Supply chain risk mitigation
Department of Industrial and Manufacturing Engineering
Master of Science
Caudill, Reggie J.
Ranky, Paul G.
Supply chain vulnerability
In recent years, especially post 9/11, there has been an increasing awareness for securing business supply chains against probable disruptions. With globalization and lean inventories, the efficiency of supply chain has greatly enhanced over the years, but at the expense of new vulnerabilities. Supply chain vulnerabilities have resulted in disruptions to the economic stability and security. As a result, risk analysis and mitigation has now grown to become one of the key links to business stabilization. To ensure business continuity, it is necessary to identify key assets (physical and operational) within the supply chain and secure them against probable threats.
This study proposes a methodology to examine risks within supply chain and analyze their consequences to recommend the most effective and cost efficient safeguards to mitigate consequences. Supply chain risk management and mitigation has been broadly classified into two stages - vulnerability and risk assessment and risk mitigation through implementation of safeguards.
The vulnerability and risk assessment stage aims at the identification of the most probable threats to an organization by analyzing the related vulnerabilities to threats. Bayesian probabilistic approach has been proposed to derive inference and model the causal simulations. The risk mitigation stage aims at continuous monitoring and analyzing risk associated with the system, evaluate alternate safeguards associated with each threat/asset pair and suggest the most effective safeguard, which would mitigate the threat consequences and occurrences.
The main objective of risk mitigation is to reduce the overall probable loss from an adversary threat. The cost of implementing countermeasures should therefore be less than the loss from a risk. Fuzzy game payoffs have been used to derive utility of safeguards and evaluate alternative safeguards available. The safeguard selected should not only be cost efficient but also provide the desired level of security to one or more supply chain elements. The level of security provided by the safeguard forms the feedback to the risk assessment stage and updates the risk levels until they are below a pre-specified acceptable range.
The risk management and mitigation system would thus enable supply chain managers to ensure sustainability of business through detection of high-risk elements, reliable identification of cost effective safeguards and continuous monitoring of these high-risk elements within the supply chain.
njit-etd2004-062 (117 pages ~ 6,982KB pdf)
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Created December 14, 2004