Supply chain disruptions-causes natural

Following Yang (2006), we classify risks, natural or man-made, that can cause supply chain disruptions into two types for the purpose of quantification ... 

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. 

Factors causing disruptions such as terrorism, infectious diseases, natural disasters, and human errors, can be catastrophic to economic sustainability. The likelihood and impact of such events are hard to predict and measure, as borne out by hurricane Katrina with an estimated economic loss of over 125 billion (Finkle 2005). Companies must be prepared with strategies for rapidly mitigating the impact of the disaster, to ensure business continuity. Another example is the recall of toys made in China by Mattel in 2007 that caused considerable disruption in Mattel s supply chain (Hoyt 2008). The recalls were for excessive lead content in toys, and exceeded 20 million toys. It sparked intense criticism of Mattel and its Chinese supply chain. The company s stock price fell 18% in 2007. 

Managing the risk in supply chains has gained a lot of attention in recent years. Man-made events, such as the labor strike in US West Coast ports in 2002, and natural events, such as the Japanese earthquake and tsunami in 2011, have caused companies to realize tiiat a singular emphasis on the cost efficiency of supply chains can actually make the supply chains brittle and much more susceptible to risk from disruptions. Chapters 3, 7, 9, and 10 incorporate supply chain risk as an objective function in multiple criteria optimization models. 

A disruption occurs when the stmcture of the supply chain system is radically transformed, through the non-availability of certain production, warehousing and distribution facilities or transportation options due to une q)ected events caused by human or natural factors. 

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