The importance of decoupling recurrent and disruption risks in a supply chain

Chopra, S and Reinhardt, G and Mohan, U (2007) The importance of decoupling recurrent and disruption risks in a supply chain. Naval Research Logistics, 54 (5). pp. 544-555.

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Abstract

This paper focuses on the importance of decoupling recurrent supply risk and disruption risk when planning appropriate mitigation strategies. We show that bundling the two uncertainties leads a manager to underutilize a reliable source while over utilizing a cheaper but less reliable supplier. As in Dada et al. (working paper, University of Illinois, Champaign, IL, 2003), we show that increasing quantity from a cheaper but less reliable source is an effective risk mitigation strategy if most of the supply risk growth comes from an increase in recurrent uncertainty. In contrast, we show that a firm should order more from a reliable source and less from a cheaper but less reliable source if most of the supply risk growth comes from an increase in disruption probability.

ISB Creators:
ISB CreatorsORCiD
Mohan, UUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Disruption; Dual sourcing; Inventory management; Supply chain risk
Subjects: Business and Management
Depositing User: Ilammaran A
Date Deposited: 28 Oct 2014 12:54
Last Modified: 31 Oct 2014 05:22
URI: http://eprints.exchange.isb.edu/id/eprint/41
Publisher URL: http://dx.doi.org/10.1002/nav.20228
Publisher OA policy: http://www.sherpa.ac.uk/romeo/issn/1520-6750/
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