Handbook of Integrated Risk Management in Global Supply Chains
, by Kouvelis, Panos; Dong, Lingxiu; Boyabatli, Onur; Li, Rong
- ISBN: 9780470535127 | 0470535121
- Cover: Hardcover
- Copyright: 11/22/2011
Risk-control practices are often carried out by the finance function of a corporation without much input from other functional areas and lack of analysis on their impact of the supply chain and operational decisions. This book aims to bridge the gap in the literature by providing an unified approach to integrated risk management in finance and operations by identifying potential sources of risk to risk-control practices in supply chain and operational decisions. Current challenges in practice are discussed from a managerial and business research perspective
PANOS KOUVELIS, PhD, is Emerson Distinguished Professor of Operations and Manufacturing Management in the Olin Business School of Washington University in St. Louis, where he also serves as Director of the Boeing Center for Technology, Information and Manufacturing.
LINGXIU DONG, PhD, is Associate Professor of Operations and Manufacturing Management in the Olin Business School of Washington University in St. Louis.
ONUR OYABATLI, PhD, is Assistant Professor of Operations Management in the Lee Kong Chian School of Business at Singapore Management University.
RONG LI, PhD, is Assistant Professor of Operations Management in the Lee Kong Chian School of Business at Singapore Management University.
Contents
Foreword xiii
Preface xv
Acknowledgments xxiii
Contributors xxv
Part ONE
Foundations and Overview
1 Integrated Risk Management: A Conceptual Framework with Research Overview and Applications in Practice 3
1.1 Introduction, 3
1.2 An Action-Based Framework for Supply Chain Risk Management, 4
1.3 Risk Mitigation Strategies, 8
1.4 Research Opportunities, 10
Reference, 12
2 Risk Management and Operational Hedging: An Overview 13
2.1 Introduction, 13
2.2 Risk Management: Concept and Process, 14
2.3 Identification of Operational Hazards, 18
2.4 Risk Assessment and Valuation, 22
2.5 Tactical Risk Decisions and Crisis Management, 28
2.6 Strategic Risk Mitigation, 30
2.7 Four Operational Hedging Strategies, 33
2.8 Financial Hedging of Operational Risk, 36
2.9 Tailored Operational Hedging, 42
2.10 Guidelines for Operational Risk Management, 47
References, 48
3 The Effect of Supply Chain Disruptions on Corporate Performance 51
3.1 Introduction, 51
3.2 Sample, Performance Metrics, and Methodology, 53
3.3 The Effect of Supply Chain Disruptions on Corporate Performance, 55
3.4 Drivers of Supply Chain Disruptions, 63
3.5 What Can Firms Do To Mitigate the Chances of Disruptions?, 64
3.6 Summary, 72
A. Methodology Used To Estimate Stock Price Performance, 73
B. Methodology Used To Estimate Changes in Share Price Volatility, 75
C. Methodology Used To Estimate Changes in Profitability, 76
References, 76
4 Operational Strategies for Managing Supply Chain Disruption Risk 79
4.1 Introduction, 79
4.2 Stockpile Inventory, 82
4.3 Diversify Supply, 86
4.4 Backup Supply, 89
4.5 Manage Demand, 92
4.6 Strengthen Supply Chain, 96
4.7 Conclusions, 98
References, 100
5 Beyond Risk: Ambiguity in Supply Chains 103
5.1 Introduction to Risk and Ambiguity, 103
5.2 Ambiguity in a Single Period Newsvendor Setting, 109
5.3 Ambiguity in a Supply Chain Inventory Positioning Setting, 113
5.4 Conclusions, 120
References, 122
Part TWO
Integrated Risk Management: Operations and Finance Interface
6 Managing Storable Commodity Risks: Role of Inventories and Financial Hedges 127
6.1 Introduction, 127
6.2 Literature Review, 132
6.3 Problem Description, 133
6.4 Optimal Policy for Single Contract Financial Hedging, 137
6.5 Optimal Policy for a Portfolio of Financial Hedges, 142
6.6 Role of the Operational and Financial Hedges, 143
6.7 Example of Model Application and Results, 150
6.8 Managerial Insights and Conclusions, 153
References, 154
7 Integrated Production and Risk Hedging with Financial Instruments 157
7.1 Introduction, 158
7.2 Single Period Models, 159
7.3 Multiperiod Models, 177
