Managing Risks of Supply-Chain Disruptions: Dual ... - CiteSeerX

4.2.5 Conclusions ...........................................................................................................................................434.3 How to Manage Real Options? ................................................................................................444.3.1 Proactive flexibility, a way to increase option value once acquired ......................................................444.3.2 Option Portfolio Management ...............................................................................................................46Chapter 5 Modeling Dual-Sourcing as a Real Option........................................................... 495.1 The model ..................................................................................................................................495.2 Model Formulation ...................................................................................................................495.2.1 State variables and associated dynamic .................................................................................................495.2.2 Control variables....................................................................................................................................525.2.3 Profit Function.......................................................................................................................................525.2.4 Other assumptions .................................................................................................................................545.3 Valuation Model........................................................................................................................545.4 Programming on Matlab..........................................................................................................565.5 Discussion on the methodology ................................................................................................57Chapter 6 Results of the Model............................................................................................... 586.1 Sourcing strategy depends on the intensity of disruption risks. ...........................................586.2 Sensitivity Analysis ...................................................................................................................606.3 More Options Thinking: Delay Option...................................................................................636.4 Management over time .............................................................................................................656.5 Conclusions................................................................................................................................66Chapter 7 Recommendations .................................................................................................. 677.1 General recommendations to build a more resilient supply-chain.......................................677.1.1 Build a Risk Awareness Culture............................................................................................................677.1.2 Find a trade-off between recent practices such as Lean Manufacturing or JIT and Risk Management.687.1.3 Revisit single sourcing strategies...........................................................................................................687.1.4 Introduce flexibility to enhance resilience.............................................................................................697.1.5 Quantifying the rewards of risk management can help to justify risk management investments ..........697.1.6 Use real options framework to value the benefits of flexible strategies ................................................717.2 Recommendations on Real Options Implementation ............................................................727.2.1 Consider Real Options as a way of thinking..........................................................................................727.2.2 Rely on experts to deal with real option calculations ............................................................................737.2.3 Put a lot of efforts on valuating inputs: this requires much time and will condition the quality of the6