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Managing Disruption Risk in Supply Chains
Abstract
There are two broad categories of risk affecting supply chain design and management: (1) risks arising from the problems of coordinating supply and demand, and (2) risks arising from disruptions to normal activities. This paper is concerned with the second category of risks, which may arise from natural disasters, from strikes and economic disruptions, and from acts of purposeful agents, including terrorists. The paper provides a conceptual framework that reflects the joint activities of risk assessment and risk mitigation that are fundamental to disruption risk management in supply chains. We then consider empirical results from a rich data set covering the period 1995–2000 on accidents in the U. S. Chemical Industry. Based on these results and other literature, we discuss the implications for the design of management systems intended to cope with supply chain disruption risks.
... Therefore, mapping the SC, evaluating where such risks could happen and managing them is becoming indispensable. The literature discusses how risks can be managed along the SC and claims that firms acting as standalone entities cannot effectively mitigate risks; inter-firm actions are needed (Colicchia and Strozzi, 2012;Kleindorfer and Saad, 2009;Li et al., 2015). Inter-firm collaboration is a valuable strategy to mitigate risks when the parties involved do not behave opportunistically, and therefore, their objectives are aligned (Cao et al., 2010;Eisenhardt, 1989). ...
... A linkage from the Planetary Level that persists and permeates the whole SC is through the Environmental Risk Financial Exposure, which is associated with strengthening the Supply Chain Within-Level Linkages. This result confirms the claims in the literature, according to which collaborating in the SC is a valuable mitigation strategy (Colicchia and Strozzi, 2012;Kleindorfer and Saad, 2009;Li et al., 2015). Nuances are given by the SC position and the direction of the linkage. ...
Purpose
This study builds on the panarchy theory by viewing the supply chain as a socio-ecological system and further expands it by considering the within-level linkages internal to the supply chain level. Three types of linkages are considered: the two cross-level linkages with the planetary and the political-economic levels and the supply chain within-level linkages. The research questions are addressed using the data gathered by the Carbon Disclosure Project within its Supply Chain Programme.
Design/methodology/approach
This work aims to study, applying the lens of panarchy theory, how the planetary and the political-economic levels affect the supply chain within-level linkages for sustainability. Furthermore, the difference in how these cross-level linkages influence focal firms and first-tier suppliers is explored.
Findings
The results show that considering the planetary-supply chain linkage, climate change risk exposure is likelier to foster within-level linkages with buyers than with suppliers. Further, climate change mitigation investments have different roles in the different tiers: focal firms are pushed to strengthen the linkages with their suppliers when they lose efficacy in improving their carbon performance, whereas first-tier suppliers exploit investments to gain legitimacy. Discussing the political-economic level effect, perceptions from first-tier suppliers could be two-fold: they could perceive a mandating power mechanism or exploit policymakers’ knowledge to advance their capabilities.
Originality/value
The results contribute to the sustainable supply chain management literature by providing empirical evidence of the cross-level linkages theorised by the panarchy theory. Moreover, the concept of within-level linkages is proposed to apply the theory in this field.
... Organizations are increasingly concerned about risk issues as they strive to survive in a difficult commercial climate. The primary sources of risk in supply chains can be categorized into three main categories: (a) operational fluctuations, such as variations in supply and price, as well as uncertainties in demand; (b) natural disasters, including hurricanes, severe droughts, and the coronavirus pandemic; and (c) catastrophes caused by humans, such as terrorist attacks and terrorist strikes [9,10]. ...
... There are numerous ways to classify and categorize supply chain risks. According to Kleindorfer and Saad [10], disruption risks refer to unforeseen and unplanned incidents that cause disturbances to the customary movement of materials and products along a supply chain. Operational risks refer to the inherent uncertainties that disrupt supply chains and have significant implications, such as uncertain costs, consumer demand, and availability. ...
Globalization and multinational commerce have increased the dynamism and complexity of supply networks, thereby increasing their susceptibility to disruptions along interconnected supply chains. This study aims to tackle the significant concern of supplier selection disruptions in the Thai agri-food industry as a response to the aforementioned challenges. A novel supplier evaluation system, PROMETHEE II, is suggested; it combines the Fuzzy Analytical Hierarchy Process (FAHP) with inferential statistical techniques. This investigation commences with the identification of critical indicators of risk in the sustainable supply chain via three phases of analysis and 315 surveys of management teams. Exploratory factor analysis (EFA) is utilized to ascertain six supply risk criteria and twenty-three sub-criteria. Following this, the parameters are prioritized by FAHP, whereas four prospective suppliers for an agricultural firm are assessed by PROMETHEE II. By integrating optimization techniques into sensitivity analysis, this hybrid approach improves supplier selection criteria by identifying dependable solutions that are customized to risk scenarios and business objectives. The iterative strategy enhances the resilience of the agri-food supply chain by enabling well-informed decision-making amidst evolving market dynamics and chain risks. In addition, this research helps agricultural and other sectors by providing a systematic approach to selecting low-risk suppliers and delineating critical supply chain risk factors. By bridging complexity and facilitating informed decision-making in supplier selection processes, the results of this study fill a significant void in the academic literature concerning sustainable supply chain risk management.
... However, companies should be able to assess the risk of supplier disruptions. This study summarizes eight main potential factors for supplier disruption incidents, including "insufficient production capacity" [17][18][19], "quality issues" [20-22], "significant price fluctuation" [22][23][24], "delivery delays" [25-27], "financial instability" [28][29][30], "changes in local government laws and regulations" [31-33], "technological changes or failures" [15,18], and "natural disasters and geopolitical risks" [34][35][36]. Building on these eight risk factors, this paper seeks to explore several critical inquiries: (i) what is the individual hazard level of these disruption risk factors (i.e., the weight of the risk factors)? ...
... The repercussions of a supplier's financial instability are particularly acute for businesses relying on single or limited sources for critical components. To manage this risk, companies may conduct regular financial health assessments of their suppliers, develop contingency plans, and diversify their supplier base to ensure the continuity and resilience of their supply chain [28][29][30]. 173 The supply disruption risk associated with changes in local government laws and regulations refers to the potential for disruptions or complications in the supply chain that arise from modifications to legal frameworks or regulatory policies within a supplier's operating region. Such changes can encompass a wide range of areas, including environmental standards, labor laws, import/export restrictions, tariffs, taxation, and safety regulations. ...
As the complexity and uncertainty of global supply chains escalate, disruptions have become an increasingly common challenge in supply chain management. Suppliers, who serve as essential connectors for the seamless movement of goods and materials critical to production and distribution, are often at the center of these disruptions, highlighting their significant impact on the overall stability of the supply chain. This study proposes an innovative approach to assessing supplier disruption risks by combining the Pythagorean Fuzzy Step-wise Weight Assessment Ratio Analysis (PF-SWARA) with the Pythagorean Fuzzy Technique for Order Preference by Similarity to Ideal Solution (PF-TOPSIS). By reviewing the literature and consulting with supply chain experts, eight key risk factors were identified. The PF-SWARA method then quantifies the significance of these risks, while a modified PF-TOPSIS technique calculates each supplier’s risk score, facilitating the prioritization of suppliers for targeted improvement. The findings of the study indicate that “natural disasters and geopolitical risks,” “financial instability,” and “delivery delays” emerge as the top three critical disruption risk factors. Suppliers facing higher disruption risks should, therefore, formulate improvement strategies that target these three areas.
... The advent of the 21st century marked a pivotal shift as globalization peaked, magnifying the critical nature of SCRM. Research expanded to cover not only traditional risk sharing and disruption management [3,4] but also the impacts of geopolitics, regional conflicts, and environmental changes on global supply chains [5,6]. Additionally, the rise of digital technologies such as big data, the Internet of Things, artificial intelligence, and cybersecurity introduced new focal areas in SCRM. ...
