Decision making in advance of a supply chain crisis

The purpose of this paper is to develop a qualitative method to examine why complex supply chain crises occur, to aid in future development of a model and theory of supply chain crisis management. The lack of analysis of crisis events in supply chains and their underlying causes is to be addressed.

The paper analyzes various types of supply chain crises and using qualitative analysis determines what key investments of time and resources would prevent crises from escalating or recurring,.

The qualitative analysis reveals key characteristics in supply chain crises. The most common is dependence on a sole supplier, while poor relationships with suppliers are also contributory, as was risk management. Several common characteristics of successful management were found, most notably capacity flexibility, but also multiple suppliers and proactive risk management.

The nature of the study is exploratory, and future research could refine the work to determine a model and theory of supply chain crisis success and failures.

Maintaining capacity flexibility during non‐crisis times can be a difficult investment to make. To pay overhead and maintenance costs on underutilized equipment and a facility with no intention of using those resources for normal production appears at the outset to be counterintuitive. However, given the potential risk of a crisis, a decision to allow for diverse capacity, back‐up equipment, or alternative manufacturing locations results in a positive return on investment in a crisis.

The first steps toward a model for decision making during a supply chain crisis in a firm have been taken. This paper examines supply chain crises by analyzing crises and their outcomes, a method not used in previous papers. Crises management needs proactive analysis, and this paper is an initial exploration of ways to undertake the evaluation of key investments, using both qualitative and quantitative methods.