Expect the Unexpected: Supply Chain Disruption and Opportunity for US Companies—A Business Case

Sameer Kumar and Gail Harrison

Transportation Journal, 2012, vol. 51, issue 1, 118-136

Abstract: Many researchers have revealed that US companies acknowledge the inevitability of supply chain disruptions in a global environment. These companies employ strategies that vary from proactive, reactive, resilient, to no supply chain risk management (SCRM) strategies to mitigate risks and ensure business continuity. When a company's competitive advantage is speed to market, it is only logical that its front‐end low‐cost country sourcing (LCCS) decision model should include a Disruption Contingency Plan (DCP) as one of the factors for evaluation. In this research, we focus on the company's financial performance with or without the up‐front DCP in a closed loop outsourcing decision model, exploring and analyzing its relative effect on the firms' Economic Value Added (EVA). In doing so, we reason, the decision to adopt low‐cost outsourcing in foreign countries should not be reached without addressing the company's speed‐to‐market capability. Using a US company that manufactures industrial printers as an example, various scenarios and options are explored for EVA comparisons in terms of a company's ability to maintain normal sales, and capture competitors' market share during supply chain disruptions. This example links the relevance among the outsourcing decision, the up‐front DCP, and the company's EVA during supply chain disruptions. Even when disruption strikes, there is still an opportunity for profitability.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:wly:transj:v:51:y:2012:i:1:p:118-136

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