As globalization deepens, factors such as the COVID-19 pandemic and geopolitical tensions have intricately complexified supply chain risks, underscoring the escalating significance of adept risk management. This study elucidates the evolution, pivotal research foci, and emergent trends in supply chain risk management over the past two decades through a multifaceted lens. Utilizing bibliometric tools CiteSpace and HistCite, we dissected the historical contours, dynamic topics, and novel trends within this domain. Our findings reveal a sustained fervor in research activity, marked by extensive scientific collaboration over the past 20 years. Distinct research hotspots have surfaced intermittently, featuring 20 domains, 62 keywords, and 60 citation bursts. Keyword clustering identified seven nascent research subfields, including stochastic planning, game theory, and risk management strategies. Furthermore, reference clustering pinpointed five contemporary focal areas: robust optimization, supply chain resilience, blockchain technology, supply chain finance, and Industry 4.0. This review delineates the scholarly landscape from 2004 to 2023, uncovering the latest research hotspots and developmental trajectories in supply chain risk management through a bibliometric analysis.
... c) It is important to consider the availability of other production options or backup machinery [105]. d) The potential financial losses that can occur due to delays or failures in delivering goods [106]. e) How customer relationships and reputation are affected in the market [107]. ...
This article explores the potential of causal AI-driven what-if simulations in enhancing decision-making across various industries. Causal AI uses theories and causal reasoning to figure out and model the underlying cause-and-effect relationships that govern a system or domain. It can make strong predictions even when it only has limited data. The article discusses the advantages of causal AI over traditional AI approaches and its ability to handle sparse data, enable counterfactual reasoning, and address bias issues. It delves into the applications of what-if simulations powered by causal AI in manufacturing, oil and gas, supply chain management, and contract management, presenting scenarios and demonstrating how causal AI can offer valuable insights and optimize decision-making. The article also highlights the challenges and opportunities associated with causal AI, including the need for domain expertise, integration with existing systems, interpretability and explainability, competitive advantage, positive social impact, research and development, and ethical considerations. The impact of causal AIdriven what-if simulations on decision-making across industries is substantial, enabling organizations to make informed decisions, mitigate risks, and seize opportunities in an ever-changing business landscape.
... Empirical research [105,122] has supported the significance of green logistics management practices, such as reducing energy consumption, minimizing waste, and improving operational efficiency, in enhancing environmental performance and strengthening supply chain resilience. Implementing such practices not only supports the overall sustainability objectives but also significantly improves the ability of supply chains to withstand potential disruptions, thus playing a crucial role in building resilient supply chain structures [123]. ...
At the heart of supply chain innovation lies the challenge of complexity, a pivotal force shaping the pathways to resilience and sustainable success in today’s business environment. Drawing from the resource-based view, dynamic capabilities, and contingency theories, this study examines the impact of green innovation strategies on supply chain resilience through the mediation role of green logistics management practices and the moderation effects of dynamic and structural supply chain complexity. Leveraging a quantitative approach, this study surveyed 404 managers from manufacturing firms in Turkey using a combination of physical and electronic questionnaires. Our analysis robustly supports the interconnected roles of green innovation strategy and logistics management practices in bolstering supply chain resilience. A green innovation strategy significantly enhances green logistics management practices and supply chain resilience. Further, green logistics practices contribute positively to supply chain resilience, acting as a crucial mediator in translating green innovation strategies into heightened supply chain resilience. Additionally, the effectiveness of green innovation strategies in improving green logistics management practices is amplified in less structurally complex supply chains. In contrast, the impact of green logistics practices on supply chain resilience becomes more pronounced in environments with lower dynamic complexity, highlighting the nuanced influence of supply chain complexity on sustainability efforts. The study’s findings contribute a novel perspective to the sustainability discourse, emphasizing complexity’s nuanced role as a determinant of supply chain resilience.
... The introduction of flexible systems, complimenting risk management to build resilience through the deployment of controls that reduce the likelihood and occurrence of realized risks. These risks arising from disruptions to normal activities due to operational issues or from natural disasters (Kleindorfer & Saad, 2005). ...
Pacific Island communities are facing disruptions to supply chains from natural disasters and a changing global environment, which have become more acute following the COVID-19 pandemic. Further, it has been demonstrated how flexible systems can enhance resilience in low-resource environments, such as adapting to changing consumer needs and minimizing supply chain disruptions. This paper considers how the development of a flexible system for conducting a risk assessment on a product that was developed and manufactured in a Makerspace environment would have application in Pacific Island communities to improve resilience. Using a participative action research (PAR) approach, a traditional product risk assessment is refined through iterative PAR cycles to reconceptualize it into a structured simplified risk process. The resulting product development risk assessment process (PDRAP) demonstrates that it is possible to adapt a detailed systematic risk assessment process, such as hazard and operability analysis (HAZOP), to be more suitable and effective for low-resource situations requiring flexible solutions. The improved process provides greater system flexibility to empower people to develop products which may improve their resilience in an ever changing and complex world. The PDRAP process can improve product design and adaptability which assists safeguarding supply chains from system wide disruptions. With the emergence of Makerspaces in developing countries for supply chain recovery from natural disasters and a changing national strategy, the PDRAP provides communities with a low-resource approach for risk assessment to ensure the safe use of products fabricated using emerging low-volume, rapid prototyping, and manufacturing technology.
... The literature provides a comprehensive overview of the various dimensions of risk management in international supply chains, encompassing the definition and types of risks, as well as the significance of risk management in global supply chains. Kleindorfer & Saad (2005) emphasize the implications for the design of management systems intended to cope with supply chain disruption risks, highlighting the need for proactive risk management strategies. address the identified gap in the literature for selecting risk management strategies in global supply chains, underscoring the importance of tailored risk management approaches. ...
The globalization of supply chains has brought about unprecedented opportunities for businesses to expand their reach and access diverse markets. However, it has also exposed them to a myriad of risks that can significantly impact the efficiency and resilience of international supply networks. This paper provides a comprehensive review of risk management strategies in international supply chains, with a focus on contrasting scenarios in the United States (USA) and African contexts. The United States, as a global economic powerhouse, boasts a highly developed supply chain infrastructure. In this context, risk management primarily revolves around technological disruptions, natural disasters, and geopolitical uncertainties. Advanced technologies, such as real-time tracking and data analytics, play a crucial role in mitigating these risks. Furthermore, the USA's well-established regulatory framework aids in ensuring compliance and reducing legal uncertainties in the supply chain. Contrastingly, African nations, while experiencing rapid economic growth, often contend with infrastructural challenges and political instability. The risk landscape in African supply chains encompasses issues such as inadequate transportation networks, customs inefficiencies, and varying degrees of political stability. Localized solutions, community engagement, and collaboration with international partners emerge as critical components of effective risk management in the African context. This review underscores the importance of adopting a holistic approach to risk management in international supply chains, acknowledging the diverse challenges faced by different regions. It highlights the need for businesses to tailor their risk mitigation strategies based on the unique characteristics of the regions in which they operate. Additionally, the study emphasizes the significance of fostering collaboration between developed and emerging economies, promoting knowledge sharing and technology transfer to enhance the overall resilience of global supply chains. This paper offers insights into the multifaceted nature of risk management in international supply chains, shedding light on specific challenges faced by the USA and African nations. By understanding and addressing these challenges, businesses can enhance their preparedness and agility in navigating the complex landscape of global supply chain management
... Existing literature extensively explores the impacts and management strategies of supplychain disruptions caused by various factors [22][23][24][25][26][27], such as natural disasters [28], demand fluctuations [29] and intentional attacks [30]. Pandemic-induced disruptions, characterized by the unpredictable nature, prolonged duration and simultaneous impacts on the supply and demand sides, pose major challenges for business operations and public health policy-making [31][32][33]. ...
Since the start of the COVID-19 pandemic, many firms have been shifting their supply chains away from countries with stringent control measures to mitigate supply-chain disruption. Nowadays, the global economy has reopened from the COVID-19 pandemic at various paces in different countries. Understanding how the global supply network evolves during and after the pandemic is necessary for determining the timing and speed of reopening. By harnessing the real-world and real-time global human movement and the latest macroeconomic data, we propose an evolutionary economic-epidemiological model to explore the evolutionary dynamics of the global supply network under various global reopening scenarios. We find that, for highly restrictive countries, the delay in reopening has limited public health benefits in the long run but leads to significant supply-chain loss. A longer duration of stringent control measures substantially hurts the profitability of firms in highly restrictive countries, leading to slower supply-chain recovery in 5 years. This research presents the first data-driven evidence of supply chain loss due to the timing and speed of reopening and sheds light on the post-pandemic supply-chain reformation and recovery. Insights learned from COVID-19 will also be a valuable policymaking reference for combating future infectious disease epidemics and geopolitical changes.
