Supply chain disruptions : managing risks vs. managing crises

Abstract

This thesis looks at two back-to-back disruptive supply chain events, one due to a sole-supplier's bankruptcy and the other caused by Hurricane Rita, that occurred at a specialty chemical company, and uses these examples to demonstrate how managing crises is more costly than managing risks. In examining the events surrounding the sole-supplier bankruptcy, managing a crisis cost this specialty chemical company 45% more money than managing a risk. Through the findings of these two disruptive events, a framework, the Eye of Providence, is created to manage supply chain risks. First, an organization must determine how developed its risk-management protocol is. Next, by studying past disruptive events and determining the key impact factors, an organization could calculate and learn about the opportunity cost of managing crisis. Then, by continuously evaluating its suppliers and rigorously applying those key impact factors to the analysis of its supply chain practice, an organization could evaluate and identify its current vulnerabilities.

(cont.) Finally, by proactively monitoring event-based warning signals, or disruption indicators, an organization could assess its potential supply chain risks, and plan accordingly. Whether a company is low on the risk-maturity level or has already integrated risk management into its corporate culture, the process developed in this thesis serves as a versatile tool that can help businesses structure a more dynamic, resilient supply chain.