Handbook of Integrated Risk Management in Global Supply Chains (Wiley Handbooks in Operations Research and Management Science)

604 Pages·2011·15.29 MB·English

by  Panos Kouvelis

The Handbook of
Integrated Risk
Management in Global
Supply Chains
handbooks operations research-cp:handbooks survey meth-cp.qxd 6/7/2011 7:11 AM Page 1
Wiley Handbooks in
OPERATIONS RESEARCH AND MANAGEMENT SCIENCE
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Kouvelis, Dong, Boyalatı, and Li · Handbook of Integrated Risk Management in
Global Supply Chains
Forthcoming Wiley Handbooks in Operations Research and
Management Science
Sokolowski and Banks · Handbook of Real-World Applications of Modeling and
Simulation
The Handbook of
Integrated Risk
Management in
Global Supply Chains
Edited by
Panos Kouvelis
Lingxiu Dong
Onur Boyabatli
Rong Li
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LibraryofCongressCataloging-in-PublicationData
Handbookofintegratedriskmanagementinglobalsupplychains/Panos
Kouvelis...[etal.].
p.cm.–(Wileyhandbooksinoperationsresearchandmanagement
science)
Includesbibliographicalreferencesandindex.
ISBN978-0-470-53512-7
1. Businesslogistics.2. Deliveryofgoods–Management.3. Risk
management.4. Globalization.I.Kouvelis,Panos.
HD38.5.H354 658.5–dc22 2011015212
PrintedintheUnitedStatesofAmerica
oBookISBN:978-1-118-11580-0
ePDFISBN:978-1-118-11577-0
ePubISBN:978-1-118-11579-4
eMobi ISBN: 978-1-118-11578-7
10987654321
Contents
Foreword xiii
Preface xv
Acknowledgments xxiii
Contributors xxv
Part ONE
Foundations and Overview
1 Integrated Risk Management: A Conceptual
Framework with Research Overview and
Applications in Practice 3
1.1 Introduction, 3
1.2 AnAction-BasedFrameworkforSupplyChainRisk
Management, 4
1.3 RiskMitigationStrategies, 8
1.4 ResearchOpportunities, 10
Reference, 12
2 RiskManagementandOperationalHedging:
An Overview 13
2.1 Introduction, 13
2.2 RiskManagement:ConceptandProcess, 14
2.3 IdentificationofOperationalHazards, 18
2.4 RiskAssessmentandValuation, 22
2.5 TacticalRiskDecisionsandCrisisManagement, 28
2.6 StrategicRiskMitigation, 30
2.7 FourOperationalHedgingStrategies, 33
2.8 FinancialHedgingofOperationalRisk, 36
v
vi Contents
2.9 TailoredOperationalHedging, 42
2.10 GuidelinesforOperationalRiskManagement, 47
References, 48
3 The Effect of Supply Chain Disruptions
on Corporate Performance 51
3.1 Introduction, 51
3.2 Sample,PerformanceMetrics,andMethodology, 53
3.3 TheEffectofSupplyChainDisruptionsonCorporate
Performance, 55
3.4 DriversofSupplyChainDisruptions, 63
3.5 WhatCanFirmsDoToMitigatetheChancesof
Disruptions?, 64
3.6 Summary, 72
A. MethodologyUsedToEstimateStockPricePerformance, 73
B. Methodology Used To Estimate Changes in Share Price
Volatility, 75
C. MethodologyUsedToEstimateChangesinProfitability, 76
References, 76
4 Operational Strategies for Managing
Supply Chain Disruption Risk 79
4.1 Introduction, 79
4.2 StockpileInventory, 82
4.3 DiversifySupply, 86
4.4 BackupSupply, 89
4.5 ManageDemand, 92
4.6 StrengthenSupplyChain, 96
4.7 Conclusions, 98
References, 100
5 Beyond Risk: Ambiguity in Supply Chains 103
5.1 IntroductiontoRiskandAmbiguity, 103
5.2 AmbiguityinaSinglePeriodNewsvendorSetting, 109
5.3 AmbiguityinaSupplyChainInventoryPositioning
Setting, 113
5.4 Conclusions, 120
References, 122
Contents vii
Part TWO
Integrated Risk Management: Operations
and Finance Interface
6 Managing Storable Commodity Risks: Role
of Inventories and Financial Hedges 127
6.1 Introduction, 127
6.2 LiteratureReview, 132
6.3 ProblemDescription, 133
6.4 OptimalPolicyforSingleContractFinancialHedging, 137
6.5 OptimalPolicyforaPortfolioofFinancialHedges, 142
6.6 RoleoftheOperationalandFinancialHedges, 143
6.7 ExampleofModelApplicationandResults, 150