This chapter deals with the optimal selection and protection of part suppliers and order quantity allocation in a supply chain under disruption risks. The protection decisions include the selection of suppliers to be protected against disruptions and the allocation of RMI (risk mitigation inventory) of parts to be pre-positioned at the protected suppliers. The decision-maker needs to decide which supplier to select for parts delivery and how to allocate order quantity among the selected suppliers, and which of the selected suppliers to protect against disruptions and how to allocate RMI among the protected suppliers. The problem objective is to achieve a minimum cost of supplier protection, RMI pre-positioning, parts ordering, purchasing, transportation, and shortage and to mitigate the impact of disruption risks by minimizing the potential worst-case cost. The resilient supply portfolio is identified with protected suppliers capable of supplying parts in the face of disruptive events. A stochastic MIP (mixed integer programming) approach is proposed to determine risk-neutral, risk-averse, or mean-risk supply portfolios, with conditional value-at-risk applied to control the risk of worst-case cost. Numerical examples are presented and some computational results are reported. The major decision-making insights are provided at the end of this chapter.
We consider force-majeure supply disruptions in a dynamic, multi-product manufacturing supply chain with time-dependent parameters. We present a linear programming model that captures a specific force-majeure scenario with respect to several objective functions that can be combined in a multi-objective framework, e.g., minimization of loss, maximization of shortage-free time, or prioritization of mitigation types. Solving this model yields an optimal mitigation plan that describes how to best (re-)allocate supply and production operations. Supported mitigation options include plant-side safety stock, supplier-side inventories, and additional production thus reflecting the manufacturing setting of a large-scale industrial player. We describe a workflow for increasing the resilience of supply chains based on risk profiles generated by our approach.
This study presents a comprehensive and integrated framework of global supply network risk structures based on agency theory, which contributes to the literature on global supply chain risk management. The research was conducted using a combination of in-depth interviews with eight management executives from four apparel businesses and a large-scale survey involving 253 companies operating within the Vietnamese apparel supply chain, especially those that execute partial free-on-board (partial FOB) orders. The empirical evidence obtained from the research demonstrated that corporate performance is highly vulnerable to various types of supply chain risks, such as logistics, information, operational, supply, demand, and external risks. To enhance supply chain resilience during disruptive events such as the COVID-19 pandemic, the US-China trade war, and Ukraine-Russia conflicts, the study recommends the adoption of such strategies as diversified sourcing, supply chain collaboration and integration, and Industry 4.0 technology adoption. For global apparel firms that relocate their offshore manufacturing from China to Vietnam, it is important to identify these global supply chain risks and employ risk management strategies to ensure the efficient and effective functioning of the supply chain during disruptions.
In today's interconnected and rapidly changing global environment, the robustness and resilience of supply chains are critical determinants of business success and sustainability. This article explores the vital relationship between supply chain robustness, resilience, and Environmental, Social, and Governance (ESG) performance. Supply chain robustness refers to the capacity to maintain operational integrity amid disruptions, while resilience denotes the ability to recover swiftly from such events. Strong ESG performance, which evaluates a company's environmental impact, social responsibility, and governance practices, is increasingly prioritized by investors and consumers alike. The discussion encompasses defining supply chain robustness and resilience, elucidating the importance of ESG performance, and examining how robust and resilient supply chains enhance ESG metrics. Strategies for improving supply chain robustness and resilience, including risk management, supplier diversification, technology integration, sustainable sourcing, and collaborative partnerships, are thoroughly explored. Case studies highlight the successful integration of ESG principles with supply chain practices. Challenges such as complexity, costs, regulatory compliance, and balancing efficiency with resilience are addressed, alongside future trends in supply chain management, including digital transformation and circular economy models. Best practices for ESG-focused supply chain management are also provided. In conclusion, fostering robust and resilient supply chains is essential for enhancing ESG performance and achieving long-term sustainability. Companies that adopt comprehensive risk management, technological advancements, sustainable practices, and continuous improvement will be better positioned to meet ESG goals and thrive in the dynamic global marketplace.
The U.N. Sustainable Development Goals (S.D.G.s) acknowledge cities as powerhouses of economic growth as evidenced by their contributions to global G.D.P. However, cities nevertheless contribute to 70 per cent of global carbon emissions and over 60 per cent of resource use and are still vulnerable to uncertainties, such as the recent impact of COVID-19. Concepts such as reverse logistics (R.L.) and circular economy (C.E.) sustainable and resilient supply chain (S.R.S.C.) could leverage the transition to sustainable and resilient cities and communities. Therefore, this chapter provides a broad overview of these concepts, highlighting how integrating these concepts, principles, and practices could act as a catalyst for building sustainable and resilient communities. Synergies are highlighted among the practices, principles, and concepts. The chapter explores how the synergistic application of these concepts leads to sustainable communities and cities that thrive on uncertainties, thus seeing them as opportunities rather than threats. In identifying the challenges and risks associated with building resilient communities, this chapter discusses how the concepts of C.E., R.L., and S.R.S.C. come together. Incorporating the resilience concept into sustainable supply chain design and vice versa has been critical to ensuring greater preparedness for the unexpected. The outcome of this chapter is a conceptual framework that describes the mechanisms for integrated circular business models, sustainable and resilient supply chains, and reverse logistics that could be used for the conceptualization of the three concepts (C.E., S.R.S.C. and R.L.) to the sustainable cities and communities attributes. The proposed conceptual framework will provide practitioners and policymakers with a reference model for assessing uncertainties and challenges to achieve the targets set out in S.D.G.s 11. Further, the Circular Business Models (C.B.M.) value propositions at the asset end-of-life stage, and reverse logistics could be used in addressing the key challenges and uncertainties facing resilient communities.
We observe and analyze the causal relations among risk factors in a system, considering the manufacturing supply chains. Seven major categories of risks were identified and scrutinized and the detailed analysis of causal relations using the grey influence analysis (GINA) methodology is outlined. With expert response based survey, we conduct an initial analysis of the risks using risk matrix analysis (RMA) and the risks under high priority are identified. Later, the GINA is implemented to understand the causal relations among various categories of risks, which is particularly useful in group decision-making environments. The results from RMA concludes that the capacity risks (CR) and delays (DL) are in the category of very high priority risks. GINA results also ratify the conclusions from RMA and observes that managers need to control and manage capacity risks (CR) and delays (DL) with high priorities. Additionally from the results of GINA, the causal factors disruptions (DS) and forecast risks (FR) appear to be primary importance and if unattended can lead to the initiation of several other risks in supply chains. Managers are recommended to identify disruptions at an early stage in supply chains and reduce the forecast errors to avoid bullwhips in supply chains.
The automobile and the semiconductor industries are two prominent sectors that operate in the twenty-first century. The use of semiconductors in automobiles has been on the rise since the early 2000s, as they are used for various sub-systems that aid in the optimization of everything from the primary functionalities of the vehicles to the secondary features. There have been significant disruptions in the past that have rattled the supply chain network linking these two industries. One such recent disruption that affected the two industries, and the relationship between them, was the COVID-19 pandemic, which caused production and sales in both industries to drop significantly. This paper attempts to use the SAM (specify, assess, and mitigate) framework along with data collected from dominant Indian companies in these industries during the pandemic, to analyze the potential for disruption within these industries and derive strategies that can be employed to minimize the effect of such disruptions in the future.
If a firm afflicted by a disaster chooses to donate to disaster relief, how will this decision affect the firm's market value? From a self-protection perspective, diverting resources to support the public may jeopardize a firm's continuity and thereby reduce its value. Yet from a reputation-building perspective, supporting the public in need may enhance corporate reputation and thus increase firm value. In this study, we contrasted the two perspectives to develop a conceptual framework consisting of various competing hypotheses. We tested these hypotheses using data on Chinese firms’ donations to disaster relief during the first coronavirus disease 2019 outbreak. Our analysis shows that firms’ donations generally led to an increase in firm value. This was especially true for firms that were smaller or less profitable, firms that donated goods in addition to cash, and firms that donated before an increasing number of industry peers had done so. These results support the reputation-building perspective, suggesting that even when firms are afflicted by disaster exposure, their donations are still recognized as a value-adding investment. In contrast, donating a larger amount of cash and donating on an earlier day after the onset of the outbreak resulted in a lower firm value. These results align with the self-protection perspective, pointing to the need to consider resource preservation.
