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Mitigating the risk of supply disruptions: a case study

Published Online:pp 131-151

A Dallas-based telephone manufacturer, that imports semi-finished products from a supplier in Malaysia, wants to develop a risk mitigation plan to minimise the operational risk it may face due to supply disruptions at a US port. Disruptions at the port can render the supply unavailable for a considerable period of time, resulting in a loss of business. We analyse two sourcing policies that evaluate the trade-off between risk-inventory cost and expected loss of business from disruptions. We examine the sensitivity of the policies to the cost parameters and demonstrate how a payment contract affects the selection of a sourcing policy.

Keywords

risk mitigation, supply chain disruption, overseas suppliers, payment contracts, supply chain management, SCM, risk management, case study, telephone manufacture, sourcing policies, trade-offs, risk-inventory cost, expected loss