06: Risk handling II - Reactive: Managing disruptions

Question 1

What a “impediments(barriers) to disruption discovery?

Answer 1

Prior to actual occurence: SC disruptions send out repeated warning signals
–>would be crucial to detect this signals

Impedients hindering the detection of warning signals:

• bounded rationality
• intensity threshold
• structural impediments: one agent knows but has limited power
• human agents are effort-averse, self-tinerest seeking with guile

Question 2

What is “disruption discovering capability”?

Answer 2

Capability to correctly detect a pending or just realized supply chain disruption and to subsequently disseminate pertinent information to relevant entities within the supply chain

Question 3

What are the levers of “disruption discovering capability”?

Answer 3

• Training
• incentive and reward systems

Question 4

Warning signals for financial supplier distreess”?

Answer 4

• stakeholder crisis
• Strategic crisis
• Operative crisis
• Revenue crisis
• Liquidity crisis

Question 5

What are stakeholder crisis?

Answer 5

Stakeholder crisis:
- Changes in ownership structure
- Loss of key employees
- Conflict in family run businesses
- Threat by inancial investors
- Strong influence of unions

Question 6

What are strategic crisis?

Answer 6

• Problems in the product portfolio
• Dependence on few customers /
  suppliers
• Extraordinarily high or low capital
  expenditures
• Worsening of competitive position
• Risks of M&A

Question 7

What are operative crisis?

Answer 7

• Quality issues
• High inventory level
• Capacity issues
• Technical problems

Question 8

What are revenue crisis?

Answer 8

• Trouble with plant utilization
• Profit collapse
• Postponing investments
• Cost explosion: raw material, personal expenses, etc.
• Cost cutting programs
• Short time work
• Further financial requirements

Question 9

What are liquidity crisis?

Answer 9

• Postponing payment
  obligations
• Invitation to talks with banks and/ or sub-suppliers
• Requests for, e.g.:
  - Change in payment terms
  - Financing of tools

Termination of trade credit insurances

Question 10

What is the dilemma between “de minimis” and “precautionary principle?
- what are the two errors in this context?

Answer 10

Dilemma
- Null hypothesis: The warning signals are true. –>Type I and Type II errors:
- Type I error: Reject the null hypothesis when the null hypothesis is true –>(False positive)

– Type II error: Fail to reject the null hypothesis when the null hypothesis is false –>(False negative

Question 11

What is the dilemma between the “de minimis principle and the “precautionary principle”?

Answer 11

• De minimis principle –> (tries to reduce Type II error)
• precautionary principle –> (tries to reduce Type I error

Question 12

What is the type 1 error: which principle reduces the type 1 error?

Answer 12

Type 1 error: (precautionary tries to reduce type1 error)

• neglect a warning signal to save resources
• can lead to a serious disruption

Question 13

What is the type 2 error?

Answer 13

Type 2 error:

• overrecating to a warning signal
• Incurs direct and opportunity costs

Question 14

What are the characteristics of a situation of a supply chain disruption? (short—term response: seeking a direct response)

Answer 14

manager face:

• Ambiguity of causes and effects
• Decisions have to be made swiftly
• Might involve surprise

Question 15

When are disruption recovery efforts effective? (Short-term response)

Answer 15

• Operations are sustained or resumed,
• Organizational and external stakeholder losses are minimized and
• Learning occurs so that lessons are transferred to future incidents

Question 16

What are the two types of “Buyer-supplier relationship conflicts” that may be created? (By have a short-term response: seeking a direct response

Answer 16

Constructive: Degree to which conflicts lead to positive relationship outcomes.
–>Partners feel better about their working relationships after a conflict

Destructive: Degree to which conflicts lead to antagonistic conduct
–>Partners feel worse about working relationships after a conflict

Question 17

What is a supply chain disrtuption?

Answer 17

are typically accompanied by uncertainty, e.g., regarding the impact of a disruption, its cause, or possible alternative actions to mitigate negative consequences

Uncertainty has been conceptualized as “a sense of doubt that blocks or delays action”

Question 18

“after a supply chain disruption: what do managers have to do? (short-term response)
(What are strategies?)

Answer 18

After supply chain disruptions, managers need to take decisions in complex and uncertain environments

• Rational approach —> delay collect information
• Bias for action —> action first

Question 19

What is the “Rational approach” after a supply chain disruption?

Answer 19

Delay action
- Minimize the uncertainty
- Collect additional information in order to take a well-elaborated decisio

Question 20

What is the “bias for action” after a supply chain disruption?

Answer 20

“Action-first” strategy

• Take immediate action although the consequences are not precisely known
• Action generates information that can be used to adjust and improve future actions

Question 21

What are the response stages after a “supply chain disrubtion”?

Answer 21

• Recognition
• Diagnosis
• Development
• Implementation

Question 22

What is the delay action and the action first strategy? (Short—term responses)

Answer 22

Delay action: Preference to collect information

“Action-first strategy”: Preference to act

Question 23

What is a firms “resilience”?

Answer 23

“The ability of a system to return to its original state or move to a new, more desirable state after being disturbed

–>the recovery provess makes an important contribution to a firm´s resillence