Assessing the Efficiency of Risk Mitigation Strategies in Supply Chains

Abstract

Mitigating supply chain risk is a critical component of a company's overall risk management strategy. Drawing upon Contingency Theory, we posit that the appropriateness and effectiveness of risk mitigation strategies are contingent on the internal and external environments and that there is no one‐size‐fits‐all strategy. While literature on risk management has proposed a variety of tools and techniques for effectively evaluating and managing supply chain risks, comprehensive assessment of the efficiencies of alternative risk mitigation strategies has not been addressed in the literature. Such an assessment will help managers select the appropriate mitigation strategy for a given decision‐making environment. To this end, this study is first of its kind in evaluating and proposing efficient supply chain risk mitigation strategies in the presence of a variety of risk categories, risk sources, and supply chain configurations. We combine an empirically grounded simulation methodology with data envelopment analysis and nonparametric statistical methods to analyze and rank alternative mitigation strategies. We find that the more efficient strategies focus on flexibility rather than on redundancy for supply chain failures. Our research presents several interesting and useful managerial insights for deciding what strategies are most capable of mitigating risks in a variety of contexts.

A Decision Framework to Mitigate Supply Chain Risks: An Application in the Offshore-Wind Industry

“…A risk is referred to as recurrent or operational if it has high probability and low impact [22]. [23] further categorized recurrent risks into delays and distortions, which are also called forecast risks. The supply chain risk profile, commonly defined as the expected value of risks, captures the overall exposure of the supply chain to risks [6].…”

“…Mitigation strategies are measures taken by companies prior to the occurrence of risks with the aim of reducing the probability or the impact of risks or to transfer or eliminate the risks altogether [24]. [23] considered the general mitigation strategies that are increasing capacity, increasing inventory, increasing responsiveness, increasing flexibility, aggregating demand, increasing capability and employing more than one supplier. Mitigation tactics are measures taken by companies after the occurrence of risks with the aim of reducing their impact [12,24].…”

Evaluating the logistics performance of Brazils corn exports: A proposal of indicators

“…DEA allows several inputs and outputs to be used when analyzing the performance of various similar organizational units (DMUs) through a standard linear programming, which seeks to establish the maximum efficiency of a DMU, expressed in the rate of ratio of inputs to outputs, comparing the performance of a unit in relation to the group of similar units. This technique allows us to identify units with relatively more efficient performance (Talluri et al, 2013).…”

Managing risks in the Indonesian seaweed supply chain

“…Some researchers also incorporate a decision model to determine the most appropriate mitigation method (Demirel 2012;Faisal et al 2007;Wang 2014). Talluri et al (2013) recommend assessing the mitigation strategies using the metric of sustainability, which seems particularly noteworthy in a discussion of risk-mitigation strategies for seaweed supply chains. From a variety of supply chain risk management processes available, we adopted the process suggested by Khan and Burnes (2007) and Sodhi and Tang (2012), because it is relatively simple and easy to apply.…”