Managing the Supply-Side Risks in Supply Chains: Taxonomies, Processes, and Examples of Decision-Making Modeling

Abstract

Today's supply chains are becoming not only more efficient with the aid of advanced information technologies, but also riskier due to the tight interconnectedness of numerous chain links that are prone to break- downs, disruptions or disasters. Although many studies focusing on business risks in various contexts have been presented in the literature over the years, research effort devoted to understanding the risks associ- ated with suppliers and the supply market has been limited, especially from a quantitative point of view. In this chapter, we first, through extensive literature view, present a taxonomy of supply-side risks, a four-step supply risk management process, and a list of techniques that help accomplish each step. Then we propose two optimization-based decision tree models that effectively formulate two decision-making sit- uations in which the questions of how many suppliers should be used and whether to use standby suppliers are addressed. Future research directions are also suggested.