Foundations and Trends® in Technology, Information and Operations Management > Vol 12 > Issue 2-3

Disruption Risk Management in Serial Multi-Echelon Supply Chains

Florian Lücker, Cass Business School, City University of London, UK, florian.lucker@city.ac.uk Sunil Chopra, Northwestern University, USA, s-chopra@kellogg.northwestern.edu Ralf W. Seifert, EPFL and IMD, Switzerland, ralf.seifert@epfl.ch
 
Suggested Citation
Florian Lücker, Sunil Chopra and Ralf W. Seifert (2019), "Disruption Risk Management in Serial Multi-Echelon Supply Chains", Foundations and Trends® in Technology, Information and Operations Management: Vol. 12: No. 2-3, pp 298-315. http://dx.doi.org/10.1561/0200000092

Published: 14 Mar 2019
© 2019 F. Lücker, S. Chopra and R. W. Seifert
 
Subjects
 
Keywords
G32 Financial Risk and Risk ManagementM11 Production management
Risk managementHedgingOperational riskSupply chain finance
 

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In this article:
1. Motivation and problem description
2. Modeling approach and methodology
3. Results and insights
4. Future research
References

Abstract

This research focuses on managing supply chain disruption risk using inventory and reserve capacity in serial multi-echelon supply chains. The research problem is to determine the optimal risk mitigation inventories and reserve capacities when product transformation occurs at each echelon. Disruptions at each echelon are modeled as a random process. We derive insights on the optimal location and quantity of risk mitigation inventory (RMI) and reserve capacity held in serial supply chains. We show that the downstream echelon typically holds at least as much RMI as the upstream echelon. At the same time, it is often optimal to hold additionally more reserve capacity downstream than upstream. These results hold under the assumption that inventory and reserve capacity holding costs are larger downstream than upstream. Our research also suggests that RMI is preferred to reserve capacity as a risk mitigation lever in long serial supply chains, i.e., in supply chains with a large number of echelons. This research problem is inspired by a risk management problem of a leading pharmaceutical company.

DOI:10.1561/0200000092
ISBN: 978-1-68083-554-0
298 pp. $99.00
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ISBN: 978-1-68083-555-7
298 pp. $280.00
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Table of contents:
Introduction and Conceptual Overview of Contents
Part 1: Supply Chain Finance
Material and Cash Flow in Two-Tier Supply Chain with Trade Credits and Defaults
Financing Suppliers under Performance Risk
Blockchain and other Distributed Ledger Technologies in Operations
Cash Beer Game
Part 2: Financial Hedging and Commodity Risks
A Framework of Hedging Decisions for Supply Chain Partners
Data and Risk Analytics for Production Panning
Risk Management in Commodity Processing Firms: An Equilibrium View
Quadratic Hedging of Commodity and Energy Cash Flows
Optimal Positioning in the Derivative Market: Review, Foundations, and Trends
Part 3: Operational Strategies and Risk Management
Corn, Soybean or Fallow: Dynamic Farmland Allocation Under Uncertainty
Disruption Risk Management in Serial Multi-Echelon Supply Chains: Where to hold Risk Mitigation Inventory and Reserve Capacity
Financial Incentives to Avoid Major Quality Problems in a Supply Chain
Specific Capacity Investment in Supply Chains with Renegotiation

Emerging Technology & Advances in Supply Chain Finance & Risk Management

Emerging Technology & Advances in Supply Chain Finance & Risk Management reflects the state-of-the-art in research thought leadership in supply chain finance and risk management, and it contains great expository pieces on how advanced technologies are shaping supply chains and risk management within them. You will also find ideas on how supply chain finance and risk management can be best taught in our classrooms.

The volume is divided into three parts, each part reflecting a major active research area of the field including: Part 1: Supply Chain Finance; Part 2: Financial Hedging and Commodity Risks; Part 3: Operational Strategies and Risk Management.

Part 1 deals with the broad area of supply chain finance and programs that will better allow for working capital management within supply chains. Part 2 introduces concepts of hedging financial and operational risks due to uncertain commodity prices, fluctuating exchange rates, and volatile interest rates. Emphasis is placed on understanding how financial hedges can be used for hedging relevant supply chain risks in a way that reflects modern view of financial risk management. Part 3 examines topics and solution approaches reflecting the more traditional treatments in the contemporary literature of operational and supply chain risks. This volume provides rich implications for future research directions in efforts to master the new complexities and uncertainties of the global business environment and better understand the impact of advanced technologies in global supply chains.

 
TOM-092

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Foundations and Trends® in Technology, Information and Operations Management, Volume 12, Issue 2-3 Special Issue: Emerging Technology & Advances in Supply Chain Finance & Risk Management
See the other articles that are also part of this special issue.