Co‐opetition and Investment for Supply‐Chain Resilience

Abstract

This paper considers the problem of disruption risk management in global supply chains. We consider a supply chain with two participants, who face interdependent losses resulting from supply chain disruptions such as terrorist strikes and natural hazards. The Harsanyi–Selten–Nash bargaining framework is used to model the supply chain participants' choice of risk mitigation investments. The bargaining approach allows a framing of both joint financing of mitigation activities before the fact and loss‐sharing net of insurance payouts after the fact. The disagreement outcome in the bargaining game is assumed to be the result of the corresponding non‐cooperative game. We describe an incentive‐compatible contract that leads to First Best investment and equal “gain” for all players, when the solution is “interior” (as it almost certainly is in practice). A supplier that has superior security practices (i.e., is inherently safer) exploits its informational advantage by extracting an “information rent” in the usual spirit of incomplete information games. We also identify a special case of this contract, which is robust to moral hazard. The role of auditing in reinforcing investment incentives is also examined.

Antecedents of Resilient Supply Chains: An Empirical Study

“…The RBV argues that an organization can achieve competitive advantage, exploit opportunities and/or mitigate threats by creating bundles of strategic resources and capabilities [9,12,20,21,22]. In the supply chain management field, the RBV has been used to study the achievement of competitive advantage through the supply chain based on the combination of valuable, rare, inimitable, and non-substitutable resources and capabilities [9,20,23,24,25].…”

“…Academic literature has discussed different elements of supply chain resilience [4,5,11,12,13,14,15,16,17]. Christopher and Peck [4] defined four principles for supply chain resilience, namely supply chain reengineering, collaboration, agility, and supply chain risk management culture.…”

Coping with uncertainties via resilient supply chain framework

“…This is analogous with the observation by Christopher and Holweg (2011) that managers consistently recognise their business environment as inherently unstable and find supply chains to experience the 'age of turbulence' (Wieland and Wallenburg, 2013). To manage with such turbulences and the inherent changes in today's supply chains, enormous deliberation, has been given to strategies that minimise supply chain risks (Bakshi and Kleindorfer, 2009;Hendricks et al, 2009;Kern et al, 2012;Sodhi et al, 2012;Wieland and Wallenburg, 2013).…”

Supply Chain Resilience Analysis: A Brazilian Automotive Case

“…The awareness regarding the magnitude of losses (direct and indirect) resulting from SC disruptions increased the interest in SC Resilience (Bakshi & Kleindorfer, 2009). Thus, SC Resilience is considered a critical component of SC risk management (Ponomarov & Holcomb, 2009) and a relatively new and underexplored research area in management as a whole (Ponis & Koroni, 2012).…”