Business Studies Paper on Supply Chain Risk Management

Theoretical Foundation

One of the essential priorities in the healthcare sector is the supply of medicine. Thus, it is important to have an efficient pharmaceutical supply chain management that will adequately cater for continuous availability of medicine in various healthcare settings. An Efficient pharmaceutical supply chain ensures the right quality and quantity of medication is supplied in the market and at optimal prices that will benefit all the stakeholders. This study will be based on the theory of constraints and strategic choice and game theory. The models will be helpful in this research because they will assist in describing the Supply Chain Risk Management practices and behaviors in the pharmaceutical industry. The models will also be used to develop effective methods that impact and change the SCRM behaviors in the pharmaceutical industry. Consequently, the Supply chain risk management notion can become clearer if examined from a variety of theoretical perspectives since it is a relatively complex concept. Therefore, this section of the study aims to evaluate the issues of the supply chain risk management theoretical perspective in the pharmaceutical industry.

The Strategic Choice Theory

According to Enyinda (2018), the strategic choice theory is effective in enhancing the research and practice of supply chain management in making a critical decision when faced with dynamic and challenging situations. The theory describes the relations that link organizations actions and events, with its essential integrative approach valuable for strategic management of the pharmaceutical industry (Grigoriou & Rothaermel, 2017). The strategic choice theory is critical for organizations approach and is used in the face to face workshops in the decision-making processes. Therefore, it is an ongoing process where the management of planned uncertainty plays a vital role. Moreover, the strategic choice theory focuses on the decision made regarding the planning process regardless of their timescale and substance of the decision.

The strategic choice theory highlights the subtle decisions that are involved on how to handle uncertainties which surround the decisions to be made in the supply chain of pharmaceutical firms and outlets (Grigoriou & Rothaermel, 2017). In addition, the approach is interactive since it has been designed as a framework for continuous communication rather than one that is used by experts, and enhances collaborative measure between individuals with different skills and backgrounds. Therefore, based on the strategic choice theory, MacCarthy, Blome, Olhager, Srai, & Zhao (2016), argue that strategic decisions within various organizations should be made with regard for the supply chain as the primary motivator. Therefore, strategic supply chain management fosters the adoption of approaches that create adaptability and agility within the pharmaceuticals supply chains.

The Game Theory and Supply Chain Risk Management

According to MacCarthy et al., (2016), the game theory consists of three primary players i.e. the payoff functions, the players, and the strategy space. Additionally, the game theory is further divided into two parts which are the cooperative and non-cooperative game theories. The cooperative game theory describes the primary players that can make bidding agreements in relation to the industry they are involved in. In Contrast, the non-cooperative theory assumes that each player in the industry can maximize their objectives regardless of the impact the decision will have on other industry players (Grigoriou & Rothaermel, 2017). However, the primary objective of either approach is to gain stability of the supply chain.

A state of equilibrium will be formed and studied, although the Game Theory is widely known to be applied in the political area, it is recently being used to solve critical issues in the supply chain risk management in the pharmaceutical industry. Consequently, the players in the Game Theory can be perceived to be the multiple objectives, resources, common risks, and information shared in the pharmaceutical industry (Sharma, Saboo, & Kumar, 2018). The pharmaceutical supply chain is an essential component of the healthcare sector because it includes the procedures production and delivery, vital medical information, logistics, modern medicine and information technology involved in the manufacture and the sales activities.

Pharmaceutical firms play a critical role in supplying medicine globally. Therefore, any risks that may impede the pharmaceutical organizations could adversely impact the supply of medicine and as a result affect the efficiency of the healthcare systems in place (Pisano, 2017). However, local pharmaceutical companies face various vulnerabilities and risks due to the complex nature of the pharmaceutical industry. Consequently, the growing complexities and disruptive influences within the pharmaceutical industry supply chain operations has led to the development of a systematic approach to identify and mitigate the risks as they occur (Grigoriou & Rothaermel, 2017). The emerging trends and continuous development of information and technology is constantly posing increasingly significant risks in the pharmaceutical supply chain performance.

Notwithstanding, the circulation of substandard and counterfeit medicine has only worsened the problem (Sharma, Saboo, & Kumar, 2018). Therefore, pharmaceutical firms are forced to go an extra mile in ensuring that the supply of their medicine does not end up in the wrong hands that end up producing counterfeits (Enyinda, 2018). Supply chain risk management can help pharmaceutical firms overcome multiple vulnerabilities since it helps them to identify and prioritize the risks and develop the best approaches for dealing with the imminent risks.




Research Hypothesis

This research is based on the hypothesis that,

Hօ    The Supply Chain Risk Management activities have no impact on the effectiveness of Pharmaceutical firms in the delivery of quality medicine.

However, the findings of this research have rejected the null hypothesis that Supply Chain Risk Management activities have no impact of the effectiveness of pharmaceutical firms in the delivery of quality medicine since the p- value is less than one.


To remain viable in today’s risky pharmaceutical industry, it is imperative for firms to implement supply chain risk management activities. Some of the benefits of supply chain risk management include better decision-making approaches that help the firm to balance the risks and opportunities as well as enhance competitiveness. Conversely, lack of sufficient risk management strategies can erode public health reputation and confidence, health safety standards and reduce the revenue for the pharmaceutical firms. Unmitigated risks can precipitate the distribution and manufacture of medicine and affect the supply chain profitability. Therefore, pharmaceutical organizations have to conduct a continuous risk analysis that involves the entire supply chain which includes the manufacturers, suppliers, and customers.

The overall risk identification process represents an essential initiating perspective for the potential hazards that may arise within the pharmaceutical firm in the current or future time. However, the steps of the risk analysis process should be implemented based on the detection and likelihood of occurrence to provide crucial quantitative ideas for each risk. Consequently, the last step of the risk assessment process should provide data that will be filtered and ranked according to severity.



Enyinda, C. I. (2018). Modeling Enterprise Risk Management in Operations and Supply Chain: A Pharmaceutical Firm Context. OPERATIONS AND SUPPLY CHAIN MANAGEMENT-AN INTERNATIONAL JOURNAL11(1), 1-12.,_2018_.pdf

Grigoriou, K., & Rothaermel, F. T. (2017). Organizing for knowledge generation: Internal knowledge networks and the contingent effect of external knowledge sourcing. Strategic Management Journal38(2), 395-414.

MacCarthy, B. L., Blome, C., Olhager, J., Srai, J. S., & Zhao, X. (2016). Supply chain evolution–theory, concepts and science. International Journal of Operations & Production Management36(12), 1696-1718.

Pisano, G. P. (2017). Toward a prescriptive theory of dynamic capabilities: connecting strategic choice, learning, and competition. Industrial and Corporate Change26(5), 747-762.

Sharma, A., Saboo, A. R., & Kumar, V. (2018). Investigating the Influence of Characteristics of the New Product Introduction Process on Firm Value: The Case of the Pharmaceutical Industry. Journal of Marketing82(5), 66-85.