Managing disruption risks in global supply chains
Open Access
- Author:
- Kungwalsong, Kanokporn
- Graduate Program:
- Industrial Engineering
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- June 05, 2013
- Committee Members:
- Arunachalam Ravindran, Dissertation Advisor/Co-Advisor
Arunachalam Ravindran, Committee Chair/Co-Chair
Paul Griffin, Committee Member
Deborah Jean Medeiros, Committee Member
Terry Paul Harrison, Committee Member - Keywords:
- Supply chain
Disruption risk
Supply chain risk management
Robustness
Resilience
Vulnerability - Abstract:
- Supply chain disruptions from man-made and natural disasters represent the most pressing concern in supply chain management. For global supply chain networks, in which entities are located in different geographical regions and goods are moved through various transportation links, each entity and transportation link present its own disruption risk and vulnerability. A disruption at a supply chain component may lead to the disruption of the entire supply chain network. Supply chain management decisions in the volatile business environments must consider the robustness and resiliency of the network to continue operations. In this dissertation, we incorporate both robustness and the resiliency in the supply chain management decisions. The robustness is considered at the strategic level, while the resiliency is considered at the tactical level. We develop a disruption risk assessment framework to quantify disruption risk scores of supply chain components (facilities and transportation links). A disruption risk score is determined from a qualitative assessment of three factors: hazard, vulnerability, and risk management practice. We apply the disruption risk assessment framework to quantify the suppliers’ disruption risks of a global distribution company and develop disruption risk matrices for the suppliers’ facilities and suppliers’ transportation links. The assessment could enable the company to better understand their suppliers, to address critical network components, and to prioritize risk management activities. Next, we use the quantified disruption risk scores as disruption risk parameters for the supply chain optimization models. We formulate a multi-criteria strategic model for a global supply chain network design. We solve the multi-criteria model using goal programming. A numerical example is provided to illustrate the robustness of the supply chain network by incorporating disruption risk in the supply chain network design decisions. Even though the robustness of a supply chain network has been considered at the strategic level, risks still exist. A disruption at a supply chain component may occur at any time during the planning horizon. We formulate a multi-period tactical supply chain model based on the strategic decisions taken during the design phase to evaluate how the disruption at a supply chain component impacts the supply chain network profit and the demand fulfillment. The supply chain network is subjected to a vulnerability analysis and risk mitigation assessment to evaluate the resiliency of the supply chain network operations under disruptions. Finally, we apply risk mitigation strategies, such as extra inventory and backup supplier, to increase the supply chain network resilience. Decision tree analysis is used to evaluate the cost and benefit among the various risk mitigation strategies. The strategic model illustrates that a supply chain network design that relies heavily on maximizing profit may create a network characterized by high disruption risk. Considering disruption risk in a strategic supply chain decision enhances the robustness of a supply chain network. The tactical model enables the resiliency improvement of an existing supply chain network. From the numerical example, all three risk mitigation strategies (use of backup supplier, keep extra raw material inventory, and have both backup supplier and extra inventory) increase the ability of a supply chain to bounce back to a stable condition after facing a supplier disruption. Using a backup supplier increases resiliency by providing adequate supply capacity when there is a disruption. Keeping extra raw material inventory temporarily prevents part shortages when facing a short-term disruption. Having both a backup supplier and extra raw material would be an appropriate strategy to mitigate medium-term or long-term disruptions as extra inventory allows a supply chain network to continue its operations until a backup supplier is available. The cost benefit analysis shows that all risk mitigation strategies are attractive. The mitigation costs are much less than the mitigation benefits and the supply chain profits with mitigation strategies are higher than those without any mitigation.