model, we consider inter relationship between
the variables to prioritize the risks along with severity or cost
impact and the ease of detection of the risk.
As far as risks in supply chain it is very difcult to assign a
probability of occurrence to any particular event because of the
uncertainty associated with it. Risk is measurable and can be estimated from the probabilities of the outcome. But, uncertainty is not
quantiable and probabilities of the outcome are not known (Knight,
2012). Yates and Stone (1992) also argue that risk implies uncertainty
about the prospective outcome and if the probability of the outcome
is known then there is no risk. Slack and Lewis (2001) discuss both
the points. With both these arguments in existence, here we consider occurrence of the risks to be uncertain and very difcult to
measure in terms of probability. Thus, with the existing FMEA as a
base framework, we propose a new model to prioritize risk using the
results of Fuzzy ISM. The driving and the dependence power of each
variable derived from the fuzzy MICMAC analysis replace the factor
occurrence in the current risk prioritization number formula
(RPN Occurrence Severity Detection). With this existing one, it
is very difcult to quantify the exact probability of occurrence. So,
the factor driving power divided by dependence power is proposed to be used as a measure of the occurrence of the uncertainty
or risk. Higher the factor, chance of the occurrence of the event is
more. Thus, it helps us to quantify the strength of occurrence in the
supply chain system.
So, Risk Prioritization Number can be found out by using the
new formula based on ISM MICMAC analysis:
Risk Prioritization Number

= severity detection
driving power
dependance power
The higher the cost or severity associated with a risk higher will be
the criticality of the risk. More the driving power of the risk, its ability
to initiate other problems in the supply chain is high. So, risks with
higher driving power must be given higher priority. Similarly, the
higher the dependence power of a risk, more variables lead to this
particular risk. The main focus must be shifted to it root causes i.e. its
drivers and a lower priority will be assigned to risk with higher dependence power. Risk with highest dependence power is more of an
effect than a cause to any other event. Thus, the above mathematical
162
formula can be used to prioritize risk taking into account the severity,
detection and mutual dependence of the variables or risk in this
particular case. This can be applied in any industry which is having
fuzzy ISM (MICMAC) analysis. While using the risk prioritization
proposed formula above, the factors having zeroed driving or dependence power should not be ranked using the method for the particular
domain. The variables can be directly assigned priority by qualitative
analysis of efforts to mitigate the particular cause or using the cost
associated with it. However, it needs to be validated through the
various empirical as well as the quantitative frameworks.
6. Managerial implications of the study

With the supply chains are operating under uncertainties,
studies pertaining to supply chain risk management are becoming
very practical and relevant according to the chosen business domain. Risk calculation methodology also should be a practice
based one and it eventually supports strategic and decision making process in a supply chain (Tummala and Schoenherr, 2011).
This paper endorses the practice based research from Indian
context. The present study also proposes a new model for RPN
calculations, which is going to be an imperative and basic tool for
major supply chain practitioners and organizations in the risk
analysis. The retail strategists/managers can use ISM framework
within their service environment to classify risk factors depending
on their impact on the supply chain system using the structured
approach. Further, these elements can also be useful for deriving
RPN values to rank based on the driving and dependence power.
Followed by that, a comprehensive plan for the supply chain risk
mitigation plan can also be designed. The study gives directions on
risk evaluations with a discrete approach. Along with the analysis
of current situation inside the company with respect to risks, it is
equally important to anticipate the future. One of the methods
could be pure play analysis of companies from the same domain.
Thus, by giving importance to supply chain risk management, a
company can reduce extra costs and improve their bottom line.
Also, retail chains trying to enter India or currently operating can
also apply these model building and the ndings of this paper
would help them to design the strategies for mitigating those risk
factors.
Structural Equation Modeling (SEM). The variables under consideration are very limited and generic as this is the initial phase of the
study. These variables can have the multitude effect having a different
degree of inter-relationships. This model and methodology will be
foolproof when applied to a single company environment, where the
costs and frequency of occurrences of disruptions are recorded in the
history to prioritize risk. Depending on the situation, mitigation strategies can be formulated taking into consideration the budget and
efforts required. The risk prioritization model can also be validated
through various sub-domains/industry stakeholders across the supply
chains. Case studies engaging different dynamics and business environments can also be developed to ascertain the newly proposed
Risk Priority Model.
8. Conclusion
It is very important for the managers to know and understand
the risks involved in apparel retail supply chains. And, the interdependence of the risks may also result into chain of risks there
increasing the costs of mitigations. One risk may lead to various
other disruptions also causing domino effect. It is therefore essential to take preventive action after thorough analysis of each
risk and prioritizing them using the suggested method. The
probabilities of known risks must be carefully assigned by looking
into past records. The cost of preventive action along with the cost
of corrective action can also be considered (cost benet analysis).
Results, in case the probabilities of future events, are not well
dened. Structural Equation Modeling (SEM) approach can be
suggested in the future scope that could help manager to understand whether the retail professionals are on the same line with
respect to the interdependencies of risks or causes of a particular
problem. It would then help to take corrective action with total
employee involvement and through other modes as well.
Acknowledgment
We would like to thank Editor-in-Chief and anonymous reviewers
for their feedback and inputs to enhance the quality of the paper. Also,
we place our sincere thanks to Dr. Rameshwar Dubey for his continued motivation and guidance to shape the article in the present
form.
7. Limitations and scope for further research