We describe the process used to identify the ten most influential papers published in the Production and Operations Management ( POM) journal in its first thirty years. We also briefly discuss and highlight the selected papers.
The interplay between a firm's customer portfolio and the firm's performance presents a theoretical conundrum that challenges traditional supply chains. In particular, the role of government customer concentration—how extensively a firm incorporates government entities as part of its customer base—emerges as a pivotal factor with the potential to both bolster and burden firm performance. Analyzing 3,643 firm‐year observations from the U.S. Federal Procurement Data System‐Next Generation, Compustat, and FactSet Revere reveals an inverse U‐shaped relationship between government customer concentration and firm performance. Excessive or insufficient government customer concentration adversely impacts performance, suggesting that a strategic balance is essential. Firm size, absorptive capacity, and network embeddedness are crucial in navigating this complex relationship, guiding a firm toward optimizing its government customer portfolio. This research advances the discourse on customer base management, underscoring the essential strategic considerations for firms interacting with government buyers.
The COVID-19 pandemic has highlighted how uncertain our world is and, importantly, how vulnerable our operations and supply chains are—from empty supermarket shelves, to shortages of personal protective equipment and microchips, to problems with the supply and recycling of cardboard boxes, and increased food waste in restaurants due to mandatory closures. Beyond COVID-19, newspaper headlines remind us on a daily basis of the consequences of risks and the globally connected nature of our world. Oil price rises due to the war in Ukraine, staff shortages in Dutch and German airports in the summer of 2022, and the Deep Water Horizon Spill in the Gulf of Mexico in 2010 are just a few of the many examples. From these examples we see that supply chain disruptions can affect any of the three dimensions of sustainability—economic, environmental, and/or social—meaning the concepts of supply chain risk and sustainability are closely linked. That is, organizations need to manage sustainability related risks while any given risk can also threaten a company’s long-term sustainability. This chapter examines how supply chain risk management practices support organizations and their supply chains in achieving long-term economic, environmental and/or social sustainability. We examine the process of supply chain risk management—including risk identification, assessment and analysis—and the risk management strategies available to organizations and supply chains. Further, we show how supply chain resilience extends traditional supply chain risk management by enabling organizations and their supply chains to deal with unforeseeable events.
Improving Disaster Preparedness Through Mutual Catastrophe Insurance
In “A Mutual Catastrophe Insurance Framework for Horizontal Collaboration in Prepositioning Strategic Reserves,” H. Zbib, B. Balcik, M.-È. Rancourt, and G. Laporte present an innovative approach to collaborative disaster preparedness. The novel framework considers a risk-averse mutual insurer offering multiyear insurance contracts with coverage deductibles and limits to a portfolio of risk-averse policyholders. It is designed to foster horizontal collaboration among policyholders for joint disaster preparedness by effectively integrating operational and financial functions. The problem is modeled as a large-scale nonlinear multistage stochastic program and solved by using an effective Benders decomposition algorithm. The framework is validated with real data from 18 Caribbean countries focusing on hurricane preparedness. Given the predicted impacts of climate change, the proposed multiyear mutual catastrophe insurance framework promises to reshape global disaster preparedness and make a profound societal impact by providing a transparent disaster financing plan to protect vulnerable regions. The study’s findings stress the importance of long-term cooperation, prenegotiation of indemnification policies, and strategic setting of deductibles and limits by taking into account the correlation between policyholders.
Purpose
The paper aims to propose an innovative two-stage decision model to address the sustainable-resilient supplier selection and order allocation (SSOA) problem in the single-valued neutrosophic (SVN) environment.
Design/methodology/approach
First, the sustainable and resilient performances of suppliers are evaluated by the proposed integrated SVN-base-criterion method (BCM)-an acronym in Portuguese of interactive and multi-criteria decision-making (TODIM) method, with consideration of the uncertainty in the decision-making process. Then, a novel multi-objective optimization model is formulated, and the best sustainable-resilient order allocation solution is found using the U-NSGA-III algorithm and TOPSIS method. Finally, based on a real-life case in the automotive manufacturing industry, experiments are conducted to demonstrate the application of the proposed two-stage decision model.
Findings
The paper provides an effective decision tool for the SSOA process in an uncertain environment. The proposed SVN-BCM-TODIM approach can effectively handle the uncertainties from the decision-maker’s confidence degree and incomplete decision information and evaluate suppliers’ performance in different dimensions while avoiding the compensatory effect between criteria. Moreover, the proposed order allocation model proposes an original way to improve sustainable-resilient procurement values.
Originality/value
The paper provides a supplier selection process that can effectively integrate sustainability and resilience evaluation in an uncertain environment and develops a sustainable-resilient procurement optimization model.
Order backlog is an important non-GAAP metric that is a leading indicator of future earnings. We explore how various fundamental analysis metrics interacted with order backlog impacts future earnings. This study examines whether future earnings predicted by order backlog is contingent on other fundamental analysis metrics, such as a sales decrease, the cash conversion cycle, asset growth, and the ratio of order backlog to sales. We find that order backlog is an even more informative leading indicator of future earnings when sales decrease, the cash conversion cycle is longer, and asset growth is higher. In contrast, we find that order backlog in the presence of a higher order backlog to sales ratio predicts lower future earnings. We also find that market participants incorporate the moderating effect of order backlog on sales decreases and the cash conversion cycle, while we do not find the same evidence with asset growth and the backlog to sales ratio. These empirical findings are important for managers who want to effectively communicate the prospects of a firm’s future profitability, and for investors who want to understand the financial fundamentals of firms with an order backlog. Overall, our findings show that the informativeness of order backlog can be conditional on fundamental analysis metrics in certain instances.
Purpose
We conducted a systematic review to explore the potential for the application of blockchain technologies for supply chain resilience in a small-scale agri-food business context.
Design/methodology/approach
As part of the research methodology, scientific databases such as Web of Science, Google Scholar and Scopus were used to find relevant articles for this review.
Findings
The systematic review of articles (n = 57) found that the use of blockchain technology in the small-scale agri-food business sector can reduce the risk of food fraud by assuring the provenance of food products.
Research limitations/implications
Only a few papers were directly from a small-scale agribusiness context. Key challenges that limit the implementation of blockchain and other distributed ledger technologies include concerns over the disclosure of proprietary information and trade secrets, incomplete or inaccurate information, economic and technical difficulties, low levels of trust in the technology, risk of human error and poor governance of process-related issues.
Originality/value
The application of blockchain technology ensures that the risks and costs associated with non-compliance, product recalls and product loss are reduced. Improved communication and information sharing can increase resilience and better support provenance claims and traceability. Better customer relationships can be built, increasing supply chain efficiency and resilience.
In this study, a comprehensive classification for supply chain risks in the pharmaceutical industry is presented using the Bailey's classical strategy method and the four-stage Collier method. Initially, through the examination of texts related to the main hazard groups, supply chain elements, considering resources and functions, and categorizing upstream supply chain organizations, primary industry, and downstream supply chain organizations within the industrial and market environment, infrastructural environment, and external macro environment were modeled. In the next stage, criteria related to the security and safety of the supply chain were identified. In the final stage, a two-dimensional matrix classification for the identification of supply chain risk factors was proposed through the cross-tabulation of supply chain elements with security and safety criteria. Based on this classification and utilizing the exemplification method through a synthetic framework, a detailed list of risk factors was compiled. The
Purpose
This paper aims to uncover the key enablers of an agile supply chain in the manufacturing sector amidst disruptions such as pandemics, trade wars and cross-border challenges. The study aims to assess the applicability of existing literature to manufacturing and identify additional industry-specific enablers contributing to the field of supply chain management.
Design/methodology/approach
The research methodology is comprehensively described, detailing the utilization of extent literature and semistructured interviews with mid- and top-level executives in a supply chain. The authors ensure the robustness of the data collection process and results interpretation.
Findings
The study identifies six essential dimensions of an agile supply chain: information availability, design robustness, external resource planning, quickness and speed, public policy influencing skills and cash flow management. The study provides valuable insights for industry professionals to develop agile supply chains capable of responding to disruptions in a rapidly changing world.
