Including costs of supply chain risk in strategic sourcing decisions
Name
497040182-MIT.pdf
Description
Full printable version
Size
42.67 MB
Format
Adobe PDF
Checksum (MD5)
f827f788afc3b222fbed59979d1b59ae
Author(s)
Jain, Avani
Advisor(s)
Amanda Schmitt.
Date Issued
2009
Publisher
Massachusetts Institute of Technology
Abstract
Cost evaluations do not always include the costs associated with risks when organizations make strategic sourcing decisions. This research was conducted to establish and quantify the impact of risks and risk-related costs on sourcing decisions for the automotive industry. The focus is on comparing distant, global suppliers entailing long supply chains with domestic, US-based suppliers. The risk factors effecting supplier selection were classified into eight categories. A model was developed using Monte Carlo simulation for scenario generation and Value-at-Risk methodology from finance theory for developing the risk-cost relationship. The model was tested using multiple scenarios which were generated by varying the risk profiles of suppliers. The results indicate that there is distinct and quantifiable relationship between supplier-related risk and total costs of sourcing. Furthermore, under high risk conditions, distant, global suppliers with relatively lower contract costs can exceed cost budgets as well as the cost of domestic sourcing. The model developed through this research can be used to compare two or more suppliers and map the total cost variation for suppliers under particular risk scenarios. Thus, the model can be used for strategically selecting low-cost and long-term suppliers.
Description
Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2009.
Includes bibliographical references (leaves 61-62).
Subjects
Engineering Systems Division.
MIT Department
Massachusetts Institute of Technology. Engineering Systems Division
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reproduction or distribution in any format is prohibited without written
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