Managing supply chain risk through inter-organisational justice

Abstract

Purpose

This study examines the impact of inter-organisational justice (i.e. distributive, procedural and interactional) in the buyer–supplier relationship on supply risk and, in turn, on a firm’s marketing and financial performance.

Design/methodology/approach

A structured survey was administered both online and in-person to Jordan-based manufacturing companies. The 137 responses received were analysed using partial least structural equation modelling.

Findings

The study found that while establishing both procedural and interactional justice in the relationship has a negative impact on supply risk, promoting distributive justice, surprisingly, has no impact. Moreover, supply risk was found to be detrimental to the firm’s marketing and financial performance.

Research limitations/implications

This study considers only the direct role of inter-organisational justice in reducing supply risk. Future research could enhance our understanding of this role by exploring the underlying mechanisms and conditions that could govern it.

Practical implications

Managers can alleviate supply risk by ensuring procedural and interactional justice in the relationship through involving suppliers in the decision-making processes, consistently adhering to established procedures and communicating transparent and ample information.

Social implications

Addressing supply risk can help in maintaining community resilience and economic stability.

Originality/value

The study highlights inter-organisational justice as a new approach to mitigating supply risk. Moreover, by examining how supply risk can affect a firm’s marketing performance, it also highlights a new implication of supply risk. Furthermore, by exclusively examining the impact of supply risk on a firm’s financial performance, the study provides a more nuanced interpretation of the effect of supply risk and how it can be reduced.