Research limitations/implications
This study is limited by its focus on the manufacturing sector, and future research may explore the applicability of these findings to other industries. By focusing on these essential dimensions identified in the study, managers can develop strategies to improve the agility and responsiveness of their supply chains. In addition, further research may investigate how these enablers may vary in different regions or contexts.
Practical implications
The COVID-19 pandemic has forced executives to reconsider their sourcing strategies and reduce dependence on suppliers from specific geographies. To ensure business continuity, companies should assess the risk associated with their suppliers and develop a business continuity plan that includes multisourcing their strategic materials. Digital transformation will revolutionize the supply chain industry, allowing for end-to-end visibility, real time insights and seamless integration of business and processes. Companies should also focus on creating a collaborative workforce ecosystem that prioritizes worker health and well-being. Maintaining trust with stakeholders is crucial, and firms must revisit their relationship management strategies. Finally, to maintain business leadership and competitiveness during volatile periods, the product portfolio needs to be diversified and marketing and sales teams must work in tandem with product teams to position new products accordingly.
Social implications
This work contributes substantially to the literature on supply chain agility (SCA) by adding several new factors. The findings result in a more efficient and cost-effective supply chain during a stable situation and high service levels in a volatile situation. A less complex methodology for understanding SCA provides factors with a more straightforward method for identifying well-springs of related drivers. First, the study contributes to reestablish the factors such as quickness, responsiveness, competency, flexibility, proactiveness, collaboration and partnership, customer focus, velocity and speed, visibility, robustness, cost-effectiveness, alertness accessibility to information and decisiveness as applicable factors for SCA. Second, the study suggests a few more factors, such as liquidity management, Vendors’ economic assessment and economic diversity, that are the study’s unique contributions in extending the enablers of SCA. Finally, public policy influencing skills, local administration connects and maintaining capable vendors are the areas that were never considered essential for SCA. These factors have emerged as a vital operational factor during the lockdown, and academicians may consider these factors in the future to assess their applicability.
Originality/value
This study provides new insights for decision-makers looking to enhance the resilience and agility of their supply chains. The identification of unique enablers specific to the manufacturing industry contributes to the existing body of literature on agile supply chains in the face of disruptions.
We examine the causal effects of nearby terrorist attacks on supplier–customer relationships. We find that for supplier firms located near terrorist attacks, the probability of relationship termination with their major customers increases by 2.9 percentage points within two years following the attacks. The major customers’ intensified perceptions of supply chain risk largely drive the relationship termination. Further analyses show that major customers tend to switch to suppliers with lower terrorism risks after they end their relationships with the suppliers near attacks. This study provides new insights into the consequences of terrorism by extending the focus to the response of a key stakeholder group (i.e., trade partners) instead of the attack-afflicted firms per se.
Online crowdfunding platforms have created new avenues for nonprofessional would-be investors to finance existing businesses or new business ventures of project creators. Project creators who launch crowdfunding campaigns can provide progress updates to potential investors throughout the fundraising process, helping to alleviate potential investors’ uncertainty about the project’s success. However, limited attention has been given to the strategic decisions of project creators on when to provide campaign updates. In this study, we focus on the timing strategy of information disclosure and investigate the effectiveness of campaign updates at different timing and performance level. Using a dataset from a leading online crowdfunding platform. We find that updates are more effective at the earlier stage of a crowdfunding campaign in attracting investors, and they play a different role depending on the project’s fundraising performance. For underperforming campaigns, the effectiveness of updates is more salient at the early stage of the campaign, whereas we find no differential impact at the later stage. We further examine the underlying mechanism and find that updates in the early stage are the most effective in attracting new backers and increasing the average pledged amount. By employing text analyses on the project descriptions and updates, we also derive insights about how the content of updates impacts their effectiveness at different stages of the campaign. Finally, our results also show that the timing of updates is more important for less experienced project creators, whereas the content of updates is more important for experienced project creators. These results provide important insights for project creators to strategically manage their campaigns in online crowdfunding platforms.
Ship inspections conducted by port state control (PSC) can effectively reduce maritime risks and protect the marine environment. The effectiveness of PSC depends on accurately selecting ships with higher risk for inspection. Ship risk profile (SRP) is currently the most common method of quantifying ship risk, but the thresholds of the factors that determine a ship's risk and classification in the SRP framework are subjective and can make the ship selection process less efficient. In this study we propose a data-driven bi-objective nonlinear programming model, referred to as the SRP+ model, to optimize the thresholds in the original SRP framework. To solve the model, we first linearize the nonlinear optimization model using the big-M method, and then develop an augmented epsilon-constraint method to transform the bi-objective model to a single-objective model and obtain all Pareto optimal solutions. We also conduct a case study using real PSC inspection records at the Hong Kong port to construct and validate the SRP+ model. The results suggest that the threshold of the total weighting points to classify a ship as high-risk ship should be slightly increased, the thresholds of ship age should be significantly increased, the threshold of historical deficiency number should be increased, while the threshold of historical ship detention times should be decreased. The proposed SRP+ model can benefit both conservative and open-minded port authority decision makers by identifying ships with more deficiencies and/or higher detention probability more efficiently. The model can also be applied to other risk management problems in transportation and supply chain management, in addition to the maritime transport domain.
This paper examines the law and economics of informational regulation (IR) of environmental risks. Informational regulation here means regulation which provides to affected stakeholders information on the operations of regulated entities, usually with the expectation that such stakeholders will then exert pressure on these entities to comply with regulations in a manner which serves the interests of stakeholders. As such, IR reinforces and augments direct regulatory monitoring and enforcement through third-party monitoring and incentives. The paper provides two contrasting frameworks, from law and economics, to analyze the costs and benefits likely to arise from IR and concludes with a discussion of the appropriate scope of IR as a substitute for and complement of traditional environmental regulation and law.
Will bring together collective wisdom of the three leading firms in this area (AIR Worldwide, EQECAT, RMS) with the Wharton team on how to assess the risk from natural hazards • Will explicitly address uncertainty in the context of catastrophe modeling, illustrating the nature of uncertainty in different case studies (e.g., Charleston, South Carolina region) • Will illustrate the linkage of risk assessment and risk management through insurance rate making, insurance portfolio management and risk financing • Will illustrate how uncertainty and risk transfer mechanisms affects the analysis of mitigation using three model cities (Oakland, Long Beach, Miami/Dade County) Audience for the Book The audience for this book is a sophisticated risk manager or policy maker who has some appreciation for the role that modeling and quantitative analysis can play in improving the decision making process. The September 11 th terrorist attacks and ensuing activities makes this book more relevant than before given the interest by the private and public sectors in risk analysis and risk management for extreme events. The book could also be used in courses in risk management.
This paper discusses a framework for strategic supply chain design that rests on an assortment of conceptual approaches. These approaches include benchmarking fast-evolving industries to posit principles of supply chain dynamics and integrating supply chain design into the concurrent processes of product and manufacturing system design. These approaches yield insights into sourcing strategy as well as implementation of concurrent engineering.
This long-awaited textbook provides a unified perspective of a rich and varied field. It recognises that in order to develop strategies for improving the decision-making process one needs to understand how decisions are made in practice and in what ways behaviour differs from guidelines implied by normative theories of choice. It is the interplay between descriptive, normative, and prescriptive analysis that gives this book a special flavour. Using a set of illustrative examples, Decision Sciences synthesises current research about different types of decision making, including individual, group, organisational, and societal. Special attention is given to the linkage between problem finding and problem solving. The principal message emerging from the book is that decision making entails a complex set of processes that need to be understood in order to develop sound prescriptions or policy advice.
A model of strategic risk taking incorporating environmental, industrial, organizational, decision maker, and problem variables is presented. The model is intended to be both a preliminary conceptualization of strategic risk taking and a stimulant for future research on risk taking in strategic management decisions. Relevant research from a number of disciplines is summarized, and the potential impacts of particular variables on the propensity to take strategic risks are examined.
The September 21, 1999 earthquake in Chichi, Taiwan, rating 7.6 in the Richter scale, had devastating consequences. It left approximately 2,300 people dead, more than 10,000 injured, over 100,000 homeless, and about 120,000 unemployed. The government of Taiwan in its late October 1999 estimates expected the economic cost of the earthquake to be $9.2 billion, including the cost of reconstructing the close to 51,000 buildings destroyed and $1.2 billion in industrial production losses (Baum, 1999b).
