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

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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
analysis. ..............................................................................................................................................................737.2.4 Exploit at maximum real option calculations ........................................................................................747.3 Recommendations for Future Research..................................................................................747.3.1 Analyze the supplier side.......................................................................................................................747.3.2 Test the methodology on real data.........................................................................................................757.3.3 Investigate other methods to assess risk management benefits..............................................................75BIBLIOGRAPHY......................................................................................................................... 77APPENDIX A: CONTRACT PORTFOLIO AS A SOURCING APPROACH ......................... 81APPENDIX B: PARAMETER VALUES USED TO OBTAIN THE RESULTS ..................... 84APPENDIX C: MATLAB PROGRAM ....................................................................................... 851) Structure of the program .............................................................................................................852) Code................................................................................................................................................877
Page 1: Managing Risks of Supply-Chain Disr
Page 4 and 5: AcknowledgementsI would like to exp
Page 8 and 9: List of FiguresFigure 1.1: Strategy
Page 11 and 12: Chapter 1Introduction.Modern supply
Page 13 and 14: - Levels 2 and 3--between these two
Page 15 and 16: 5. In terms of implementation, Forr
Page 17 and 18: Some articles focus precisely on di
Page 19 and 20: 2.3 Secure the Supply-ChainThere ar
Page 21 and 22: 1) Firms need to build a resilient
Page 23 and 24: at ports and airports and along the
Page 25 and 26: 2.6 Conclusions- Increase the secur
Page 27 and 28: The most adapted approach (single V
Page 29 and 30: suppliers’. The main objective of
Page 31 and 32: Some people continue to think that
Page 33 and 34: For example, there is no market for
Page 35 and 36: 4.1.3 Option ValueJust like a finan
Page 37 and 38: - I0: initial investmentThe problem
Page 39 and 40: Re plicating portfolio in the up st
Page 41 and 42: Let’s consider a portfolio compri
Page 43 and 44: The differential equation is quite
Page 45 and 46: value of the cash flows of the proj
Page 47 and 48: update their option management stra
Page 49 and 50: Chapter 5OptionModeling Dual-Sourci
Page 52 and 53: We will describe the firm’s curre
Page 54 and 55: investment costs are denotedIMainSu
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5.4 Programming on MatlabTo solve t
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Chapter 6Results of the ModelThis c
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uses the main supplier its profits
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drivers - in particular at the time
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what will happen. To hedge this dem
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6.5 Conclusions- Real options allow
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market share from its competitor.7.
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= 0.99 * ($100) + 0.01* (-$200)= $9
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Table 7.1: Assumption on Parameter
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7.2.4 Exploit at maximum real optio
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developed “ a general simulation
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(13) Lee, H.L., Wolfe, M. (2003),
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and Supply Management Course.(38) Z
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to reserve for the future, by maxim
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APPENDIX B: PARAMETER VALUES USED T
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normal or in disruption.The program
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% Probability of going from (m,k,j)
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elsevalue.DecOneNormal=3;end-------
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