The ISM model developed here is based on the expert opinion and
it may be biased and limited to a particular industry that they belong
to. The links established using ISM may be tested for validity using
Appendix A
See Tables A1A3.
Table A1
Risk assumptions.
Risk no.
Risk
Background of risks
R1
R2
R3
R4
R5
R6
R7
R8
R9
R10
R11
R12
Globalization
Raw material and product quality
Scarcity of resources
Supplier uncertainty
Lack of co-ordination/alignment
Behavioral aspect of employees
Infrastructure risks
Delay in schedule/lead time
Demand uncertainty
Customer dissatisfaction
nancial risk
Security and safety
Currency uctuations; design transfers, competition; legal and political risk; policy changes; etc.
Retailers do not have the complete SOP of the product quality and it varies from season to season/and product to product
Scarcity of raw material; power shortage; labor shortage; resource cost; cost of technology etc.
Failure to deliver on time; supplier bankruptcy; unreliable supplier; Cost and quality not reliable/consistent; etc.
Lack of communication; no cross functional teams; no transparency between partners/departments; etc.
Employee disputes; inefcient/unskilled employee; resistance to change; unavailability of labor due to absence; etc.
Transport breakdown; inadequate means of transport; inconsistent warehouse facility; IT failure; etc.
Order fulllment error; change in production schedules; machine breakdown; delay in delivery; change in design; etc.
Error in demand forecast (short term or long term); bullwhip effect; short product life cycle; risk from new entrants; etc.
Product returns; customers complaints; reduced demand; stock out; poor quality; wrong product delivery; etc.
High cash conversion cycle; low market share; low prot margins; decreasing revenues; etc.
Pilferages and shrinkage of the materials in the warehouse/losses in transit, performance of the product, cyber attack etc.
163
Table A2
Summary of ISM research works from 2000 to 2012.
Authors(s)
Research objective
Gorane and Kant

(2013)
To identify the supply chain management enablers (SCMEs) and establish relationships among them using interpretive structural
modeling (ISM) and nd out driving and dependence power of enablers, using fuzzy MICMAC analysis.
Pfohl et al. (2011)
Structural analysis of potential supply chain risks using Interpretive
Structural Modeling (ISM) and MICMAC analysis methodology.
Tummala & Schoenherr The purpose of this paper is to purpose a comprehensive and co(2011).
herent approach for managing risks in supply chains.
Olson and Wu (2011)
To compare tools to aid supply chain organizations in measuring,

evaluating and assessing various risks.
Jharkharia (2011)
To understand mutual inuences of the factors those adversely impact the process and results of ERP.
Farooq and OBrien

(2010)
To present results of a developed technology selection framework

and provide insights into the risk calculation and their implication in
manufacturing technology selection process.
To address the issue whether supply chain members should strive to
build the trust or strive to reduce the risk with its members and from
which perspective?
Laeequddin et al.
(2009)
Pujawan and Geraldin

(2009)
To provide a framework to proactively manage supply chain risks.
Manuj and Mentzer

