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19 SUPPLY CHAIN RISK AND DISRUPTION

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19 SUPPLY CHAIN RISK AND DISRUPTION
SCM 460 GLOBAL SUPPLY CHAIN STRATEGY
Dr. Alex Rodrigues
Supply Chain Risk and Disruption

Supply Chain Risk
• Risk: Impact vs. Magnitude

Supply Chain Risk
• Risk: Mitigation Strategies

Supply Chain Risk

Source: adapted from Manuj, I. and J.T. Mentzer, (2008) "Global supply chain risk management strategies", International Journal of Physical Distribution & Logistics Management, Vol. 38, No. 3, pp. 192-223. World Economic Forum (2012) New Models for Addressing Supply Chain and
Transport Risk.

Supply Chain Risk

Supply Chain Disruptions

Supply Chain Disruptions

Supply Chain Disruptions

Supply Chain Disruptions

Supply Chain Disruptions

Supply Chain Disruptions

The Bullwhip Effect
• The downstream part of the supply chain generate the demand.
• For companies further upstream in the channel, demand is a compilation of orders from the companies downstream.
• Distortions in demand information can and do occur as we move further away from the end customer along the supply chain.
• Both the perceived demand seasonality and forecast error can increase as we proceed upstream in the supply chain.
• This phenomenon is referred to as the bullwhip effect.

The Bullwhip Effect

The Bullwhip Effect
• The bullwhip effect refers to the phenomenon where:
– DEMAND DISTORTION: Orders to the upstream member in a supply chain exhibit greater variance than actual orders at the point of retail sale. – VARIANCE PROPAGATION: The variance of orders increases as one moves upstream. The Bullwhip Effect

The Bullwhip Effect

The Bullwhip Effect: Causes

Behavioral Causes
• Individual / Functional Decisions
• Types of Incentives
Non-Behavioral Causes
• Demand Forecast Updating
• Order Batching
• Price Fluctuations
• Rationing and Shortage Gaming

The Bullwhip Effect: Causes

Forrester Effect

Topics

Topic 1:
• Describe factors that impact the severity of
Supply Chain disruptions and how to manage them Topic 2:
•

Understand the impact of natural resource scarcity on
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