Modeling Disruption Risk in Supply Chain Risk Management

Abstract

Disruptions have often been ignored in supply chain models due to their infrequency; however, there is evidence that disruptions are among the most significant threats to supply chains. This paper presents analytical methods to model and quantify disruption risks. The methods consist of breaking disruption risks down into four components: impact, occurrence, detectability and recovery. Analytical frameworks to quantify each individual component is provided. Methods to combine the individual components of risk are discussed and illustrated with numerical examples.