Sources of Supply Chain Disruptions, Factors That Breed Vulnerability, and Mitigating Strategies

Abstract

The focus of business toward increasing efficiency and reducing costs has resulted in supply chains that are efficient during normal times, but at the cost of being vulnerable to disruptions. From time to time, frequent as well as rare catastrophes also disrupt supply chain operations. We collect and compile data from many sources and show that there has been a marked increase in both the frequency and economic losses from natural and man-made catastrophes. We find that business losses constitute a major percentage of the total losses caused by these catastrophes. The statistics suggest that for terrorist attacks, the vulnerability of U.S. business interests is much higher than others. Examination of the geographical and chronological distributions of catastrophes provides useful information for managers concerned about such disruptions. We develop a catastrophe classification framework that matches different types of catastrophes to a variety of infrastructural components of supply chains. The framework also connects a variety of mitigating strategies to appropriate catastrophe types. We identify factors that can be used to assess the vulnerability of a supply chain. They can also be useful to compare possible alternative decisions based on the vulnerability they may cause in the supply chain. To manage vulnerability in supply chains, we propose strategies that can be implemented by a company to decrease the possibility of occurrence, provide advance warning, and cope after a disturbance. We reveal potential benefits from mitigating strategies during normal times, which indicate that well-developed strategies can also result in better efficiency. We identify many future research areas concerning disruption handling in supply chains.