Roles of inventory and reserve capacity in mitigating supply chain disruption risk

F Lucker, R W Seifert, Isik Bicer

Research output: Contribution to journalArticleAcademicpeer-review

104 Citations (Scopus)
79 Downloads (Pure)

Abstract

This research focuses on managing disruption risk in supply chains using inventory and reserve capacity under stochastic demand. While inventory can be considered as a speculative risk mitigation lever, reserve capacity can be used in a reactive fashion when a disruption occurs. We determine optimal inventory levels and reserve capacity production rates for a firm that is exposed to supply chain disruption risk. We fully characterise four main risk mitigation strategies: inventory strategy, reserve capacity strategy, mixed strategy and passive acceptance. We illustrate how the optimal risk mitigation strategy depends on product characteristics (functional versus innovative) and supply chain characteristics (agile versus efficient). This work is inspired from a risk management problem of a leading pharmaceutical company.
Original languageEnglish
Pages (from-to)1238-1249
Number of pages12
JournalInternational Journal of Production Research
Volume57
Issue number4
DOIs
Publication statusPublished - 2019

Research programs

  • RSM LIS

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