A Review on Supply Chain Disturbance Management Research

' Xiao Kaihong o

2

' ' ' Dong Qianli ,Wang Jianhua , Xu Lei 1. School of Economics and Management Chang'an University Xi'an, P.R.China, 710064 dongqI169@vip.sina.com alogistics@163.com
disturbances

1. School of Economics and Management Chang'An University, Xi'an, P.R.China, 710064 2. School of Management, Henan University of Technology, Zhengzhou, P.R.China, 450001 xiaokaihong@126.com
Abstract--In recent years, supply chain

occurred, which resulted in the failures of Sanlu Group. The melamine milk incident also greatly strike the people's confidence of the national milk industry, and negative effect later spread to the entire milk industry, which brought about great losses to farmers and the milk industrial of China. The recent Toyota automobiles "recall" incident in 2009 not only enmeshes Toyota into deep crisis, but also causes loses to tens of thousands of suppliers and vendors involved. The automobiles "recall" incident is leading to a crisis of confidence about the whole of reputation of Japan's manufacturing industry. The tremendous negative effect of supply chain disturbances arouses the attention of scholars, and they have made a lot of contributions. From a deep analysis of existing literatures about supply chain disturbance management, most articles focus on the origins of supply chain disturbance, preventing measures and emergency management before/after supply chain disturbance, as well as the evolution mechanism. So the rest of this paper summarizes the major literatures that focus on the four directions above. Furthermore the paper also proposes the future research directions on supply chain disturbances management
2 THE ORGINS IDENTIFICATION OF SUPPLY CHAIN DISTURBANCE

happen frequently, and they have seriously struck the goods flow, information flow and cash flow in the supply chains. Some supply chain disturbances even lead to the collapse of the entire supply chain and cause huge loss to the members of supply chain and even the whole industry chain. So supply chain disturbances have brought about tremendous negative effect to the logistics enterprises and society. Now quite a few scholars pay much attention to the supply chain disturbances management and contribute many useful results. This paper summarizes the major literatures that focus on supply chain disturbance origins and preventing measures, as well as

emergency management and evolution mechanism of supply chain disturbance. Furthermore this paper proposes the future research directions on supply chain disturbances management, such as empirical study of origins identification and modeling research about the evolution mechanism, as well as integrated management of supply chain disturbance.

Keywords--Supp/y chain disturbance management; Origins; Preventing mechanism

1.

measures;

Emergency

management;

Evolution

INTRODUCTION

In recent years, supply chain disturbances happen frequently and have brought about tremendous negative effect to the logistics enterprises and even the whole society. Such as the "Sudan Red" event in 2005 not only caused big loss to additives manufacturers, but also brought about damages to the raw material suppliers, product distributors, retailers in the internal food supply chain. Only the 1,200 KFC stores in China suffered the loss over 26 million Yuan in 4 days.
In

In the early studies, researchers tend to find the origins of supply chain disturbance from the perspective of the supply chain risks. Some foreign representative scholars, such as Hallikas et al.(2002), Sheffi et al.(2003), Sunil et al(2004), Hallikas et al. (2004), Martin Bailey et al. (2004), Kleindoffer et al. (2005) etc, made significant contributions. Hallikas et al. (2002) believed that supply chain risk came

2008, Sanlu Group melamine milk incident

This paper is supported by Chinese Physical distribution Academic society Foundation (20IOCSLKT2IS)and Henan University of Technology Foundation (09XSK002)

978-1-4244-6065-6/10/$26.00 2010 IEEE

49

from variety of uncertainties, such as demand risk, delivery risk, performance risk and pricing risk, the risks above might lead to the breakdown or failure of supply chain. Sheffi et al. (2003) summarized 6 risks through specific case, namely supply failure, transport failure, equipment implementation failure, logistics failures, communication failures and demand failure; these failures will also lead failure to supply chain. Sunil et al (2004) have proposed 9 supply chain risk. They are rupture risk, extension risk, intellectual property risks, TI systematic risk, prediction risk, purchase risks, inventory risks, production risks and acceptable risk. Martin Bailey et al. (2004) divides supply chain risks into three risk factors. The supply chain risk research in domestic was a little later than in foreign countries, and the representative studies are followings. Ma Shi-hua (2003) divided the supply chain risks into two categories of endogenous risks and exogenous risks. The endogenous risks including moral risk, information risk, relationship risk, logistics risks. The exogenous risks include political risk, economic risk, legal risk, technology risk, supply risk and demand risk. Li Xiao-Ying (2003) put forward 5 supply chain risks, namely system risk, management risk, information risk, market risk and other risk. Xie Ke-fan, etc. (2003) studied the "bullwhip effect"and information risk in supply chain. Ma Lin (2005) made a systematic summary of present supply chain risk management researches. However, with a large number of supply chain disturbances occurrence in recent years, some scholars began to realize that the origins of supply chain disturbance were quite different from supply chain risks. Wu Jun, Li Jian, Wang Shou-yang (2006) divided supply chain risks into two types. One is the daily risk, which is characterized by the large probability of occurrence and light harm. This kind of risk is easy to control. Another type of supply chain risk is characterized small probability of occurrence and severe harm, and this kind of risk is hard to control. Obviously, supply chain disturbance is caused by the second type of risk, which happens suddenly and has disastrous results. Zhou Yanju, Qiu Wan-hua (2006) and Sheng Fang-zheng, Ji Jianhua (2008) also imply supply categories of external risks, operational risks and natural disasters, which contains 21

