Preparing for the Worst
Investments in supply chain risk management (SCRM), like other risk management initiatives, often require an upfront investment in an initiative that has no guaranteed or even likely payoff because the value is linked to a highly uncertain contingency. Such investments in SCRM can be modeled as real options that give a company the right but not the obligation to take action in the future, such as in response to a risk event. This chapter revisits supply chain risk by describing how companies are now managing supply chain risks. It illustrates four common categories of investment—each of which can be looked upon as a real option—that companies make in preparation for disruptions in supply (although these preparations also serve to handle surges in demand). The categories are investments in redundancy (e.g., inventory), flexibility (i.e., of facilities and processes), emergency operation centers (EOC), and business continuity planning (BCP).
- Anupindi, R. (2011). Supply Chain Risk Management at Cisco: Response to H1N1, case 1-428-881 March 7, 2011.Google Scholar
- Barbaro, M., & Gillis, J. (2005). Walmart at forefront of hurricane relief. The Washington Post, 6.Google Scholar
- BASF (2012). Responsible care management system. http://report.basf.com/2012/en/managementsanalysis/responsibilityalongthevaluechain/responsiblecare.html.
- Cooper, M. (2013). (Senior Director, Emergency Management, Walmart), Personal Communications, 25.Google Scholar
- De Neufville, R., & Scholtes, S. (2011). Flexibility in engineering design, engineering systems series. Cambridge: MIT Press.Google Scholar
- Harrington, K., & O’Connor, J. (2009). How cisco succeeds. Supply Chain Management Review, July/August, 2009, 10–17.Google Scholar
- Leemhorst, L., & Crippa, R. (2011). Do or die: Manage or ignore supply chain risk? Supply Chain Movement, 3(Q4), 11–16. https://www.supplychainmovement.com/wp-content/uploads/Supply-Chain-Movement-Quarterly-No3-2011.pdf.
- Linton, T. (2012). (Chief Procurement Officer, FLEX) Personal Communication, 30.Google Scholar
- Luu, N. (2012). The cisco method presentation at advancing supply chain risk management: Emerging challenges and strategies. In MIT Center for Transportation and Logistics Conference, Cambridge, MA, 10 October 2012.Google Scholar
- Luu, N. (2013). (Senior Manager, Supply Chain Risk Management, Cisco), Personal Communications.Google Scholar
- Raso, T. (2010). Focusing and measuring your continuity efforts to improve resiliency. In Continuity Insights 2010 Management Conference, 12–14 April 2010.Google Scholar
- Ratcliffe, S. (2014). Oxford essential quotations. Oxford: Oxford University Press.Google Scholar
- Sheffi, Y. (2005). The resilient enterprise: Overcoming vulnerability for competitive advantage. Cambridge, MA: MIT Press.Google Scholar
- Smith, J. (2012) AT&T Brings 9 COWs to Indianapolis for super bowl 46 (Video). GottaBeMobile.Google Scholar
- Trigeorgis, L. (1995). Real options. Cambridge, MA: MIT Press.Google Scholar
- van Opstal, D. (2007). Transform. The resilient economy: Integrating competitiveness and security. Council on Competitiveness, July 2007. http://www.nyu.edu/intercep/research/pubs/annotated-business-case_20-aug-2007.pdf.
- Walmart (2018). Our Business, https://corporate.walmart.com/our-story/our-business. Accessed 27 Feb 2018.
- Weintraub, J. (2013). Inside AT&T’s 83 GB/hour mobile cell tower … or why your iPhone no longer drops out at huge events 9TO5Mac, May 19, 2013 https://9to5mac.com/guides/network-performance/.
- Zurich (2011a). Measuring risk is key to protecting your business. Insights Supply Chain Risk (2011), 11–13.Google Scholar
- Zurich (2011b). Taking measures to cope with delivery disruption. Insights Supply Chain Risk (2011), 14–16.Google Scholar