Session 11: Modeling and Mitigating Supply Chain Risk

Larry Snyder , Sr. Research Associate, Opex Analytics

From earthquakes to floods, sabotage to blizzards, the world has a way of disrupting even the best-laid plans of supply chain managers and optimizers. Disruptions can have enormous impacts on your company’s supply chain and its bottom line. Even smaller events that don’t make the headlines can still throw a wrench into your day-to-day operations. Although these events cannot be predicted, they can be planned for. As supply chain science has evolved, it has introduced new tools for proactively modeling and mitigating supply chain disruption risk. The question is ‘What is the best way to include these considerations within our planning and models?’

This session will introduce you to some of the ways that disruption risks are considered in supply chain optimization models. We will discuss some “triumphs and fails” that companies have experienced in recent years when faced with disruptions. Then we will review some fundamental supply chain optimization models (such as the EOQ model for inventory optimization and the p-median model for facility location) and discuss how these models can be extended to proactively protect against disruption risk. We will discuss the tradeoff between supply chain cost and supply chain risk to address the question, “is it worth it?”. Finally, we will discuss the first steps that companies might take when starting to add disruption risk to their supply chain planning.