Miss-the-Target MtT Risk Models

The presentation in this section is based on the doctoral work of Yang (2006). As discussed in Section 7.8.1 (Table 7.4), supply chain risks are classified into 

VaR type risks are rare events that can cause supply chain disruptions due to man-made or natural disasters. We discussed quantitative models for VaR type risks, using EVT in Section 7.9. In this section, we will present quantitative models for MtT type risks. 

Most MtT type risks are primarily due to suppliers not conforming to the buyers requirements with respect to cost, quality and delivery. Suppliers deviating from buyers targets cause cost increases and profit losses to the buyers and OEMs. MtT type risks can also happen when cost targets and launch/ramp-up dates are missed for new product lines. 

Compared to VaR type risks, MtT type risks happen more frequently. They can be controlled, but may not be totally eliminated. The impacts to the supply chains are usually not as dramatic as VaR type risks. However, in the long run, the accumulated impacts can also be significant. 

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