Mitigating Supply Chain Vulnerability

Competitive pressures are forcing companies to adopt practices and supply chain structures that will produce high quality, reliable, reasonably priced products with continuously shorter lead times. In order to meet these goals, companies are utilizing flatter organizational structures and narrower supply chains. Flatter structures and narrower supply chains typically reap the benefits of reduced coordination costs and improved organizational efficiencies. However, there exists an associated burden of an increased risk of a single point of failure that could leave the supply chain unable to deliver products to the market in a timely manner. This research study develops a model of risk, called the risk assessment index, to assess the vulnerability of different supply chain structures. It is determined that there exists significant trade-offs between the number of suppliers in the supplier base, product diversification, supply chain coordination, and supply chain efficiency that must be examined for a supply chain to remain competitive in a highly risky, vulnerable environment.