Table Of ContentTHE BUSINESS Supply Chain Risk Management O Supply and Operations
L
EXPERT PRESS SO Management Collection
Tools for Analysis, Second Edition
DIGITAL LIBRARIES N
M. Johnny Rungtusanatham, Editor
David L. Olson
EBOOKS FOR
BUSINESS STUDENTS The supply chain management field is one of the fast-
Curriculum-oriented, born- est growing fields in our economy, given the heavy
digital books for advanced growth in international trade as a means to access Supply
business students, written
outsourced production opportunities to lower costs
by academic thought
and the growth in information technology to coordi-
leaders who translate real-
world business experience nate supply chains. However, this opportunity to lower Chain Risk
into course readings and costs entails significant risks, such as tsunamis, earth-
reference materials for quakes, political unrest, and economic turbulence.
students expecting to tackle
This book discusses risks in supply chain manage- Management
management and leadership
ment, followed by graphic and quantitative tools (risk
challenges during their
professional careers. matrices, selection methods, risk simulation mod-
elling, linear programming, and business scorecard
POLICIES BUILT Tools for Analysis
BY LIBRARIANS analysis) to help manage these risks. SU
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• Unlimited simultaneous P
David L. Olson is the James & H.K. Stuart Professor L
usage Y
• Unrestricted downloading in MIS and Chancellor’s Professor at the University C Second Edition
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and printing of N ebraska. He has published research in over 150 A
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• Perpetual access for a refereed journal articles, primarily on the topic of mul- N
one-time fee R
tiple objective decision making, information technolo- I
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• No platform or K
maintenance fees gy, supply chain risk management, and data mining. He M
• Free MARC records teaches in the management information systems, man- A
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• No license to execute agement science, and operations management areas. A
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The Digital Libraries are a He has authored 18 books; is associate editor of Service EM
comprehensive, cost-effective Business, Decision Support Systems, and D ecision Sciences; E
N
way to deliver practical and co-editor in chief of International Journal of Services T David L. Olson
treatments of important
Sciences. He was a Lowry Mays endowed Professor at
business issues to every
Texas A&M University from 1999 to 2001. He was named
student and faculty member.
the Raymond E. Miles Distinguished Scholar award for
2002, and was a James C. and Rhonda Seacrest Fellow
from 2005 to 2006. He was named Best Enterprise Infor-
For further information, a
mation Systems Educator by IFIP in 2006. He is a Fellow
free trial, or to order, contact:
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Supply and Operations
www.businessexpertpress.com/librarians
Management Collection
M. Johnny Rungtusanatham, Editor
ISBN: 978-1-63157-057-5
Supply Chain Risk
Management
Supply Chain Risk
Management
Tools for Analysis
Second Edition
David L. Olson
Supply Chain Risk Management: Tools for Analysis, Second Edition
Copyright © Business Expert Press, LLC, 2014.
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
means—electronic, mechanical, photocopy, recording, or any other
except for brief quotations, not to exceed 400 words, without the prior
permission of the publisher.
First published in 2011 by
Business Expert Press, LLC
222 East 46th Street, New York, NY 10017
www.businessexpertpress.com
ISBN-13: 978-1-63157-057-5 (paperback)
ISBN-13: 978-1-63157-058-2 (e-book)
Business Expert Press Supply and Operations Management Collection
Collection ISSN: 2156-8189 (print)
Collection ISSN: 2156-8200 (electronic)
Cover and interior design by Exeter Premedia Services Private Ltd.,
Chennai, India
First edition: 2011
Second edition: 2014
10 9 8 7 6 5 4 3 2 1
Printed in the United States of America.
Abstract
The supply chain management field is one of the fastest growing fields in
our economy, given the heavy growth in international trade as a means
to access outsourced production opportunities to lower costs and the
growth in information technology to coordinate supply chains. However,
this opportunity to lower costs entails significant risks, such as tsunamis,
earthquakes, political unrest, and economic turbulence. This book dis-
cusses risks in supply chain management, followed by graphic and quan-
titative tools (risk matrices, selection methods, risk simulation modeling,
linear programming, and business scorecard analysis) to help manage
these risks.
Keywords
Supply chain, risk management, risk matrix, system selection, Monte
Carlo simulation, optimization model, balanced scorecard
Contents
Chapter 1 Introduction ....................................................................1
Chapter 2 Supply Chain Risk Management Process .......................11
Chapter 3 Risk Matrices in Supply Chain
Risk Management ..........................................................29
Chapter 4 Supply Chain Selection Decisions ..................................43
Chapter 5 Simulation of Supply Chain Risk ...................................61
Chapter 6 Supply Chain Management Risk Models .......................77
Chapter 7 Optimization Models in Supply Chain
Risk Management ..........................................................89
Chapter 8 Balanced Scorecard in Supply Chain
Management ...............................................................111
Epilogue: Recapitulation ...................................................................125
Notes................................................................................................. 127
References ...........................................................................................131
Index .................................................................................................137
ChApteR 1
Introduction
Supply Chains and Risk
Supply chains have connected sources of goods to customers for as
long as humans have done business. Military organizations have always
been involved in logistics, which is moving things over a supply chain,
and they still are, as demonstrated by the movement of U.S. and allied
forces to Iraq and Afghanistan. But armies aren’t the only organizations
involved in supply chains. Toyota’s lean manufacturing, Dell’s make-
to- order operations, and Walmart’s revolutionary retail operations all
rely on supply chains linked across many source organizations through
computer systems.
Supply chains provide all of us with many benefits as consumers.
Producers of goods and services need to take advantage of the many
opportunities for efficiency provided by global linkage. However, these
opportunities are not free— they involve risks. This book is about the risks
involved in supply chains, especially in contemporary global operations.
Some supply chains can be quite simple—b ananas picked in Costa
Rica may be directly delivered to the plantation owner who might be
living in the Cayman Islands. Beans can be picked in California and
delivered to a farmers’ market in Nevada. However, most goods require
a lot of processing, especially foods and drugs, partially for reasons of
preservation and partially for reasons of safety. Standard Oil had a wide-
spread supply chain from oil wells throughout the world to places where
crude oil was refined. Steel producers had even more complicated supply
chains, from various kinds of mines (again, worldwide) to various pro-
cessing facilities, to blast furnaces, to open- hearth steel producing ovens,
to rolling mills, and on to steel yards, which in turn fed many different
