Supply chain sustainability risk decision support model using integrated Preference Selection Index (PSI) method and prospect theory

Abstract

PurposeThe purpose of this paper is to introduce the integrated model of the Preference Selection Index (PSI) and the prospect theory as new means to appraise the impact of supply chain sustainability risks based on five pillars of sustainability. Research has shown that sustainability risk assessment has a strong positive impact on improving the performance of enterprises.Design/methodology/approachThis study adopts a new decision support model for assessing supply chain sustainability risk based on additional failure mode and effect analysis parameters and its integration with PSI methodology and prospect theory. A case example of the supply chain small and medium enterprise (SME) producing fashion have been used in this study.FindingsThe result of this study reveals some critical supply chain sustainability risks affecting the sustainability of enterprises under study.Research limitations/implicationsThe use of a limited sample is often associated as a limitation in the research studies and this study is based on findings from SMEs in the fashion retail supply chain. This preliminary study provides academics and practitioners an exemplar of supply chain sustainability risk assessment using integration of the PSI method and prospect theory.Practical implicationsThe result of this study is beneficial for practitioners, particularly owner–managers of SMEs who can use this study as guidance on how to consider risk behavior to identify and select the critical sustainability risks and plan mitigating strategies accordingly.Originality/valueScientific studies on using the PSI and its integration with prospect theory as means to assess the criticality of supply chain sustainability risks is very rare. To the best of the authors’ knowledge, this is the first paper that presents the integrated model of the PSI and prospect theory to rank supply chain sustainability risks based on five pillars of sustainability.