Journal
INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 162, Issue -, Pages 115-124Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijpe.2015.01.007
Keywords
Supply chain risk management; Network theory; Disruption management; Reduced form model
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We propose a model for the quantification of business disruption risk in a global supply chain network. To calculate the loss distribution induced by supply chain disruptions for a focal firm, we apply a bottom-up modeling approach. On the firm level, we model production disruptions of various hazard events in reduced form. We incorporate the network structure explicitly and define the loss propagation between the firms. Via Monte Carlo simulation, we analyze the effects of different model specifications and network structures on the loss distribution of the focal firm. We show that diversification effects can lead to counterintuitive results when we consider the network structure and the correlations of hazard events. Our methodology and findings enable more informed and transparent decisions for supply chain design. (C) 2015 Elsevier B.V. All rights reserved.
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