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Supply Chain Risk Management

Supply Chain Risk Management The existing models utilise a mean value approach with deterministic failure cost to determine the optimal number of suppliers in the presence of supplier failure risks. The mean value approach assumes, the firm has a linear utility function with respect to the supply disruptions. For major disruptions that could threaten the survival of the firm, the linearity assumption is questionable. Furthermore, the operating cost of working with the suppliers and the financial loss cause by failure of suppliers are subject to uncertainty. This article utilises the mean-variance approach to determine the optimal set of suppliers in the presence of supplier failure risks. The importance of cash-flow variability in the supplier selection/planning process is considered explicitly. Our methodology allows us to balance the two desirable, but conflicting objectives of cost minimisation and service levels achieved. Furthermore, traditional risk management tools like insurance are incorporate into the optimal suppliers' selection process. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Information and Decision Sciences Inderscience Publishers

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd. All rights reserved
ISSN
1756-7017
eISSN
1756-7025
DOI
10.1504/IJIDS.2008.02005
Publisher site
See Article on Publisher Site

Abstract

The existing models utilise a mean value approach with deterministic failure cost to determine the optimal number of suppliers in the presence of supplier failure risks. The mean value approach assumes, the firm has a linear utility function with respect to the supply disruptions. For major disruptions that could threaten the survival of the firm, the linearity assumption is questionable. Furthermore, the operating cost of working with the suppliers and the financial loss cause by failure of suppliers are subject to uncertainty. This article utilises the mean-variance approach to determine the optimal set of suppliers in the presence of supplier failure risks. The importance of cash-flow variability in the supplier selection/planning process is considered explicitly. Our methodology allows us to balance the two desirable, but conflicting objectives of cost minimisation and service levels achieved. Furthermore, traditional risk management tools like insurance are incorporate into the optimal suppliers' selection process.

Journal

International Journal of Information and Decision SciencesInderscience Publishers

Published: Jan 1, 2008

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