(2008)
To explore the phenomenon of risk and risk management strategies

in global supply chains.
Research ndings
This paper has identied 24 key SCMEs and developed an integrated model
using ISM and the fuzzy MICMAC approach, which is helpful to identify and
classify the important SCMEs and reveal the direct and indirect effects of
each SCME on the SCM implementation.
ISM was proved to be a effective methodology to establish inter-relationship among supply chain risks.
The Supply Chain risk Management Process (SCRMP) framework proposed
here is a coherent and comprehensive approach for managing risks and
uncertainties associated with a given problem. Risk identication, measurement, assessment, evaluation, mitigation and control strategies have
been discussed in detail. The SCRMP can be used as an aid in making
decisions.
The work considers the strategies of outsourcing to China and other nations. It offers many cost advantages as low cost producers anywhere can
compete. There are greater risks with outsourcing but these can be handles
using the ability to communicate in real time (via Internet). The use of Data
Envelopment Analysis and Monte Carlo Simulation for evaluation of risk on
hypothetical data shows that vendors from the Great China are preferred to
those from western nations due to low risk-adjusted cost and higher
efciencies.
The Interpretative Structural Modeling (ISM) has been used to establish the
relationship between the critical factors. Three factors namely, poor understanding of business implications and requirements, poor data quality
and lack of top management support, have been identied as drivers for
ERP implementation and hence need serious attention.
The paper explains the role of risk and an approach to calculate risk in the
manufacturing technology selection process. The research quanties the
risk involving different manufacturing technology selection alternatives.
A conceptual framework was developed considering ve key perspectives:
characteristics, economics, dynamic capabilities, technology, and institutions to evaluate the risk in a relationship. These perspective of risk can
initiate and build trust between supply chain members in the global
business environment.
The two house of Risk (HOQ) models have been adopted to supply chain
risk management. HOQ1 determines which risk agents in the ve supply
chain processes (SCOR) are to be given priority for prevention. HOQ2 gives
priority to those actions considered effective but with reasonable money
and resource commitments.
Six risk management strategies have been suggested depending upon the
nature of demand and supply uncertainty.
(1) Postponement
(2) Speculation
(3) Hedging
(4) Control/Share/Transfer
(5) Security
(6) Avoidance
The paper also provides insights into the role of three moderators in the
process of supply chain risks namely
(1) Team composition
(2) Supply chain complexity
(3) Inter-organizational learning
Khan and Burnes

(2007)
To develop a research agenda for risk and supply chain management. The paper discusses the fact that the application of risk theory in supply
chain management is still in its nascent stages and all the models for risk
measurement need to be empirically tested.
Faisal et al. (2006)
To present an approach to effective supply chain risk mitigation using The model shows that there exists a group of enablers having a high driving
ISM. To understand the dynamics between various enablers that help power and low dependence power which requires maximum attention and
is of strategic importance. Another group of variables consists of those
to mitigate risk in the supply chain.
variables which have high dependence and are the resultant actions.
Gaudenzi and Borghesi To evaluate supply chain risks that stand in the way of supply chain The application of AHP is helpful particularly to support the prioritization
(2006)
objective using Analytical Hierarchy Process (AHP).
of objectives and the analysis of overall impact. The establishment of
through consideration of critical issues requires the involvement of managers from different areas.
Cucchiella and Gastaldi To individualize a framework to manage uncertainty in the supply
The risk management framework has been designed using the real option
(2006)
chain nalized to reduce the rm risk.
theory. After analyzing the risk characteristics it is possible to individualize
the real options that better suit the risk under consideration. The outsource
option has been tested using Mat Lab to cover two risks related to production capacity and price uctuation.
Kleindorfer and Saad
To develop a conceptual framework that reects the joint activities of The framework SAM-SAC consists of six activities
(1) Specication of sources and vulnerabilities
(2005)
risk assessment and mitigation that are fundamental to disruption
(2) Assessment
risk (natural disaster, strikes, economic disruptions, etc.) in supply
(3) Mitigation
chain.
(4) Strategies with dual dimension
164
Table A2 (continued )
Authors(s)
Research ndings
Research objective
(5) Actions and

(6) Necessary conditions
The model involves the process of identifying, assessing, planning and
implementing solution, conducting FMEA analysis, and doing continuous
improvement.
Nine categories of risks have been identied and the impact of eight mitigation strategies on these risks has been assessed. The following two
managerial implications follows:
(1) Stress testing your supply chain can create a shared organization wide
understanding of the supply chain risks.
(2) Adapt risk mitigation approaches to the circumstances of a particular
company.
Sinha et al. (2004)
To propose a methodology to mitigate supply chain risks.
Chopra and Sodhi

(2004)
To categorize various supply chain risks and suggest risk mitigation

strategies for these categories.
Zsidisin et al. (2004)
To explore, analyze, and derive common themes on supply risk assessment techniques.
Harland et al. (2003)
The research describes the development of a risk tool to increase visibility

of risk in the supply chain network. The tool was tested on four case studies
in the electronics sector. The case studies were conducted to design a framework for the tool.
The main objective of this paper is to provide a grounded denition The paper provides academicians and practitioners a starting point to
understand the supply risks and to provide insights to how these risks can
of supply risk. Case studies from various purchasing organizations
negatively impact the business environment.
have been considered for this purpose.
Zsidisin and Ellram

