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The importance of effectively managing supply chain disruptions as well as the lack of preparedness of most companies has drawn attention to both academia and industry. However, interestingly, supply chain disruption in maritime operations has not been discussed intensively as a disruption management topic in the overall context of the supply chain. The application of automotive (Skipper & Hanna 2009), capital market

(Sheffi 2001), chemical (Mitroff & Alpasian 2003), electronics (Kleindorfer & Saad 2005), information technology (Jia & Rutherford 2010), pharmacy (Rice & Caniato 2003), and toy production (Johnson 2001) dominates the study of mitigation strategies in the supply chain (see Table 3-8). In addition, the location of mitigation research in the USA and the issue of delay and deviation is evidence that the perception of disruption risk has a strong effect in the literature of risk mitigation strategies in supply chains.

Table 3-8. The literature of mitigation strategies in the supply chain risk management

Application Researcher Country Disruptive event Strategy

Aerospace Military Automotive Capital market Chemical Electronics Fuel transport Information technology Inland transport Inventory Pharmacy Purchasing Project management Road transport Toy industry Sinha et al. (2004) Vactor (2007)

Chopra and Sodhi (2004) Skipper and Hanna (2009) Kunreuther (2001) Sheffi (2001) Mitroff (1994) Mitroff and Alpasian (2003)

Kleindorfer and Saad (2005)

Blos et al. (2009)

Jia and Rutherford (2010) Yeh et al. (2008)

Levy (1995) Ng et al. (2000) Faisal et al. (2006) Artikis and Artikis (2009) Edward and Steven (1997)

Blackhurst et al.(2005)

Tomlin (2006)

Wagner and Bode (2008) Rice and Caniato (2003) Cavinato et al. (2004) Zsidisin and Smith (2005) Howick and Eden (2001) McKinnon (2006) Johnson (2001) USA USA USA USA USA USA India Global USA Brazil China USA USA China India UK Australia, USA USA Germany USA USA USA UK UK USA

Delay and deviation Deviation

Delay and deviation Delay and deviation Disaster

Deviation Disaster Disaster

Delay to disaster Delay and deviation Delay and deviation Delay

Delay Delay

Delay to disaster Delay to stoppage Delay and deviation Delay and deviation Delay to disaster Delay to stoppage Delay and deviation Deviation

Delay Delay

Delay and deviation Delay and deviation

IDEF0 model Composite plan Risk preparedness Flexibility planning Insurance support Replanning tool Quality approach Proactive plan Mitigation assessment Risk communication Cultural response Bottom-up model Stability flow Case-based model Enabling model Recovery strategy Holistic coordination Networking plan Supply contingency Strategic decision Resilience concept Integrated approach Supplier involvement Incentive strategy Macro assessment Dynamic mitigation Source: Author

Mitroff and Alpasin (2003) state that between five and 25 per cent of Fortune 500 companies are prepared to handle crises or disruptions. Farris (2008), Howick (2001), Lichtenberg (2004), Quiggin and Fisher (1994), and Shailesh et al. (2005) find that disruptions can be costly in supply chain systems and can cause a variety of problems such as long lead-times, stock-outs, inability to meet customer demand and increases in costs. Levy (1995) investigates international supply chain physical flows with disruptions in demand and finds that disruptions in an international supply chain can lead to unexpected costs when shipping lead times are long. It is also interesting to note that Levy found that when crises in a supply chain do occur, managers tend to handle them as one-time events rather than understanding that they may lack a robust supply chain. Additionally, the cost of supply chain disruptions to a company can be of significance. While many companies have not been able to quantify the cost of supply chain disruptions or crises, some work has been done in this area.

Rice and Caniato (2003) present results from a company survey that estimates a US$ 50-100 million cost impact for each day of a substantially disrupted supply network. Riddalls and Bennett (2002) suggest a model of a production–inventory system using differential equations to predict the consequence of production disruption.

The model allows disturbances to be transmitted through the system and found that as the system becomes unstable, costly demand swings and stock-outs occur. The research area of supply chain disruption management is an area of interest both in academic research and industry practice due to the fact that failure at any one point in the supply chain can cause the entire network to fail (Rice & Caniato 2003). Indeed, there is a new focus in this area beyond the four walls of the plant (Peck 2006). However, despite increasing awareness among practitioners, the concept of supply chain vulnerability and supply chain risk are still in their infancy (Juttner et al. 2003). In terms of a mitigation approach for managing disruptions (as seen in Table 3-9), there are four different categories of mitigation with 19 strategies implemented by supply chain entities in the literature. Those categories are (i) inventory and sourcing, (ii) contingency rerouting, (iii) business continuity planning, and (iv) recovery planning. In the next sub-sections, the four categories will be explored in detail.

3.4.2.1 Inventory and sourcing

Vachal and Reichart (2000), Sheffi (2001) and Kleindorfer and Saad (2005) suggests a mix of inventory/sourcing mitigation concepts as strategies for managing disruptions (as listed in Table 3-9).

