Industrial Engineering and Management Systems

Korean Institute of Industrial Engineers (대한산업공학회)
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A Framework of Managing Supply Chain Disruption Risks Using Network Reliability

  • Ohmori, Shunichi (Department of Industrial and Management System Engineering, School of Creative Science and Engineering, Waseda University) ;
  • Yoshimoto, Kazuho (Department of Industrial and Management System Engineering, School of Creative Science and Engineering, Waseda University)
  • Received : 2013.01.31
  • Accepted : 2013.05.31
  • Published : 2013.06.30
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Abstract

This paper discusses how to manage supply chain disruption risks from natural disasters or other low-likelihood-high-impact risk drivers. After the catastrophic earthquake in Eastern Japan and the severe flood in Thailand, most companies have been attempting to re-establish the business continuity plan to prevent their supply chain from disruption. However, the challenges for managers and individual risks are often interrelated, and thus, actions that mitigate one risk can end up being no contribution as a whole. In this paper, we describe a framework for assessing how much impact individual mitigation strategies have on the entire supply chain protection against disruption, using network reliability. We propose three categories of risk-mitigation approaches: Stabilization, Absorption, and Duplication. We analyze the situation under which each of these strategies is the best suitable. With a clear understanding of relations between these mitigation strategies and the entire supply chain risks, managers can select effective risk-reduction approaches to their supply chain.

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References

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