Quantification of delivery time variance in support of an effective Supply Chain RisK Management

"For some time now, there has been discussion, in the literature and in practice, of the concept of supply chain management, which is concerned with the planning, management and monitoring of business processes that occur within a network of companies from the initial raw material supplier to the end user with a view to achieving gains in effectiveness and efficiency. However, it is only recently that increased attention has been paid to the risks to be taken into account here. Not only the risks of one's own company, but also those that occur within the entire supply network must therefore be captured. It is proving to be exceptionally difficult to select the relevant risks from the large number of risks and to quantify them.

This study has succeeded in using the one-factor model well known from finance to quantify, in functional form, those risks that express themselves in delivery time divergences. It models the dependencies between stakeholders in the supply chain, while keeping the recording and calculation overhead within limits. The result for supply chain management is distributions for delivery time divergences, which constitute the basis for assessing risks using cash flow analyses as well as providing necessary information for determining safety stocks and stockholding policies." (Preface by Prof. Dr Udo Buscher)

Author

Dr. Andreas Wels

Year of publication

2008