Sodhi M.S., Tang C.S. Managing Supply Chain Risk

Springer – 2012, 332 p.
ISBN: 1461432375Supply Chain Risk Management is an issue that many companies face and yet few companies know how to deal with it in a systematic and pragmatic manner. While avoiding and reducing supply chain risks are certainly preferable, developing ways to restore and stabilize supply chain operations rapidly after a major disruption is critical for managing global supply chains. Sodhi and Tang present important concepts, frameworks, strategies, and analyses that are essential for managing supply chain risks. Not only does this book suggest some practical ways to work with different partners to manage the risks that are present in a global supply chain, it creates a framework that would enable practitioners to engage researchers to work on this important area. —Thomas A. Debrowski, Executive Vice President, Worldwide Operations, Mattel, Inc. When a firm outsources its operations to external suppliers, the firm is vulnerable to major and rare disruptions that can occur at any link in the global supply chain. Because these disruptions rarely occur, few firms take commensurable actions to identify, assess, mitigate and respond to various types of supply chain risks. By introducing frameworks and concepts along with several case studies and a review of academic literature, Sodhi and Tang treat this important subject with practical relevance and academic rigor. This book will bring practitioners and researchers to develop effective and efficient ways to manage supply chain risks. —Marshall L. Fisher, UPS Professor, Professor of Operations and Information Management and Co-Director of Fishman-Davidson Center for Service and Operations Management, The Wharton School, University of Pennsylvania This book ties observations in practice to methodologies and research. The rich case examples motivated the approaches and methodologies used to mitigate risks, and in the course of doing so, Sodhi and Tang provided insights on existing and new research opportunities. As a result, this book is highly relevant to both practitioners and academics. Also, the book is also written with management lessons on how risks can be mitigated, and how risks can be contained once disruptions have occurred. As such, it is also a book for management to gain insights and to develop management skills. —Hau L. Lee, Thoma Professor of Operations, Information and Technology and Director of the Stanford Global Supply Chain Management Forum, Graduate School of Business, Stanford University As companies have extended their supply chains globally and as the face increasing resource issues, they face a number of new risk challenges. While there are various case studies written about supply chain risks, this book gives a comprehensive treatment of the subject with clarity. The concepts and frameworks developed by Sodhi and Tang in this book would create awareness of this important and yet not well understood subject, and strategies described in this book would stimulate practitioners to develop a holistic approach for identifying, assessing, mitigating, and responding to different types of supply chain risks. —Nick Wildgoose, Global Supply Chain Proposition Manager, Zurich InsuranceEndorsementsPart I Introduction — Identifying, Assessing, Mitigating and Responding to
Supply Chain Risk
Supply Chain Risk ManagementThis BookThe Supply Chain Management Context
The Need for Supply Chain Risk Management
Apprehension without Action
Robust Strategies for Supply Chain Management
Disciplinary Roots of Supply Chain Risk Management
Risk IdentificationA Conceptual View of Risk for Identification and Categorization
A Butterfly Depiction of Supply Chain Risk
Delays and Disruptions: Normal and Abnormal Risks
Local-and-Global Drivers and Local-and-Global
Consequences
Risk Categorization Motivated by the Supply Chain Organization
Supply Risks
Process Risks
Demand Risks
Corporate-Level RisksRisk AssessmentWhat Risks to Assess
How to Assess Risks
Example of a Cross-Company Survey: What Risks and How to Assess
Our Sample
What Risks Were Assessed
How We Assessed These Risks
DiscussionMitigating RisksRisk Mitigation Strategies
Building Reserves for Redundancy
Tailoring Risk Management for any Given CompanyResponse as a Mitigation ApproachExamples of Disruptions and Their Impacts
Dealing with Disruptions
Time-Based Risk Management
The -D Framework: Detect, Design, and Deploy
Response Time and Impact
Modeling Disruption Impact over Time
Time-Based Risk Management in Practice
Risk and Reward ConsiderationsHow do Global Manufacturing Companies Mitigate Supply Chain
RisksLiterature Review
Motivation
Methodology
Samsung ElectronicsPart II Mitigation Approaches and Applications
Strategic Approaches for Mitigating Supply Chain RisksRobust Supply Chain StrategiesTactical Approaches for Mitigating Supply Chain Risks: Financial
and Operational HedgingDifferent Types of Financial Risks
Risks Associated with Input Material Costs
Risks Associated with Labor Costs
Risks Associated with Foreign Currency Exchange
Risks Associated with Supplier Defaults
Financial Instruments for Managing Input Material Cost and
Foreign Exchange Risks
Financial Instruments for Reducing Supplier Default Risks
Operational Planning for Managing Cost Risks and Supplier
Default Risks
Capability for In-Season Replenishment
Flexibility for Switching Sourcing Locations
Integrated Financial and Operational HedgingApplication — Scenario Planning for Mitigating Supply Chain
Restructuring Risk at a PVC ManufacturerOne Company’s Story: Restructuring A Post-Acquisition Supply
Chain
The Planning Spectrum.
