The Role of Flexibility in Mitigating Risks

In this chapter we focus on the 5 types of flexibihty described above and summarized in Table 10.1. Since our focus is on the benefit of flexibility, we do not consider the cost for implementing flexibility in our models. One can combine the cost and the benefit associated with different levels of flexibility to determine the optimal level of flexibility. However, the determination of the optimal level of flexibility is beyond the scope of this chapter. 

Supply chain risk Flexible strategy reducing the negative impact of the risk Underlying mechanism 

Supply Flexible supply via multiple suppliers. Flexible supply via flexible supply contracts. Shift orders quantities across suppliers. Shift order quantities across time. 

Process Flexible process via flexible manufacturing processes. Shift production quantities across internal resources (plants or machines). 

Demand Flexible product via postponement flexible pricing via responsive pricing. Shift production quantities across different products. Shift demands across different products. 

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