Risk Diversification And Risk Pooling In Supply Chain Design Pdf

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risk diversification and risk pooling in supply chain design pdf

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A risk pool is one of the forms of risk management mostly practiced by insurance companies. Under this system, insurance companies come together to form a pool, which can provide protection to insurance companies against catastrophic risks such as floods or earthquakes. The term is also used to describe the pooling of similar risks that underlies the concept of insurance. It is basically like more than one insurance companies coming together to form one. While risk pooling is necessary for insurance to work, not all risks can be effectively pooled in a voluntary insurance bracket, unless there is a subsidy available to encourage participation.

An agile and diversified supply chain: reducing operational risks

We study the effects of disruption risk in a supply chain where one retailer deals with competing risky suppliers who may default during their production lead times. The suppliers, who compete for business with the retailer by setting wholesale prices, are leaders in a Stackelberg game with the retailer. The retailer, facing uncertain future demand, chooses order quantities while weighing the benefits of procuring from the cheapest supplier against the advantages of order diversification. For the model with two suppliers, we show that low supplier default correlations dampen competition among the suppliers, increasing the equilibrium wholesale prices. Therefore the retailer prefers suppliers with highly correlated default events, despite the loss of diversification benefits. In contrast, the suppliers and the channel prefer defaults that are negatively correlated.

Recent trends of outsourcing in global competition make the firms vulnerable to operational risks. The purpose of this paper is to illustrate how firms implement supply chain strategies to reduce operational risks, especially risk exposure involving catastrophic events. Drawn on risk management and supply chain research, the concepts of operational risk and the underlying demand and supply uncertainties are delineated. Then, based on literature review and numerical demonstrations, the authors evaluate the effectiveness of supply chain strategies in reducing operational risks. The paper examines the benefit of these strategies and illustrate how to setup risk pooling and dual sourcing programs. Employing the strategies of risk pooling and dual sourcing, an agile and diversified supply chain can be built to cope with the demand or supply uncertainties and in turn reduce the operational risks. Leaders in any organization should consider operational and supply risk critically when planning their competitive strategy.

In recent decades the world has become much, much smaller than it used to be. The internet and significant improvements to transportation infrastructures has turned the world into one globalized market. This global market offers businesses opportunities to reach new customers and secure a diverse selection of new workers, materials, and products. Though the opportunities associated with globalization are numerous, the risks it poses to your supply chain may be bigger than you expect. In regards to supply chain management, globalization refers to the process in which a business operates on an international scale. Globalization offers companies the opportunity to reach new customers in new markets, which dramatically upsets how manufacturers need to operate to be successful.

COVID-19: how to build supply chains resilient to disruption

Nearly every eighth German hospital faces an elevated risk of bankruptcy. An inappropriate use of inventory management practices is among the causes. Hospitals suffer from demand and lead time uncertainty, and the current COVID pandemic worsened the plight. The popular business logistics concept of risk pooling has been shown to reduce these uncertainties in industry and trade, but has been neglected as a variability reduction method in healthcare operations research and practice. Based on a survey with German hospitals, this study explores how ten risk pooling methods can be adapted and applied in the healthcare context to reduce economic losses while maintaining a given service level. The results suggest that in general risk pooling may improve the economic situation of hospitals and, in particular, inventory pooling, transshipments, and product substitution for medications and consumer goods are the most effective methods in the healthcare context, while form postponement may be unsuitable for hospitals due to the required efforts, delay in treatments, and liability issues.

C hina and the rest of the world continue to be affected by the outbreak of COVID novel coronavirus , with many more being nursed back to health by dedicated healthcare professionals who work tirelessly around the clock. Millions are displaced regionally and globally due to cautionary guidelines and travel restrictions. Global routes of all forms of transportation are temporarily disrupted for both businesses and everyday commuters. A pandemic outbreak of this magnitude has caught companies and whole industries off guard, with a shockwave of ripple effects tearing through their supply chains and businesses. From a consumer angle, many companies suddenly do not have a clear demand signal as the outbreak has completely changed buying behaviors and patterns.

Not a MyNAP member yet? Register for a free account to start saving and receiving special member only perks. For as long as there have been supply chains, there have been disruptions, and no supply chain, logistics system, or infrastructure network is immune to them. Nevertheless, supply chain disruptions have only recently begun to receive significant attention from practitioners and researchers. Although lean supply chains are efficient when the environment behaves as predicted, they are extremely fragile, and disruptions can leave them virtually paralyzed. Evidently, there is some value to having slack in a system.

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Risk diversification and risk pooling in supply chain design

In this paper we address the operational issue of quantity allocation between two uncertain suppliers and its effects on the inventory policies of the buyer. Based on the type of delivery contract a buyer has with the suppliers, we suggest three models for the supply process. Model II is also a one-delivery contract with a random fraction of the order quantity delivered in the current period; the portion of the order quantity not delivered is cancelled. We derive the optimal ordering policies that minimize the total ordering, holding and penalty costs with backlogging. For the limiting case in the single period version of Model I, we derive conditions under which one would continue ordering from one or the other or both suppliers.

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