City Research Online

Abstract

This research focuses on managing disruption risk in supply chains using inventory and reserve capacity under stochastic demand. While inventory can be considered as a speculative risk mitigation lever, reserve capacity can be used in a reactive fashion when a disruption occurs. We determine optimal inventory levels and reserve capacity production rates for a firm that is exposed to supply chain disruption risk. We fully characterize four main risk mitigation strategies: inventory strategy, reserve capacity strategy, mixed strategy
and passive acceptance. We illustrate how the optimal risk mitigation strategy depends on product characteristics (functional versus innovative) and supply chain characteristics (agile versus efficient). This work is inspired from a risk management problem of a leading pharmaceutical company.

Publication Type:	Article
Additional Information:	This is an Accepted Manuscript of an article published by Taylor & Francis in 'International Journal of Production Research' on 10 August 2018, available online: http://www.tandfonline.com/10.108/00207543.2018.1504173.
Publisher Keywords:	supply chain resilience, supply chain management, disruption management, inventory management, stochastic models
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
Departments:	Bayes Business School > Management
SWORD Depositor:	Symplectic Administrator

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