The risk of second-tier supplier failures in serial supply chains: Implications for order policies and distributor autonomy

Thomas Kull, David Closs

Research output: Contribution to journalArticle

78 Scopus citations

Abstract

As organizations decrease inventory, the potential impact of a supply disruption increases. However, due to supply chain structural changes, the likelihood of a disruption may be less. Additionally independent supply chain actors may react to policy changes, changing supply chain configurations and perhaps reducing loss magnitudes. If risk is a product of likelihood and magnitude, does higher inventory reduce an organization's supply related risk? This paper examines the supply risk issue within the context of a second-tier supply failure, and is grounded in inventory and resource dependency theories. By evaluating risk assessment in a simulation environment, exploratory findings suggest that increased inventory in a tiered supply chain can sometimes increase supply risk rather than decrease it. Managerial insights into the effects of supply chain stability and coordination are provided. By taking a systems perspective of supply risk management, organizations will be better able to manage supply risk concerns.

Original languageEnglish (US)
Pages (from-to)1158-1174
Number of pages17
JournalEuropean Journal of Operational Research
Volume186
Issue number3
DOIs
StatePublished - May 1 2008
Externally publishedYes

Keywords

  • Resource dependence
  • Risk management
  • Simulation
  • Supply chain management

ASJC Scopus subject areas

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research
  • Information Systems and Management

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