The Power of Flexibility for Mitigating Supply Chain Risks

Despite the fact that many firms are instituting risk assessment programs to systematically uncover and estimate supply chain risks, very few firms are making concomitant investments to reduce risk. While the exact reasons for this are not known, Rice and Caniato (2004), Zsidisin et al. (2001, 2004) suspected that the lack of precise cost/benefit or return on investment (ROI) analyses can be one of the key reasons. To garner support for implementing certain risk reduction programs without exact analyses of certain risk reduction programs, Tang (2006) argued that risk reduction programs must provide strategic value to the firms regardless of the occurrence of major disruptions that rarely occur. Indeed, in…