In this paper, the supplier of a key component to a global manufacturer offers a one-time price discount; we study the firm's optimal response to the discount under two different strategies. In the first strategy, the firm does not pass along the discount to its customers (sales subsidiaries); the firm simply coordinates purchasing and production among the different factories to take advantage of this one-time price discount. In the second strategy, the firm offers price discounts for its most profitable products in different sales subsidiaries to increase their demand. We carried out experiments for the two strategies based on a mathematical programming model, built around Toshiba's global notebook supply chain. Model constraints include, among others, material constraints, bill-of-materials, capacity and transportation constraints, minimum lot size constraints, and a constraint on minimum fill rate (service level constraint). Unlike most models of this type in the literature, which define variables in terms of single arc flows, we employ path variables, which allow for direct identification and manipulation of profitable and non-profitable products.
There are two broad categories of risk affecting supply chain design and management: (1) risks arising from the problems of coordinating supply and demand, and (2) risks arising from disruptions to normal activities. This paper is concerned with the second category of risks, which may arise from natural disasters, from strikes and economic disruptions, and from acts of purposeful agents, including terrorists. The paper provides a conceptual framework that reflects the joint activities of risk assessment and risk mitigation that are fundamental to disruption risk management in supply chains. We then consider empirical results from a rich data set covering the period 1995-2000 on accidents in the U.S. Chemical Industry. Based on these results and other literature, we discuss the implications for the design of management systems intended to cope with supply chain disruption risks.
Study objectives: The Clean Air Act Amendments of 1990 requires that chemical facilities in the US with specified quantities of certain toxic or flammable chemicals file a five year history of accidents. This study considers the relation between the reported accidents and surrounding community characteristics. Design: This study is a retrospective analysis of the association between the demographics of counties in which facilities are located and the risk of accidental chemical release and resulting injuries at those facilities. The “location risk” (the risk that a facility having large volumes of hazardous chemicals is located in a community) and “operations risk” (the risk of an accident itself) are investigated. Setting:1994–2000 accident history data from 15 083 US industrial facilities using one or more of 140 flammable or toxic substances above a threshold level. Demographic makeup of 2333 counties surrounding these facilities was determined from the 1990 US census. Main results: Larger and more chemical intensive facilities tend to be located in counties with larger African-American populations and in counties with both higher median incomes and high levels of income inequality. Even after adjusting for location risk there is greater risk of accidents for facilities in heavily African-American counties (OR of accident = 1.9, 95% CI = 1.5 to 2.4). Conclusions: Further research and policy interventions are required to reduce the probability of locating facilities in an inequitable fashion, as well as health surveillance, and regulatory monitoring and enforcement activities to ensure that hazardous facilities in minority communities prepare and prevent accidental chemical releases to the same standards as elsewhere.
Today's supply chain managers have been bombarded with a wide variety of the socalled leading-edge supply chain strategies. New terminologies and initiatives are being developed constantly. However not all these initiatives or strategies are appropriate for all firms. Companies need to first understand the uncertainties faced by the demand and supply of its products and then try to match these uncertainties with the right supply chain strategies. Based on an analysis of the uncertainties of supply and demand faced by the firm, this article develops a framework that can assist managers in developing the right supply chain strategy for their products.
This paper discusses main challenges faced in managing supply chains in general, and those of E-Business environments in particular. Conceptual extensions and a guiding framework are proposed. Based on this framework, solutions are developed which help overcome main challenges faced in practice. Special emphasis has been given to the challenges resulting from uncertainty, complexity, and information systems. The contribution thought is two folds: first, current challenges faced in managing supply chains are analyzed and categorized conceptually, according to their orientation. Secondly, a general framework to guide management practice is developed, and used to generate solutions that help overcome many of those challenges. The solutions proposed comprise both proactive and reactive strategies, and implementation guidelines.
Risk analysis in industrial contexts consists of four integrated processes: (i) identifying underlying sources of risk, (ii) determining the pathways by which such risks can materialize, (iii) estimating the potential consequences of these risks under various scenarios, and (iv) providing the means for mitigating and coping with these consequences. Specific risks, once identified, are usually characterized by the probability of their occurrence and the magnitude of their consequences, but many other attributes of risks may be of interest to individuals affected by these risks. Risks can have both positive and negative outcomes and can occur in any domain of a company’s operations, from engineering to finance. A great deal of work in corporate finance and insurance has gone into the design of efficient risk management instruments for risks that can be monetized (e.g., Doherty, 1999), and to the extent that the consequences of these risks are borne by the owners of an enterprise, there are strong incentives for managers to make efficient choices in balancing risks and returns. This is not usually true for industrial risks having safety, health or environmental (SHE) impacts, since these impacts are often borne by the eco-system and by uninvolved third parties including future generations. Thus, for SHE risks, market forces are not usually sufficient to motivate a profit-oriented company to operate efficiently. Achieving efficient tradeoffs here requires instead that industrial practice be tempered by
Assembly and kitting operations, as well as jointly sold products, are rather basic yet intriguing A decentralized supply chains, where achieving coordination through appropriate incentives is very important, especially when demand is uncertain. We investigate two very distinct types of arrangements between an assembler/retailer and its suppliers. One scheme is a vendor-managed inventory with revenue sharing, and the other a wholesale-price driven contract. In the VMI case, each supplier faces strategic uncertainty as to the amounts of components, which need to be mated with its own, that other suppliers will deliver. We explore the resulting components' delivery quantities equilibrium in this decentralized supply chain and its implications for participants' and system's expected profits. We derive the revenue shares the assembler should select in order to maximize its own profits. We then explore a revenue-plus-surplus-subsidy incentive scheme, where, in addition to a share of revenue, the assembler also provides a subsidy to component suppliers for their unsold components. We show that, by using this two-parameter contract, the assembler can achieve channel coordination and increase the profits of all parties involved. We then explore a wholesale-price-driven scheme, both as a single lever and in combination with buybacks. The channel performance of a wholesale-price-only scheme is shown to degrade with the number of suppliers, which is not the case with a revenue-share-only contract.
The past few years have seen an explosion in the number of e-market- places, including a variety of electronic exchanges in the B2B arena, but many of these have also collapsed (e.g., Chemdex/Ventro). The question addressed in this pa- per is what are the underlying factors that affect which transactions are likely to be supportable by B2B exchanges. In particular, we identify and study three factors: supplier management, idiosyncratic investments in information systems, and codifiability (i.e., digitalizability) of product and order-fulfillment specifications un- derlying transactions. We show that transaction codifiability plays a fundamental role in influencing the nature of sustainable contracting and IT investments in e-markets. Hypotheses are derived from an analytical model of codifiability in e-marketplaces;
Normal Accidents analyzes the social side of technological risk. Charles Perrow argues that the conventional engineering approach to ensuring safety--building in more warnings and safeguards--fails because systems complexity makes failures inevitable. He asserts that typical precautions, by adding to complexity, may help create new categories of accidents. (At Chernobyl, tests of a new safety system helped produce the meltdown and subsequent fire.) By recognizing two dimensions of risk--complex versus linear interactions, and tight versus loose coupling--this book provides a powerful framework for analyzing risks and the organizations that insist we run them. The first edition fulfilled one reviewer's prediction that it "may mark the beginning of accident research." In the new afterword to this edition Perrow reviews the extensive work on the major accidents of the last fifteen years, including Bhopal, Chernobyl, and the Challenger disaster. The new postscript probes what the author considers to be the "quintessential 'Normal Accident'" of our time: the Y2K computer problem.
In this paper, we develop a stochastic dynamic programming formulation for the valuation of global manufacturing strategy options with switching costs. Overall, we adopt a hierarchical approach. First, exchange rates are modeled as stochastic diffusion processes that exhibit intercountry correlation. Second, the firm's global manufacturing strategy determines options for alternative product designs as well as supply chain network designs. Product options introduce international supply flexibility. Supply chain network options determine the firm's manufacturing flexibility through production capacity and supply chain network linkages. Third, switching costs determine the cost of operational hedging, i.e., the costs associated with reducing downside risks. Overall, the firm maximizes its expected, discounted, global, after-tax value through the exercise of product and supply chain network options and/or through exploitation of operational flexibility contingent on exchange rate realizations. In this environment, the firm must trade off fixed operating costs, switching costs, and the economic benefits derived from exploiting differentials in factor costs and corporate tax rates. A multinomial approximation of correlated exchange rate processes is proposed that leads to a consistent and tractable lattice model for this compound option valuation problem. We then demonstrate how the global manufacturing strategy planning model framework can be utilized to analyze financial and operational hedging strategies.