6.8 ManagerialInsightsandConclusions, 153
References, 154
7 Integrated Production and Risk Hedging
with Financial Instruments 157
7.1 Introduction, 158
7.2 SinglePeriodModels, 159
7.3 MultiperiodModels, 177
7.4 Conclusion, 192
References, 193
8 Capacity Expansion As A Contingent
Claim: Flexibility And Real Options
In Operations 197
8.1 Introduction, 198
8.2 AFinancialOptionPricingModel:BlackScholes(1973)
andMerton(1973)Model, 201
8.3 RealOptionsValuation(ROV)inOperations, 205
8.4 Conclusion, 214
References, 215
9 Financial Valuation of Supply Chain
Contracts 219
9.1 Introduction, 220
9.2 ReviewofFinancialMarkets,Arbitrage,andMartingales, 223
viii Contents
9.3 AModelforFinancialValuationofSupply
ChainContracts, 226
9.4 DualFormulation, 231
9.5 ExperimentalStudy, 234
9.6 Conclusion, 243
References, 243
Part THREE
Supply Chain Finance
10 Supply Chain Finance 249
10.1 Introduction, 250
10.2 TheModelSetting,CommonNotationandAssumptions, 253
10.3 Bankrupt-ProneSupplyChainsunderWholesale
PriceContracts, 255
10.4 FinancingtheBankrupt-ProneNewsvendorwithTrade
CreditContracts, 272
10.5 ConclusionsandFutureResearch, 285
References, 286
11 The Role of Financial Services
in Procurement Contracts 289
11.1 Introduction, 290
11.2 ModelDescription, 294
11.3 WholesaleContractwithaBudgetConstraint(w ,Q ), 298
T T
11.4 EquilibriumUnderaCreditContract(Q ,w,˛), 299
I I I
11.5 EquilibriumwithExternalFinancing(Q ,w ), 307
E E
11.6 ComputationalExperiments, 310
11.7 ConcludingRemarksandExtensions, 315
References, 324
12 Production/Inventory Management
and Capital Structure 327
12.1 OperationsandFinance, 327
12.2 TheModel, 329
12.3 StructuralPropertiesofanOptimalPolicy, 333
12.4 CharacterizationoftheOptimalPolicy, 337
12.5 Long-TermDecisionsonCapitalStructure, 346
12.6 ExtensionsandVariationsoftheBasicModel, 354
Contents ix
12.7 ConcludingRemarks, 357
12.8 BibliographicalNotes, 358
References, 360
13 Bank Financing of Newsvendor Inventory:
Coordinating Loan Schedules 363
13.1 Introduction, 364
13.2 TheStackelbergGame, 366
13.3 ANumericalStudy, 370
13.4 CoordinatingLoanSchedules, 377
13.5 ConcludingRemarks, 380
References, 384
Part FOUR
Operational Risk Management Strategies
14 Decentralized Supply Risk Management 389
14.1 Introduction, 389
14.2 LiteratureTaxonomies, 394
14.3 MisalignmentofIncentives, 398
14.4 CompetingSuppliers, 398
14.5 CompetingManufacturers, 408
14.6 AsymmetricInformation, 413
14.7 Conclusions, 419
References, 421
15 Using Supplier Portfolios to Manage
Demand Risk 425
15.1 Introduction, 426
15.2 LiteratureReview, 428
15.3 AStaticModel, 430
15.4 ADynamicModelwithProgressiveDemandRevelation, 436
15.5 Conclusions, 442
References, 443
16 An Opportunity Cost View of Base-Stock
Optimality for the Warehouse Problem 447
16.1 Introduction, 448
16.2 ASimpleMotivatingExample, 449
x Contents
16.3 Model, 450
16.4 Base-StockOptimality, 452
16.5 ManagerialAspects, 457
16.6 Conclusions, 460
References, 460
Part FIVE
Industrial Applications
17 Procurement Risk Management in Beef
Supply Chains 465
17.1 Introduction, 465
17.2 LiteratureReview, 470
17.3 ModelDescription, 473
17.4 ComputationalExperimentsfortheBeefSupplyChain, 477
17.5 Discussion, 491
References, 493
18 Risk Management in Electric Utilities 495
18.1 Introduction, 495
18.2 PriceRisk, 497
18.3 VolumeRisk, 501
18.4 OtherRiskExamples, 507
18.5 Summary, 511
References, 511
19 Supply Chain Risk Management:
A Perspective from Practice 515
19.1 DefiningSupplyChainRiskManagement, 516
19.2 UnderstandingYourSupplyChain, 517
19.3 DevelopingSCRMCapabilities, 518
19.4 ProcessApproachtoSupplyChainRiskManagement, 523
19.5 CaseStudy:CiscoRespondstotheSichuanEarthquake, 527
19.6 TheImportanceofanInternationalStandardinSCRM, 534
19.7 Conclusion, 534