Frontiers of Engineering Reports on Leading-Edge Engineering from the 2006 Symposium (2007) / Chapter Skim
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Managing Disruptions to Supply Chains
Managing Disruptions to Supply Chains
Pages 139-148
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From page 139... ...
Nevertheless, supply chain disruptions have only recently begun to receive significant attention from practitioners and researchers. One reason for this growing interest is the spate of recent high-profile disruptions, such as 9/11, the West Coast port lockout of 2002, and hurricanes Katrina and Rita in 2005.
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From page 140... ...
IBM and SunGard, the two main players in this field, provide secure data, systems, networks, and support to keep businesses running smoothly during and after disruptions. Supply chains are multilocation entities, and disruptions are almost never local -- they tend to cascade through the system, with upstream disruptions causing downstream "stockouts." In 1998, for example, strikes at two General Motors parts plants led to shutdowns of more than 100 other parts plants, which caused closures of 26 assembly plants and led to vacant dealer lots for months (Brack, 1998)
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From page 141... ...
explores strategies for coping with disruptions, including inventory, dual sourcing, and acceptance (i.e., simply accepting the risk of disruption and not protecting against it) , and shows that the optimal strategy changes as the disruption characteristics change (e.g., disruptions become longer or more frequent)
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From page 142... ...
. Although the assumptions of equal holding costs and negligible lead times are unrealistic, the risk-pooling effect and the insights that arise from it are applied widely in supply chain planning and management.
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From page 143... ...
It is preferable to hold inventory downstream, where it can protect against disruptions elsewhere in the supply chain. For example, this might mean that a manufacturing firm should hold inventory of raw materials under DU but of finished goods under SU.
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From page 144... ...
Under SU, however, backup suppliers play a vital role because they provide capacity both to meet demand during a disruption to the primary supplier and to ramp up supply after a disruption. Facility Location Classical facility-location models choose locations for plants, warehouses, and other facilities to minimize transportation cost or achieve some other measure of proximity to both suppliers and customers (Daskin, 1995; Drezner and Hamacher, 2002)
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From page 145... ...
. CONCLUSIONS Studies of SU and DU in multi-echelon supply chains show that the two types of uncertainty require different strategies in terms of centralization, inventory placement, and supply chain structure.
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From page 146... ...
Another promising avenue for future research is to develop strategies for designing resilient supply chains. How can a supply chain's infrastructure be designed so that buffers are located in the right places and in the right quantities to protect against disruptions and other forms of uncertainty?
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From page 147... ...
2005b. An empirical analysis of the effect of supply chain disruptions on long-run stock price performance and equity risk of the firm.
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