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Risk management has become an essential issue in supply chain management, from the modeling of the decision maker's risk preference, and the studies on uncertain elements such as demand, supply, price, lead time, etc., to the consideration of more practical background including cash flow constraints, inventory financing and delayed cash payment. In this new volume, the authors provide a framework to study the interaction of various factors related to risk and their influence on supply chain management.

The scope of areas covered includes operations management, decision analysis, and business administration. This book focuses on several key issues of risk management in supply chains. Specifically, an analysis framework is presented for studying the supplier selection problem and identifying the optimal sourcing strategy in a one-retailer two-suppliers supply chain with random yields. The optimal sourcing strategy of a retailer and the pricing strategies of two suppliers under an environment of supply disruption are investigated. Besides, the authors study the dynamic inventory control problems with cash flow constraints, financing decisions as well as delayed cash payment. In addition, originating from the annual international iron ore price negotiation, the authors model the bargaining process to deal with the risk of wholesale price in the game analysis context.

Within the three perspectives of risk management in supply chains, the modeling of decision maker's risk preference has been extensively studied and many results have been obtained to guide the practice. However, the analysis on the other two kinds of topics is still in its infancy, and needs more efforts from academia. It is thus the ambition and innovation for this book to contribute on risk management in supply chains in the following ways:

(1) characterizing the explicit sourcing strategy (i.e., single sourcing or dual sourcing) to deal with supply disruption risk;

(2) introducing the concepts of financial risk measurement by incorporating cash flow constraints, inventory financing and delayed cash payment into inventory management models; and

(3) providing insights for the iron ore price negotiation to help steel manufacturers handle the risk of price increase.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
In recent years, the adopting of some supply chain practice such as outsourcing and lean production helps in smoothing the operations, but it also results in little buffer inventory in a supply chain which may lead to increased vulnerability of the chains.1 At the same time, the business environment has evolved to be an increasingly complex scenario characterized by high uncertainty and rapid and frequent changes. For example, supply chains are subject to many potential external sources of disruption, e.g., natural disasters, terrorist attacks, and industrial actions, etc. The disruption in one firm can rapidly result in a significant adversary impact on the entire chain. Due to such changes, firm managers not only concern profit maximization but also pay much attention to risk containment or loss minimization for their firms. Motivated by the requirements of real world practice, supply chain risk management attracts more and more attention from academia (Chen et al. 2007; Shi 2004; Tang 2006a;Wu and Wang 2004a,b;Wu et al. 2006a; Zhou et al. 2006).
Jian Li, Jia Chen, Shouyang Wang

Chapter 2. Dynamic Suppliers Selection: Single or Dual Sourcing?

Abstract
Supply chain disruptions are unplanned and unanticipated events that disrupt the normal flow of goods and materials within a supply chain (Hendricks and Singhal 2003; Kleindorfer and Saad 2005) and, as a consequence, expose firms within the supply chain to operational and financial risks (Stauffer 2003).
Jian Li, Jia Chen, Shouyang Wang

Chapter 3. Sourcing Strategy of Retailer and Pricing Strategies of Suppliers

Abstract
Supply disruption management has received increasing attention from both industry and academia. Firms are starting to realize that supply disruption severely affects their ability to successfully manage their supply chains. The academia has devoted much research effort to studying this issue. Many papers have been published that advise firms on how to manage their supply chains in the presence of supply disruption.
Jian Li, Jia Chen, Shouyang Wang

Chapter 4. Dynamic Inventory Management with Cash Flow Constraints

Abstract
Current research efforts on inventory management mainly focus on operational decisions and inventory control, i.e., characterizing replenishment policies based on inventory level over a planning horizon. There is an extensive literature on inventory control in both deterministic and stochastic environments, see e.g., Axsäter (2000), Zipkin (2000), Nahmias (2001), Porteus (2002), and Cheng et al. (2010). Most of them ignore financial status of a firm and assume that the firm is able to obtain infinite capital to implement any operational decisions.
Jian Li, Jia Chen, Shouyang Wang

Chapter 5. Dynamic Inventory Management with Short-Term Financing

Abstract
A large literature on corporate finance has paid sufficient attention on start-up and growing firms and tried to establish solution concepts for capital shortage problem.1 While financial and operational decisions are usually studied separately. As one of the most fundamental results in corporate finance, Modigliani–Miller (MM) proposes that in perfect capital markets, the firm’s capital structure and its financial decisions (e.g., the allocation between equity and debt) are independent of the firm’s investment and its operational decisions (e.g., inputs and outputs, the levels of inventory and capital). However, real capital markets are imperfect: there are taxes, information asymmetry, accounting costs, bankruptcy costs, and so on. In many cases, start-up and growing firms with limited capital should seek help from banks or other lenders for more capital available to fund operations.
Jian Li, Jia Chen, Shouyang Wang

Chapter 6. Delayed Cash Payment, Receivable and Inventory Management

Abstract
Chapters 4 and 5 incorporates the financial issue into inventory management. More specifically, the cash on hand is characterized as the financial constraint. Besides cash, another state of the firm is receivable, which is mainly due to the delayed cash payment. In practice of a supply chain, it is common that downstream firms pay for upstream firms with certain delay. Actually, powerful retailers (e.g., Wal-Mart, Carrefour) usually delay up to 50% of their payments for several months. On the other hand, firms also offer potential customers some preferential choice to delay their payment. Installment plan is a common case for it.
Jian Li, Jia Chen, Shouyang Wang

Chapter 7. Game Analysis in Negotiation of Iron Ore Price

Abstract
The international iron ore market determines prices through yearly negotiations, using certain long-term trade agreements as its main price-setting mechanism. According to convention, the new fiscal year’s iron ore prices are decided before April of every year. During the process, the largest iron and steel enterprises, acting as industry representatives, negotiate with iron ore suppliers to form the basic prices for European and Asian importers. Australia’s BHP Billiton Ltd, Rio Tinto Group, and Brazil’s Companhia Vale do Rio Doce are the three major suppliers of iron ore across the world. While for a long time, Japan sets the standard for Asia.
Jian Li, Jia Chen, Shouyang Wang

Chapter 8. Conclusions and Further Research Topics

Abstract
Today’s operating environment calls for a supply chain design that is both secure and resilient. The field of risk management in supply chain is young, growing, and promising.
Jian Li, Jia Chen, Shouyang Wang

Backmatter

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