Table 3-9. Mitigation strategies of managing disruptions from the literature

Mitigation Strategies Literature

Inventory and Sourcing

Inventory polling at ports Young 1999; Vachal & Reichart 2000; Park & Koo 2001; Sheffi 2001 Utilising agency service RIRDC 2005; Tomlin 2006; Rick & Van Horn 2008

Apply other chain links Janzen & Rice 2001; Kleindorfer & Saad 2005; Tang 2006 Optimum ordering policy Wilson & Preszler 1993; Depak 2003; Tomlin 2006 Postponement delays Sheffi 2001; Tang 2006; Tomlin 2006;

Supply flexibility Schlect 2001; Buschel & Mac Aulay 2005; McCormack 2008

Contingency Rerouting

Reserves routes Biere 1998; Handfield & McCormack 2008

Critical nodes mapping Binkley 1983; Handfield et al. 2008; Blackhurst et al. 2005 Apply other chain links Schlect et al. 2004; Tang 2006

Formal assessment Faruquee et al.1997; Zsidisin et al. 2004; Philip & Smyth 2007 Contingency plan Hoskisson et al.1999; Lewis 2006; Tomlin 2006

Business Continuity

Planning

Changes to working practices CCTA (1995); Beatty (2001); Gibb (2006); Skelton (2007);

Maximum allowable interruption William (2002); Haque & Burton (2004); Tomlin (2006); Farber (2008); Develop warning system Craighead et al. 2007

Implication monitoring Howick and Eden (2001); Rosamond et al. 2007; Elkins et al. (2008) Recovery

Planning

Risk-based budgeting Craighead et al. 2007

Apply discovery responses Blackhurst et al. 2005; Craighead et al. 2007; Garcia (2008) Apply recovery actions Pinto and Wayne (2006); Craighead et al. 2007;

Network & procedures redesign Handfield et al. 2008

Source: Author

These mix strategies are recommended for a firm that faces instability in supply and sources from two identical cost and infinite capacity suppliers when disruptions occur along a supply chain. The mitigation strategies in this category include inventory polling at ports, utilising an agency service, applying other chain links, an optimum ordering policy that postpones delays, and supply flexibility. These studies focus on how to minimise demurrage costs without incurring high government costs or distorting price signals. Following these two types of relevant costs, Schlecht (2001) and Schlecht

et al. (2004) explore different inventory and sourcing strategies to mitigate supply chain risks such as delays and cargo handling deviations due to different grades of

commodities in the import market. This concept, is then broadly developed by Janzen and Rice (2001) who apply inventory and sourcing strategies focusing on two main joint risk measures, namely the wheat market and wheat shipments in a wheat chain.

3.4.2.2 Contingency rerouting

Contingency rerouting is another category of mitigation applied by supply chain entities in managing disruptions. Biere (1983), Handfield and MacCormack (2008) examine the concept of an international reserved route in a supply chain and its impact mechanism particularly on costs and benefits of alternative supply chains under dynamic conditions of transportation operation including fluctuating shipping freight rate. Further, Binkley (1983), Blackhurst (1993) and Handfield et al. (2008) suggest a general method of identifying critical nodes with uncertainty coefficients and risk probability index of suppliers on the import demand of a product. Their research also includes transportation and trade expenses to various importing countries. The main goal of their research is identifying critical points to determine the uncertainty of supply level and potential costs.

Similar to critical nodes, the mitigation strategy of applying other alternative chains is recommended by Schlect, Wilson and Dahl (2004) and Tang (2006) as one applicable response when any interruptive events occur in the targeted market. In relation to this, Duval and Biere (1998) develop a framework of parameters of a commodity model in a vulnerable supply chain system and examined logistical risks associated with the marketing of homogenous corn between an inland and export terminal. Operational uncertainties included in the study are yearly supplies of commodities, deliveries into the system, railcar and barge placements, vessel arrivals, and transportation transit times. Further, Zsidisin et al. (2004), and Philiph and Smyth (2007) examine the formal logistical risks assessment technique of marketing grain in a dynamic domestic price system. Logistical risks that are included in the research are defined as shipment-related uncertainties in terms of vessel arrivals, inventory levels of grain at the port, mis-grades that arrive at port, and the rail car unload rate. Their research confirm the previous research result of Faruqee et al. (1997) that find an increase of mis-handling wheat

based on its grade is a major limiting factor in the efficient movement of grain from the producer (farm) to the port.

3.4.2.3 Business continuity

Another mitigation strategy that can be implemented when disruptions occur is business continuity planning. In relation to supply chain disruptions, Beatty (2000) and Gibb (2006) emphasise the importance of changes to working practices of a company when disruptions occur in order to achieve the optimum efficiency under interruptive supply chain operations. This may be achieved through transferring risk or risk-sharing decision methods such as insurance plans and outsourcing strategy. Given the application above, the implication of monitoring supply chain flow through a certain supply chain process, as well as the damage control plans are discussed by Elkins et al.

(2008) and Howick and Eden (2001) in order to find continuity actions in the period of disruptive events. On the basis of these particular models, Rosamond et al. (2007) also propose a broad business continuity mitigation model examining three main risk factors such as cargo availability, security and the environment factors.

3.4.2.4 Recovery planning

The wider literature of recovery planning studies on a wheat supply chain appears to have begun by Clark and Miller (1967) who initiated the impact analysis study on export related costs because of the uncertainty of cargo shipment availability. The study provides a cost analysis and comparison of various changes to transportation and shipment arrangements to international markets. A similar research focus is then continued by Garcia (2008) which expand on the inter-correlation impact of port operator, agents of shipping companies, shippers, and agricultural consignees. A study undertaken by Craighead et al. (2008) builds a comprehensive assessment technique to identify threats in the grain industry and the warning system of various threats. A study by Pinto (2003) provides a discussion on security risks incurred when a port is facing disruptive events. The study developed incident cycles including a comparison of ships versus container movements. Many benefits of containerised shipping are included, and a justification for their use is thoroughly analysed. Figure 3-4 shows 19 mitigation strategies which are recommended in the literature of disruption management (as listed

in Table 3-9). In terms of a disruption period, the 19 mitigation strategies may be categorised into three different groups at pre disruption, on disruption, and post disruption stages. The sequence of strategies implemented during pre, on, and post disruption stage is linked with arrows as discussed in the literature (Kleindorfer & Saad 2005; Rundmo & Moen 2006; Tomlin 2006; Nilsen & Olsen 2007; Gojovic et al.

2009).

Figure 3-4. Mitigation strategies for supply chain disruption

Source: Author