A model of strategic risk taking incorporating environmental, industrial, organizational, decision maker, and problem variables is presented. The model is intended to be both a preliminary conceptualization of strategic risk taking and a stimulant for future research on risk taking in strategic management decisions. Relevant research from a number of disciplines is summarized, and the potential impacts of particular variables on the propensity to take strategic risks are examined.
Addresses quality management issues of both conceptual and practical significance. The contribution is twofold: first, conceptual issues and critical relationships which have been overlooked in the current literature are discussed, as well as their policy implications. Second, a contingency approach for managing quality is proposed to guide implementation, and to help reduce the deviations between the desired and the actual outcomes of quality programs. The contingency model developed provides a basis for advancing both theory and practice.
Supply Chain Redesign delivers practical guidance for every aspect of supply chain redesign: mapping existing supply chains; identifying changes that promise the best ROI; intelligently leveraging new technologies; strengthening relationships with key partners; designing products that support lean supply chains; implementing new approaches to strategic cost management; and much more. Coverage includes key success factors, emerging trends, and detailed case studies from Nortel and GM.
Research in Supply Chain Management and Electronic Commerce has grown dramatically in the past decade as firms have intensified efforts to streamline operations and improve service to a diverse and demanding customer base. Central to this theme is the need for firms to look outside of their organizations for opportunities to collaborate and coordinate with partners to ensure that the supply chain is both efficient and responsive to dynamic market needs. Such collaboration and coordination opportunities introduce new challenges and complexities as a result of increased problem scale and scope, and potentially conflicting incentives among different supply chain players. Motivated by these new challenges, this special issue explores a range of coordination and collaboration problems, stressing the role of information and associated technologies in facilitating and enabling supply chain integration.
In this paper, the supplier of a key component to a global manufacturer offers a one-time price discount; we study the firm's optimal response to the discount under two different strategies. In the first strategy, the firm does not pass along the discount to its customers (sales subsidiaries); the firm simply coordinates purchasing and production among the different factories to take advantage of this one-time price discount. In the second strategy, the firm offers price discounts for its most profitable products in different sales subsidiaries to increase their demand. We carried out experiments for the two strategies based on a mathematical programming model, built around Toshiba's global notebook supply chain. Model constraints include, among others, material constraints, bill-of-materials, capacity and transportation constraints, minimum lot size constraints, and a constraint on minimum fill rate (service level constraint). Unlike most models of this type in the literature, which define variables in terms of single arc flows, we employ path variables, which allow for direct identification and manipulation of profitable and non-profitable products.
We consider a market with two competing supply chains, each consisting of one wholesaler and one retailer. We assume that the business environment forces supply chains to charge similar prices and to compete strictly on the basis of customer service. We model customer service competition using game-theoretical concepts. We consider three competition scenarios between the supply chains. In the uncoordinated scenario, individual members of both supply chains maximize their own profits by individually selecting their service and inventory policies. In the coordinated scenario, wholesalers and retailers of each supply chain coordinate their service and inventory policy decisions to maximize supply chain profits. In the hybrid scenario, competition is between one coordinated and one uncoordinated supply chain. We discuss the derivation of the equilibrium service strategies, resulting inventory policies, and profits for each scenario, and compare the equilibria in a numerical study. We find that coordination is a dominant strategy for both supply chains, but as in the prisoner's dilemma, both supply chains are often worse off under the coordinated scenario relative to the uncoordinated scenario. The consumers are the only guaranteed beneficiaries of coordination.
Reducing lead time enables a company to react more quickly to demand information and, hence, to better match supply with uncertain demand. But it is only one lever for improving response capability. Managers are familiar with others (e.g., excess capacity, supplier choice, and so forth) but lack techniques to quantify the impact of adjusting these levers. Here, we enumerate a number of these levers and present a model whereby they might be combined into effective response capability. The impact of adjusting these levers is illustrated by data obtained from a skiwear manufacturer that did so. Some of the insights that resulted run counter to intuition.
We investigate how a supply chain involving a risk-neutral supplier and a downside-risk-averse retailer can be coordinated with a supply contract. We show that the standard buy-back or revenue-sharing contracts may not coordinate such a channel. Using a definition of coordination of supply chains proposed earlier by the authors, we design a risk-sharing contract that offers the desired downside protection to the retailer, provides respective reservation profits to the agents, and accomplishes channel coordination.
We consider the problem of managing demand risk in tactical supply chain planning for a particular global consumer electronics company. The company follows a deterministic replenishment-and-planning process despite considerable demand uncertainty. As a possible way to formally address uncertainty, we provide two risk measures, “demand-at-risk” (DaR) and “inventory-at-risk” (IaR) and two linear programming models to help manage demand uncertainty. The first model is deterministic and can be used to allocate the replenishment schedule from the plants among the customers as per the existing process. The other model is stochastic and can be used to determine the “ideal” replenishment request from the plants under demand uncertainty. The gap between the output of the two models as regards requested replenishment and the values of the risk measures can be used by the company to reallocate capacity among different products and to thus manage demand/inventory risk.
Retailers often stock competing products from multiple manufacturers. When the retailer stocks out of a particular item, customers who prefer the item are likely, with some probability, to switch to a substitute product from another manufacturer at the same store. In such an event, a “lost sale” for the manufacturer is not a “lost sale” for the retailer. This exacerbates differences in manufacturer's and retailer's stockout costs for the item. Such differences in stockout cost influence the optimal contract between the manufacturer and the retailer and also impose agency costs on the channel. Such contracts, in turn, determine equilibrium inventory levels and fill rates. We study these issues in a single-period supply chain, consisting of a manufacturer and a retailer, under three different scenarios (when the two firms are integrated into a single entity, when the retailer makes stocking decisions, and when the manufacturer makes stocking decisions). We compare, and present a methodology for comparing, stocking quantities, manufacturer efforts, and supply chain profits across different scenarios. We find that VMI performs better when manufacturer effort is a substantial driver of consumer demand and when consumers are unlikely to substitute to another brand in case of a stockout. On the other hand, if non-contractible manufacturer effort is unimportant, or when substitution is significant, VMI can exacerbate, rather than mitigate, channel inefficiencies, and can perform worse than traditional Retailer Managed Inventory.
The extant supply chain management literature has not addressed the issue of coordination in supply chains involving risk-averse agents. We take up this issue and begin with defining a coordinating contract as one that results in a Pareto-optimal solution acceptable to each agent. Our definition generalizes the standard one in the risk-neutral case. We then develop coordinating contracts in three specific cases: (i) the supplier is risk neutral and the retailer maximizes his expected profit subject to a downside risk constraint; (ii) the supplier and the retailer each maximizes his own mean-variance trade-off; and (iii) the supplier and the retailer each maximizes his own expected utility. Moreover, in case (iii), we show that our contract yields the Nash Bargaining solution. In each case, we show how we can find the set of Pareto-optimal solutions, and then design a contract to achieve the solutions. We also exhibit a case in which we obtain Pareto-optimal sharing rules explicitly, and outline a procedure to obtain Pareto-optimal solutions.
The purpose of this paper is to develop a general framework for supply contracts in which portfolios of contracts can be analyzed and optimized. We focus on a multi-period environment with convex contract, spot market, and inventory holding costs. We specialize the model to the case of a portfolio consisting of option contracts. We characterize the optimal replenishment policy and show that it has a simple structure. Namely, the use of every different option contract and the spot market is dictated by a modified base-stock policy. In addition, we derive conditions to determine when an option is relatively attractive compared to other options or the spot market. Finally, we present our computational study, where we report the sensitivity of the results to the parameters of the model. Our experiments indicate that portfolio contracts not only increase the manufacturer's expected profit, but can also reduce its financial risk.
