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. ISSN 1520-6750

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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.

Item Type: Article
Subjects: Business and Management
Date Deposited: 28 Oct 2014 12:54
Last Modified: 12 Jul 2023 18:26
URI: https://eprints.exchange.isb.edu/id/eprint/41

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