Global Supply Chain Network Design Incorporating Disruption Risk

Introduction

Supply chain networks have expanded globally in today’s business environment. The geographies, regulations, and ecosystems associated with different countries have increased the complexity associated with global supply chain management and made the global supply chain more vulnerable to disruptions (Ravindran & Warsing, 2013). Disruption in one country can significantly impact global supply chains. From a supply chain risk perspective, disruption risks due to natural disasters in each country or region are varied; for instance, Asia experiences high economic losses from earthquake, tsunami, and floods, while America’s economic losses are primarily due to storms and hurricanes (Guha-Sapir, 2012). The vulnerability of supply chain components to disruptions also differs based on their roles in the supply chain network (Kungwalsong & Ravindran, 2012; 2013). Risk identification and mitigation strategies also vary among countries. Countries with efficient, transparent, and accountable governments engage in both pre-disaster planning and post-disaster recovery planning, making them better able to respond to natural disasters than the countries with corrupt governments (Kellenberg & Mobarak, 2008; Stromberg, 2007; Ye & Abe, 2012). A study by The Harvard Business Review Analytic Services (Harvard Business Review, 2011) showed that 89% of companies, natural disasters have been among the significant risks over the last three years. Furthermore, the International Disaster Database (2012) indicates that natural disasters have occurred more frequently in recent decades. Supply chain network designs that emphasize cost and customer satisfaction seem inadequate for supply chain resiliency in such complex environment. Plausible disruptions should be considered in order to design a robust value-creating network (Klibi & Martel, 2012). Table 1 presents examples of significant disruptive events and their financial impacts to global supply chains.