(2003)
The paper provides the supply managers insights into the techniques their
rms can adapt to assess supplier risks. the cases studied would help
purchasing organizations to assess supply risk with techniques such as
(1) Addressing supplier quality issues
(2) Improving supplier processes
(3) Reducing the likelihood of supply disruptions
(4) Promoting goal congruence between buying and selling rms and
(5) Reducing outcome uncertainty associated with inbound supply
The purpose of the paper is to provide a review of denition and

classication of risks. It also provides a holistic view of risk assessment and measurement.
Table A3 Questions for Delphi rounds

No. Questions
Key words/issues
1
2
3
4
Globalization
Product standards
Raw material
SOP systems
5
6
7
8
8
9
10
11
12
13
14
15
16
17
18
19
20
How do you rate the globalization is having perceived risk for Indian retail companies?
How do you perceive the impact of product quality and standards affect the apparel retail business?
Are you seeing the availability of raw material and their quality standards in India is a risk to the retail business?
Absence of standard systems/operating procedures in the retail environment is a risk to the business How do you
see?
Do you include the non-availability of the skilled resources in the retail domain as a major risk in the Indian
environment?
Availability of less merchandise options in different forms of retail gives some amount of risk to the business, in terms
of making merchandise available to the people. How do you see as a risk to the business?
Perception of small players that retail business is a domain to be handled only by the big corporate houses with huge
investments Is that a threat to the development?
How do you rate the impact of reliability of the suppliers in the retail business?
Do you see the lack of alignment of the stakeholders with the retail rm is high? What kind of threats posed by?
How do you see the behavior practices of the employees risk the retail business as they are directly in touch with the
customers?
Financial risk is always there with the retail business? From the Buying as well as the supplier's perspective?
Retail business is impacted by a delay in the lead-time of the product? How does it impact the business
Customer dissatisfaction will lead to a huge impact on the Indian retail business?
Retail companies are not having the big support in terms of infrastructure. Is that a risk posed to the Industry, when
compared to the industry standards in abroad.
How do you rate the pilferages and shrinkages control system, is that a risk to the retail business?
Employee orientation methods are not being given on the retail business. Is it perceived to be a risk?
Customization trend in the business is at the very low level at the Indian retail. Is that posing a threat to the business
growth?
India does not have the logistics support to the retail industry in terms of warehousing and advanced systems such as
VMI and all, Is that a threat to the business performance?
Does Indian retail follow the global trend and do not have the sense of developing the products for the domestic
customers? Is that a risk to the business?
Existing HR policies in the retail domain is a big threat?
Fear of dominance of Foreign brands is also posing a risk to the retail business?
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Contents lists available at ScienceDirect

Journal of Retailing and Consumer Services

Analysis on supply chain risks in Indian apparel retail chains and

from disruption? The answer lies in the integration of supply chain

importance to risks domain from supply chain perspective

process is the most imperative step in risk management domain

international retailers vying to enter the Indian market (Batra and

3.1. ISM why and how?

3.2. Identication of the variables

such as for strategic decision making, policy formulation and to

3.3. Interpretive structural modeling (ISM)

Financial Risk (R11)

Delay in schedule / lead

Infrastructure Risk (R7)

Supplier Uncertainty (R4)

Scarcity of Resources (R3)

Product quality and raw

Security and Safety (R12)

Fig. 1. Interpretive Structural Model for risk relationship in apparel retail

levels of relationships between the risks. To be more precise with

4. Findings and discussions

Fig. 2. Cluster of risks.

convert the consumer taste and participate in designing the supply

5. Risk prioritization: proposed model

Risk Prioritization Number

6. Managerial implications of the study

7. Limitations and scope for further research

Gorane and Kant

Olson and Wu (2011)

To compare tools to aid supply chain organizations in measuring,

Farooq and OBrien

To present results of a developed technology selection framework

Pujawan and Geraldin

To provide a framework to proactively manage supply chain risks.

Manuj and Mentzer

To explore the phenomenon of risk and risk management strategies

Khan and Burnes

(5) Actions and

Sinha et al. (2004)

To propose a methodology to mitigate supply chain risks.

Chopra and Sodhi

To categorize various supply chain risks and suggest risk mitigation

Zsidisin et al. (2004)

Harland et al. (2003)

The research describes the development of a risk tool to increase visibility

Zsidisin and Ellram

The purpose of the paper is to provide a review of denition and

Table A3 Questions for Delphi rounds

Wareld, J.W., 1974. Developing interconnected matrices in structural modeling.

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