This article discusses disruptive supply chain risks that can have large negative impacts on the supply chain’s performance. Using stylized network models and examples, the article first looks at how to incorporate probability in supply chain design given the difficulty of estimating the probability of a disruption. Next, the article deals with two fundamental strategies a supply chain designer can use to mitigate the effects of disruptive risks: (a) containment, i.e., containing the risk, and (b) tailoring reserves like capacity and inventory. Finally, the article discusses how a company can respond to disruptions. These response considerations need to be taken into the supply chain configuration as well.
|Original language||English (US)|
|Title of host publication||The Oxford Handbook of Managerial Economics|
|Editors||Christopher R. Thomas, William F. Shughart II|
|Publisher||Oxford University Press, Inc.|
|State||Published - 2013|