This paper investigates the long-term stock price effects and equity risk effects of supply chain disruptions based on a sample of 827 disruption announcements made during 1989–2000. Stock price effects are examined starting one year before through two years after the disruption announcement date. Over this time period the average abnormal stock returns of firms that experienced disruptions is nearly –40%. Much of this underperformance is observed in the year before the announcement, the day of the announcement, and the year after the announcement. Furthermore, the evidence indicates that firms do not quickly recover from the negative effects of disruptions. The equity risk of the firm also increases significantly around the announcement date. The equity risk in the year after the announcement is 13.50% higher when compared to the equity risk in the year before the announcement.
This paper explores the use of inspections or audits to monitor compliance with environmental standards, whether these are set by government agencies or as self-regulatory measures by business. The key issue studied here is the "privatization" of this auditing or inspection process through the use of third parties (the auditors). Such auditors are private (and likely profit-oriented) organizations that may be certified to undertake the task by the competent regulatory authority. We will focus, in particular, on the recent move to implement ISO 14000 environmental standards (and related EMAS standards in the European Union) through precisely this kind of process. The ISO 14000 standards are management system standards and not prescriptive technological or performance standards. Since it is clear that the latter standards also have an important role to play in achieving acceptable environmental performance in an economy, we discuss how the ISO standards might act as a lever for implementing other more detailed specification or outcome-based standards. The paper analyses the costs and benefits of relying on such market-based provision of auditing services at several levels: regulatory compliance and transactions costs at a regional or national level; business performance, including the potential for improved risk management and insurability conditions; and the impact on local community knowledge and welfare. It is argued that management system standards of the kind currently being developed under the ISO 14000 initiative have the potential to achieve a positive balance at all levels, but to do so such standards must emphasize measurable results and not just process and management system standardization.
This paper estimates the shareholder wealth affects of supply chain glitches that resulted in production or shipment delays. The results are based on a sample of 519 glitches announcements made during 1989–2000. Shareholder wealth affects are estimated by computing the abnormal stock returns (actual returns adjusted for industry and market-wide influences) around the date when information about glitches is publicly announced. Supply chain glitch announcements are associated with an abnormal decrease in shareholder value of 10.28%. Regression analysis is used to identify factors that influence the direction and magnitude of the change in the stock market’s reaction to glitches. We find that larger firms experience a less negative market reaction, and firms with higher growth prospects experience a more negative reaction. There is no difference between the stock market’s reaction to pre-1995 and post-1995 glitches, suggesting that the market has always viewed glitches unfavorably. Capital structure (debt–equity ratio) has little impact on the stock market’s reaction to glitches. We also provide descriptive results on how sources of responsibility and reasons for glitches affect shareholder wealth.
Supply chain security has become a major concern to the private and public sector, after the disastrous event of September 11, 2001. Prior to September 11, 2001, supply chain security concerns were related to controlling theft and reducing contraband such as illegal drugs, illegal immigrants, and export of stolen goods. But after September 11, 2001, the threat of terrorist attacks has heightened the need to assure supply chain security. The public is of course concerned with the potential of having weapons of mass destruction embedded in the shipments through the supply chain. In addition, the private sector is concerned with the costs of assuring security, and the potential disruptions associated with real or potential terrorist acts. Governments and industry have all responded with proposals to create more confidence in supply chain security, while maintaining smooth flows of goods and services in a global supply chain. One of the most effective strategies may be to apply the lessons of successful quality improvement programs. In this paper, we describe how the principles of total quality management can actually be used to design and operate processes to assure supply chain security. The central theme of the quality movement––that higher quality can be attained at lower cost by proper management and operational design––is also applicable in supply chain security. By using the right management approach, new technology, and re-engineered operational processes, we can also achieve higher supply chain security at lower cost. We will demonstrate how this can be done with a quantitative model of a specific case example.
Addresses the question of how to assure effective performance evaluation of a public service strategic unit. Both descriptive and prescriptive approaches are discussed. Based on this analysis a practical model for performance evaluation is developed. The model proposed comprises key drivers of performance, including internal and external factors, as well as both quantitative and qualitative factors, simultaneously. The model has been designed using the Analytical Hierarchy Process (AHP) and tested using the Expert Choice Software. The testing results show that the evaluation outcomes differ as a function of the criteria used, the weight assigned, and the meaning given to each criterion. Using the same criteria with a different weighting scheme results in different outcomes for the same performance. This counter-intuitive finding has important implications for management practice.
Total financial management is a program designed by author Robert Katz, M.S., C.P.A., which says that by managing from the top down, the physician/administrator team can regain control of the practice and its major financial centers. His article describes the two-phased approach to total financial management.
Introduction -- Invisible risk and its impact on investment -- The world's troublespots -- Threat and defence -- Conclusions
Sumario: The world of finance -- Essential concepts in finance -- Long-term financial management decisions -- Short-term financial management decisions -- Finance in the global economy
A model of the occurrence of accidents is used to examine liability and safety regulation as means of controlling risks. According to the model, regulation does not result in the appropriate reduction of risk--because the regulator lacks perfect information--nor does liability result in that outcome--because the incentives it creates are diluted by the chance that parties would not be sued for harm done or would not be able to pay fully for it. Thus, neither liability nor regulation is necessarily better than the other, and as is stressed, their joint use is generally socially advantageous.
This article studies moral hazard with many agents. The focus is on two features that are novel in a multiagent setting: free riding and competition. The free-rider problem implies a new role for the principal: administering incentive schemes that do not balance the budget. This new role is essential for controlling incentives and suggests that firms in which ownership and labor are partly separated will have an advantage over partnerships in which output is distributed among agents. A new characterization of informative (hence valuable) monitoring is derived and applied to analyze the value of relative performance evaluation. It is shown that competition among agents (due to relative evaluations) has merit solely as a device to extract information optimally. Competition per se is worthless. The role of aggregate measures in relative performance evaluation is also explored, and the implications for investment rules are discussed.
This article provides a systematic framework for the analysis and improvement of near-miss programs in the chemical process industries. Near-miss programs improve corporate environmental, health, and safety (EHS) performance through the identification and management of near misses. Based on more than 100 interviews at 20 chemical and pharmaceutical facilities, a seven-stage framework has been developed and is presented herein. The framework enables sites to analyze their own near-miss programs, identify weak management links, and implement systemwide improvements.
This article presents the results of an analysis of the accident history data reported under section 112(r) of the Clean Air Act Amendments. These data provide a fairly complete record of the consequences of reportable accidental releases occurring during the time frame 1995-1999 in the U.S. chemical industry and covering 77 toxic and 63 flammable substances subject to the provisions of section 112(r). As such, these results are of fundamental interest to the affected communities, regulators, and insurers, as well as to owners and managers in the chemical industry. The results show the statistical associations between accident frequency and severity and a number of characteristics of reporting facilities, including their size, the hazardousness of the processes and chemicals inventoried, and the regulatory programs (in addition to section 112(r)) to which these facilities are subject. The results are interpreted in light of economic drivers of protective activity and regulatory priorities for monitoring and enforcement.
This article reports on the data collected on one of the most ambitious government-sponsored environmental data acquisition projects of all time, the Risk Management Plan (RMP) data collected under section 112(r) of the Clean Air Act Amendments of 1990. This RMP Rule 112(r) was triggered by the Bhopal accident in 1984 and led to the requirement that each qualifying facility develop and file with the U.S. Environmental Protection Agency a Risk Management Plan (RMP) as well as accident history data for the five-year period preceding the filing of the RMP. These data were collected in 1999-2001 on more than 15,000 facilities in the United States that store or use listed toxic or flammable chemicals believed to be a hazard to the environment or to human health of facility employees or off-site residents of host communities. The resulting database, RMP*Info, has become a key resource for regulators and researchers concerned with the frequency and severity of accidents, and the underlying facility-specific factors that are statistically associated with accident and injury rates. This article analyzes which facilities actually filed under the Rule and presents results on accident frequencies and severities available from the RMP*Info database. This article also presents summaries of related results from RMP*Info on Offsite Consequence Analysis (OCA), an analytical estimate of the potential consequences of hypothetical worst-case and alternative accidental releases on the public and environment around the facility. The OCA data have become a key input in the evaluation of site security assessment and mitigation policies for both government planners as well as facility managers and their insurers. Following the survey of the RMP*Info data, we discuss the rich set of policy decisions that may be informed by research based on these data.