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Title: Disruption risk management in supply chains
Authors: Sobhan Asian
Keywords: DRNTU::Business::Operations management::Supply chain management
Issue Date: 2015
Source: Sobhan Asian. (2015). Disruption risk management in supply chains. Doctoral thesis, Nanyang Technological University, Singapore.
Abstract: Many companies with complex supply chains suffer from disruptive events, which adversely affect their supply networks and magnify the negative effect of competition in both demand and supply. Although implementing mechanisms such as backup sourcing is effective to mitigate supply risk, the negative impacts of demand uncertainty and market competition are critical problems needed to be investigated at early design stages. Channel coordination has been introduced as a mechanism that aligns individual stakeholders' objectives and provides the conditions under which system-wide efficiency is maximized. However, individual members may not have enough motivation to satisfy those conditions and need to be incentivized. Numerous research has been conducted and many contract models have been designed to help the decentralized supply chain act similar to the centralized one, so that the whole supply chain's performance is improved. To our knowledge, most of the existing models in the literature do not consider emergency sourcing and channel coordination in the presence of supply disruptions, market uncertainty, and price competition. In our first attempt, we consider a general supply chain under demand uncertainty and supply disruptions, and propose a contract-based coordination mechanism between a buyer and a backup supplier. Our main objective in this study is to design a combined sourcing-contracting strategy which enables the firms to simultaneously mitigate their demand and supply risks. We first establish two benchmark models (a centralized system and a price-only contract), and then analyze the channel members' decision making taking an option contract into consideration. We finally devise a win-win coordination mechanism that motivates the supply chain members to share demand and supply risks such that the maximum system-wide profit is achieved. The efficiency of a mitigation strategy is another problem that has not been adequately addressed in previous studies. Nowadays, rapidly growing technologies have shortened the life-cycles of many products. As a consequence, competition among retailers is intensified and the sensitivity of their demand to market price is magnified. In such an environment, none of the existing mitigation strategies perfectly secures the procurement process. The situation becomes even more complex, if a common disruption interrupts the supply delivery of several competing buying firms. Our second study tackles the issue of collaborative procurement under market competition and supply disruptions. More specifically, the main goal of the second study is to tailor the competing retailers' emergency procurement strategies while their main low-cost suppliers are subject to disruptions. We propose a joint emergency procurement strategy (rather than a traditional separate buying strategy) that mitigates the risk of disruptions, maximizes the individual members' profits, and removes the negative effects of the retailers' competition. We are specifically interested in characterizing the existing trade-off that the retailers undertake by choosing a joint procurement strategy. How to establish win-win situations, where the emergency source also prefers the competing firms' purchasing alliance, is another question answered in this study.
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