chain disturbance have the features of sudden outbreak and catastrophic. Dong Qian-li (2009) clearly stated that supply chain disturbance is caused inside or external factors and it outbreak in short time with high possibly of disastrous consequences. From the literatures view above, the origins of supply chain disturbance is only small part of supply chain risks, and not all supply chain risks can lead to supply chain disturbance. So a further identification of supply chain disturbance origins is needed because the origins identification of supply chain disturbance are precondition of prevention. Unfortunately, the existing literatures have not indicated the origins concretely. Therefore, the studies of supply chain disturbance origins has important theoretical and practical value.
3 THE PREVENTIVE STRATEGY OF SUPPLY CHAIN DISTURBANCE

At present, most scholars believe that contract is an effective strategy to prevent supply chain disturbance. Yang De-Ii et al (2006) made a wonderful overview of supply chain contracts and divided them into four main types: wholesale price contracts, buy-back contracts, revenue sharing contract and quantity flexibility contracts, and carried out a study on the basic model of the four contracts above. Wang Hong (2007) conducted a detailed study on the quantity discount contract, the price discount contracts and revenue sharing contract. Sheng Fang-zheng, Ji Jianhua (2008) study a supply chain network consisting of one retailer and one risk aversion supplier, and found out that the prior fine contracts can prompt suppliers to take additional measures to prevent supply chain disturbance and restore the supply chain in a short time. Sheng Fang-zheng, Ji Jianhua, Zhou Na (2009) concluded that transfer payment contract can encourage all members take measures to restore the supply chain as soon as possible and led to the maximum benefits of the whole supply chain in condition of Symmetric information. However, in non-symmetric information case, the transfer payment contract is invalid. Therefore, information sharing and transfer prevent supply chain disturbance. Some other scholars studied the prevention of prevent supply chain disturbance from the perspective of risk prediction or risk warning. Ding Ling (2006) pointed out payment contract among the members are effective Strategies to

50

that risk forecasting can reduce the probability of supply chain disturbance occurrence. And the forecasting targets include economic fluctuations, unforeseen factors, suppliers and information risk. Tomlin (2005) further analysis how to weigh the various preventive measures and choose appropriate measures to prevent supply chain disturbance. The study of supply chain disturbance prevention strategies is still in development stage, and the existing researches mainly draw lessons from supply chain risks prevention.
In

systems. In the stochastic models, it's assumed that demand or market share is disturb and how to find out recovery strategies to settle the disturbance. Qi, Bard, and Yu (2004) studied the impact of demand disturbance upon supply chain, and propound a real-time adjustment method. Yu Hui, Chen Jian and Yu Gang (2006) studied the impact of disturbance on the classical quantity discount contract in supply chain coordination. The study shows that only the market share fluctuation is big enough, suppliers will adjust production plans in the condition of classics quantity discount supply chain. Huang (2006) also studied large scale fluctuation of market demand, and analyzed the methods of centralized decision-making and decentralized decision-making in supply chain coordination after demand fluctuation. Hu Jinsong, Wang Hong (2007) researched a three stages supply chain, consisting of one supplier, one manufacturer and one retailer, and proved that the contract of price discount is effective to deal with demand fluctuation. From the literatures above, we know that the studies about emergency management of supply chain disturbance is becoming mature, especially the trend of quantitative models are used to enhance reliability of research results. However, most literatures only focus on single or double factors affected by disturbance.
In

the future, if the studied of prevention

strategies is interrelated with origins of supply chain disturbance, and then prevention strategies will be more effective.
4 EMERGENCY MANAGEMENT OF SUPPLY CHAIN DISTURBANCE

Now, the researches about disturbance emergency management are plentiful, especially focusing on coordination mechanisms, and large quantitative models were used to enhanced reliability of research results. The quantitative models can be divided into deterministic model and stochastic model according to the different objects of study. In the deterministic models, it's assumed that demand is deterministic, and the production or supply, production costs or expenses, storage systems or price elasticity coefficient may be interrupted by unexpected events. The goal is to find out the fast recovery strategies after disturbance. The existing representative studies are followings. Gurfer and Parlar (1997) studied a two-stage supply chain, and put forward optimization strategies to deal with the disturbance of production and supply. Xiao (2005) studies the effect of two methods, namely the whole quantity discounts and incremental quantity discount, aiming to deal with the disturbance of production costs and expenses. Yang, Qi and Yu (2007) also studies the emergency management approaches to modify the original manufacture plan and smooth the operation after the disturbance of production costs and expenses. Chen Jian (2008) studied the contract of unsold goods compensation, and proves it's an effective way solve the problem of inventory shortage. Xia et.al (2004) studies the classical EPQ model, and put forward a two stages real-time production system to deal with the disturbance of storage

practice, the impacts of

disturbance upon supply chain is miscellaneous, and the affected factors are changing over time with the evolution of supply chain disturbance. So the research about disturbance emergency management should combine with the evolution of supply chain disturbance in order to enhance the effect and maneuverability of disturbance emergency management.
5 THE EVOLUTION MECHANISM OF SUPPLY CHAIN DISTURBANCE

