Managing Disruption Risks in Supply Chains

TLDR

Supply‑chain risks are divided into coordination problems and disruptions, and this paper focuses on the latter, including natural disasters, strikes, economic shocks, and intentional acts such as terrorism. The study proposes a conceptual framework that integrates risk assessment and mitigation for managing supply‑chain disruption risks. The framework is illustrated using empirical data on U.S. chemical industry accidents from 1995–2000.

Abstract

There are two broad categories of risk affecting supply chain design and management: (1) risks arising from the problems of coordinating supply and demand, and (2) risks arising from disruptions to normal activities. This paper is concerned with the second category of risks, which may arise from natural disasters, from strikes and economic disruptions, and from acts of purposeful agents, including terrorists. The paper provides a conceptual framework that reflects the joint activities of risk assessment and risk mitigation that are fundamental to disruption risk management in supply chains. We then consider empirical results from a rich data set covering the period 1995–2000 on accidents in the U. S. Chemical Industry. Based on these results and other literature, we discuss the implications for the design of management systems intended to cope with supply chain disruption risks.