Reducing the Risk of Supply Chain Disruptions - Journal Article
Book Details
Author(s)Sunil Chopra, ManMohan S. Sodhi
PublisherMIT Sloan Management Review
ISBN / ASINB00JIBFPMK
ISBN-13978B00JIBFPM2
Sales Rank1,878,915
MarketplaceUnited States 🇺🇸
Description
Most managers know that they should protect their supply chains from serious and costly disruptions — but comparatively few take action. The dilemma: Solutions to reduce risk mean little unless they are evaluated against their impact on cost efficiency.
For supply chain executives, the early years of the 21st century have been notable for major supply chain disruptions that have highlighted vulnerabilities for individual companies and for entire industries globally. In addition to taking many lives, the Japanese tsunami in 2011 left the world auto industry reeling for several months. Thailand’s 2011 floods affected the supply chains of computer manufacturers dependent on hard disks and of Japanese auto companies with plants in Thailand. The 2010 eruption of a volcano in Iceland disrupted millions of air travelers and affected time-sensitive air shipments.
Today’s managers know that they need to protect their supply chains from serious and costly disruptions, but the most obvious solutions — increasing inventory, adding capacity at different locations and having multiple suppliers — undermine efforts to improve supply chain cost efficiency. Surveys have shown that while managers appreciate the impact of supply chain disruptions, they have done very little to prevent such incidents or mitigate their impacts.1 This is because solutions to reduce risk mean little unless they are weighed against supply chain cost efficiency. After all, financial performance is what pays the bills.
Broadly speaking, today’s managers have two choices for achieving lower risk in the supply chain: They can reduce risk while also improving supply chain efficiency — a “win-win” – or they can reduce risk while limiting the impact on supply chain cost efficiency. Article includes 3 exhibits and 17 bibliographic references.
For supply chain executives, the early years of the 21st century have been notable for major supply chain disruptions that have highlighted vulnerabilities for individual companies and for entire industries globally. In addition to taking many lives, the Japanese tsunami in 2011 left the world auto industry reeling for several months. Thailand’s 2011 floods affected the supply chains of computer manufacturers dependent on hard disks and of Japanese auto companies with plants in Thailand. The 2010 eruption of a volcano in Iceland disrupted millions of air travelers and affected time-sensitive air shipments.
Today’s managers know that they need to protect their supply chains from serious and costly disruptions, but the most obvious solutions — increasing inventory, adding capacity at different locations and having multiple suppliers — undermine efforts to improve supply chain cost efficiency. Surveys have shown that while managers appreciate the impact of supply chain disruptions, they have done very little to prevent such incidents or mitigate their impacts.1 This is because solutions to reduce risk mean little unless they are weighed against supply chain cost efficiency. After all, financial performance is what pays the bills.
Broadly speaking, today’s managers have two choices for achieving lower risk in the supply chain: They can reduce risk while also improving supply chain efficiency — a “win-win” – or they can reduce risk while limiting the impact on supply chain cost efficiency. Article includes 3 exhibits and 17 bibliographic references.