7.4 Conclusion, 192
References, 193
8 Capacity Expansion As A Contingent Claim: Flexibility And Real Options In Operations 197
8.1 Introduction, 198
8.2 A Financial Option Pricing Model: Black Scholes (1973) and Merton (1973) Model, 201
8.3 Real Options Valuation (ROV) in Operations, 205
8.4 Conclusion, 214
References, 215
9 Financial Valuation of Supply Chain Contracts 219
9.1 Introduction, 220
9.2 Review of Financial Markets, Arbitrage, and Martingales, 223
9.3 A Model for Financial Valuation of Supply Chain Contracts, 226
9.4 Dual Formulation, 231
9.5 Experimental Study, 234
9.6 Conclusion, 243
References, 243
Part THREE
Supply Chain Finance
10 Supply Chain Finance 249
10.1 Introduction, 250
10.2 TheModel Setting, Common Notation and Assumptions, 253
10.3 Bankrupt-Prone Supply Chains under Wholesale Price Contracts, 255
10.4 Financing the Bankrupt-Prone Newsvendor with Trade Credit Contracts, 272
10.5 Conclusions and Future Research, 285
References, 286
11 The Role of Financial Services in Procurement Contracts 289
11.1 Introduction, 290
11.2 Model Description, 294
11.3 Wholesale Contract with a Budget Constraint (wT,QT), 298
11.4 Equilibrium Under a Credit Contract (QI,wI, ²I), 299
11.5 Equilibrium with External Financing (QE,wE), 307
11.6 Computational Experiments, 310
11.7 Concluding Remarks and Extensions, 315
References, 324
12 Production/Inventory Management and Capital Structure 327
12.1 Operations and Finance, 327
12.2 The Model, 329
12.3 Structural Properties of an Optimal Policy, 333
12.4 Characterization of the Optimal Policy, 337
12.5 Long-Term Decisions on Capital Structure, 346
12.6 Extensions and Variations of the Basic Model, 354
12.7 Concluding Remarks, 357
12.8 Bibliographical Notes, 358
References, 360
13 Bank Financing of Newsvendor Inventory: Coordinating Loan Schedules 363
13.1 Introduction, 364
13.2 The Stackelberg Game, 366
13.3 A Numerical Study, 370
13.4 Coordinating Loan Schedules, 377
13.5 Concluding Remarks, 380
References, 384
Part FOUR
Operational Risk Management Strategies
14 Decentralized Supply Risk Management 389
14.1 Introduction, 389
14.2 Literature Taxonomies, 394
14.3 Misalignment of Incentives, 398
14.4 Competing Suppliers, 398
14.5 Competing Manufacturers, 408
14.6 Asymmetric Information, 413
14.7 Conclusions, 419
References, 421
15 Using Supplier Portfolios to Manage Demand Risk 425
15.1 Introduction, 426
15.2 Literature Review, 428
15.3 A Static Model, 430
15.4 A Dynamic Model with Progressive Demand Revelation, 436
15.5 Conclusions, 442
References, 443
16 An Opportunity Cost View of Base-Stock Optimality for the Warehouse Problem 447
16.1 Introduction, 448
16.2 A Simple Motivating Example, 449
16.3 Model, 450
16.4 Base-Stock Optimality, 452
16.5 Managerial Aspects, 457
16.6 Conclusions, 460
References, 460
Part FIVE
Industrial Applications
17 Procurement Risk Management in Beef Supply Chains 465
17.1 Introduction, 465
17.2 Literature Review, 470
17.3 Model Description, 473
17.4 Computational Experiments for the Beef Supply Chain, 477
17.5 Discussion, 491
References, 493
18 Risk Management in Electric Utilities 495
18.1 Introduction, 495
18.2 Price Risk, 497
18.3 Volume Risk, 501
18.4 Other Risk Examples, 507
18.5 Summary, 511
References, 511
19 Supply Chain Risk Management: A Perspective from Practice 515
19.1 Defining Supply Chain Risk Management, 516
19.2 Understanding Your Supply Chain, 517
19.3 Developing SCRM Capabilities, 518
19.4 Process Approach to Supply Chain Risk Management, 523
19.5 Case Study: Cisco Responds to the Sichuan Earthquake, 527
19.6 The Importance of an International Standard in SCRM, 534
19.7 Conclusion, 534
20 A Bayesian Framework for Supply Chain Risk Management Using Business Process Standards 537
20.1 Introduction, 538
20.2 Related Literature, 541
20.3 A Framework for Supply Chain Risk Categorization, 543
20.4 Risk Quantification through Bayesian Learning, 545
20.5 Case Study: Risk Modeling for a Global Supply Chain, 550
20.6 Summary, 561
References, 562
Index 565
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