Planning Processes and Optimization
Use of Optimization for Strategic Supply-Chain Planning
The Need for a Combined Process
Scenarios and Scenario Planning
Middle GroundApplication — Mitigating Outsourcing-Related RisksRisk : Underestimating the Strategic Value of Procurement
Risk : Underestimating the Strategic Value of Outsourcing
Risk : Poor Understanding of Internal Capability and Cost Structure
Risk : Outsourcing the Wrong Thing
Risk : Underestimating the Importance of Incentive Alignment
Risk : Outsourcing Operations without Considering the Supply Chain
Risk : Outsourcing without the Right Contracts
Risk : Not Being Prepared for Supply DisruptionsApplication: Mitigating New Product Development Risks — The
Case of the Boeing DreamlinerThe Dreamliner’s Unconventional Supply Chain
The Dreamliner’s Supply Chain Risks
What Boeing Did to Mitigate Risk
What Might Boeing Have Done Differently to Mitigate RiskApplication: Managing Product Recalls — the Case of Mattel, Inc.Underlying Causes of Mattel’s Product Recalls
Mattel’s Product Recall Management Process
Challenges Pertaining to Product Recalls
Opportunities Associated with Product RecallsPart III Review of Quantitative Models for Managing Supply Chain Risk
Risk Models for Supply Chain ManagementSupply Management
Supply Network Design
Supplier Relationships
Supplier Selection Process
Supplier Order Allocation
Supply Contracts
Robust Supply Management Strategies
Demand Management
Shifting Demand Across Time
Shifting Demand Across Markets
Shifting Demand Across Products
Robust Demand Management Strategies
Product Management
Postponement
Process Sequencing
Robust Product Management Strategies
Information Management
Information Management Strategies for Managing Fashion
Products
Information Management Strategies for Managing
Functional Products
Robust Information Management Strategies
Managerial AttitudesModeling the Value of FlexibilitySupply-Cost Risk and the Value of Flexibility via Multiple Suppliers
Supply-Commitment Risk: the Value of Flexibility via Flexible
Supply Contracts
Uniformly Distributed Market Shocks
General Market Shocks
Process risk: the Value of Flexibility via Flexible Manufacturing
(Discrete) Uniformly Distributed Plant Capacity
Normally Distributed Plant Capacity
Demand Risk: the Value of Flexibility via Postponement
Demand Risk: the Value of Flexibility via Responsive PricingStochastic Programming for Supply Chain Planning Under
Demand UncertaintyMotivation
A Stochastic Program for Supply-Chain Planning
A Stochastic Program for Asset Liability Management
A Stochastic Program for Supply Chain Planning
Comparison of SCP Model with the ALM Model
Demand-Scenario Generation: An Example
Risk Measures Consideration
Modeling Choices
Representation of Uncertainty
Decision variables
Time Periods and the Decision Horizon
Objective function
Constraints
Solution-Technique Choices
Decomposition
Aggregation
Sampling ScenariosPart IV Perspectives and Topics for Future Research
Researchers’ Perspectives on Supply-Chain Risk ResearchGrowing Interest in Supply Chain Risk
Motivation for This Study
Methodology
Step Findings: Diversity in Scope and Research Tools
Step Findings: A Closer Look at the Definition Gap
Step Findings: Three Gaps
Addressing the Gaps
Closing the Definition Gap
Closing the Process Gap
Closing the Methodology GapConclusion and Future ResearchIdentifying and Assessing Supply Chain Risk
Mitigating and Responding to Supply Chain Risk
The Nature of the Organization
Managerial Impact
Research Methods
Final Thoughts