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On the Value of Mitigation and Contingency Strategies for Managing Supply Chain Disruption Risks

Abstract:We study a single-product setting in which a firm can source from two suppliers, one that is unreliable and another that is reliable but more expensive. Suppliers are capacity constrained, but the reliable supplier may possess volume flexibility. We prove that in the special case in which the reliable supplier has no flexibility and the unreliable supplier has infinite capacity, a risk-neutral firm will pursue a single disruption-management strategy: mitigation by carrying inventory, mitigation by single-sourcing from the reliable supplier, or passive acceptance. We find that a suppliers percentage uptime and the nature of the disruptions (frequent but short versus rare but long) are key determinants of the optimal strategy. For a given percentage uptime, sourcing mitigation is increasingly favored over inventory mitigation as disruptions become less frequent but longer. Further, we show that a mixed mitigation strategy (partial sourcing from the reliable supplier and carrying inventory) can be optimal if the unreliable supplier has finite capacity or if the firm is risk averse. Contingent rerouting is a possible tactic if the reliable supplier can ramp up its processing capacity, that is, if it has volume flexibility. We find that contingent rerouting is often a component of the optimal disruption-management strategy, and that it can significantly reduce the firms costs. For a given percentage uptime, mitigation rather than contingent rerouting tends to be optimal if disruptions are rare.

摘要:我们研究了一种单一产品的情况,在这种情况下,一家公司可以从两个供应商那里采购,一个不可靠,另一个可靠,但价格更高。供应商的产能是有限的,但可靠的供应商可能具有产量灵活性。我们证明了在可靠的供应商没有灵活性而不可靠的供应商具有无限能力的特殊情况下,风险中性的企业将采取单一的干扰管理策略:通过持有库存来缓解风险,通过从可靠的供应商那里单一来源来缓解风险,或者被动接受。我们发现,供应商的正常运行时间百分比和中断的性质(频繁但短与罕见但长)是最优策略的关键决定因素。对于给定的正常运行时间百分比,随着中断变得不那么频繁但时间更长,采购缓解比库存缓解越来越受欢迎。此外,我们还证明了当不可靠的供应商具有有限的能力或者如果企业是风险厌恶的时,混合缓解策略(部分从可靠的供应商那里采购并携带库存)可能是最优的。 如果可靠的供应商能够提高其处理能力,也就是说,如果它具有批量灵活性,应急改变路线是一种可能的策略。我们发现,应急改道通常是最优中断管理策略的一个组成部分,它可以显著降低企业的成本。对于给定的正常运行时间百分比,如果中断很少发生,则缓解而不是应急重路由往往是最优的。

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