Some researcher makes exploratory studies about the evolution mechanism of supply chain disturbance. Du shou Mei (2008) summarized the basic theories implicated to explain the diffusion mechanism of supply chain disturbance, such as the domino theory, the energy release theory and game theory. She initially established supply chain disturbance diffusion model, including the system model, causal model and diffusion description model, as

51

well as the dynamic phase of diffusion model. Finally, she inspected spread time and spread intensity of disturbance diffusion respectively for linearity supply chain and netted supply chain. Shang Hongyan (2009) studied the origins, evolution phases and evolution mechanism of dangerous goods emergencies in transportation. In aspect of

[4] Ma Shi-hua. How to Prevent Supply Chain Risk. China Computer Users, 2003(3):21. [5] Li Xiao-ying, Chen Wei-zheng. A study on Mechanism of the Formation of Supply Chain Risk. Circulating Economics in China.2003 (9):I0-13. [6] Xie Ke-f an, Peng Hua-tao. Bullwhip Effect and Information Risk in Supply [7] Chain Management. China Mechanical Engineering . 2003(17): 1510-1512. MaLin. Study of Supply Chain Risk Identification, Asscssmen, Integration Risk Management Based on SCOR. Hangzhou: Zhe Jang University. 2005. [8] WU Jun, LI Jian, Wang Shou-yang. Some Key Problems in Supply Chain Risk Management. Journal of Management Sciences in China. 2006(6): 1-8. [9] ZHOU Yan-ju, Qiu Wan-hua, Wang Zong-run. A Review on Supply Chain Risk Management. Systems Engineering, 2006(3):1-7. [10] Sheng Fang-zheng, Ji Jian-hua. Managing Disrupted Supply Chain Based on Risk Aversion. Industrial Engineering and Management,2008(3):7-11. [II] Dong Qian-li. Research on the Integrated Management for Supply Emergencies. Logistics Technology. 2009(7): 180-184. [12] Yang De-Ii, Guo Qiong, He Yong Xu Jing-yi. Review of Supply Chain Contracts. Chinese Journal of Management, 2006(1): 117-125. [13] Sheng Fang-zheng, Ji Jian-hua, Zhou Na. Coordinate Disruption Supply Chain with Multi-retailers by Transfer Payment. Journal of Industrial Engineering, 2009(1):76-81. [14] Tomlin B T. Selecting a disruption management strategy for short life cycle products: diversifieation, contingent sourcing, and demand management, [15] Gurler B.. [16] Xiao TJ.. Workingpaper, Kenan 2005. Flagler Business Sehool, University of North Carolina.

emergencies origins identification, the author proposed single factor model, two-factors and three factors coupling mechanism model. The author divided the evolution phases into four stages, namely emergence period, expansion period, outbreak period and Declining Period. For evolution mechanism of mechanisms. dangerous Finally, she goods emergencies, proposed an Shang Hongyan gave a theoretical model based on multiple integrated management of dangerous goods transportation based on the evolution mechanisms. The literature probed into the evolution mechanism of supply chain disturbance, and their findings are meaningful. Maybe, quantitative models about the evolution mechanisms of supply chain disturbance is to be strengthened in future.
6 PROSPECTS FOR FUTURE RESEARCH

Parlar M. Aninventory Problem with two randomly Qi X.T. Price competition, cost and demand disruption

available suppliers. Operations Research, 1997,45(6):904-918. and coordination of a supply chain with one manuf acturer and two competing retailers.http://www. elsevier.com!location/omega. [17] Yang, J.,X. Qi and G. Yu. Disruption management in production planning. Working paper, Department of Management Science and Information Systems, McCombs School of Business, The University of Texas, Austin, TX.78712, 2005. [18] Zhang Ju-liang, Chen Jian. Vender Manage Inventory under Disrution. Chinese Journal of Management Science,2008(5): 71-76. [19] Xia Y.. YangJ.. Golany B. Teal-time disruption management in a two-stage Production and inventory system. lIE transactions, 2004, 36(1): 1-15. [20] Qi XT.. Bard 1.. Yu G. Supply chain coordination with demand disruption. Omega, 2004, 32(4):301-312. [21] Yu Hui, Chen Jian, Yu Gang. Managing Wholesale Price Contract in the Supply Chain under Disruptions. Theory and Practice of Systems Engineering,2006(7): 34 - 41. [22] Huang C.C., Yu G, Wang S. Disruption management for supply chain coordination with exponential demand fluention. Acta Mathematical Seventies, 2006, 26B (4):655-669. [23] HU Jin-song, Wang Hong. The Price Discount Contract Analysis of Three-Level Supply Chain under Disruption. Chinese Journal of Management Science, 2007(3):103-107. [24] Du Shou-mei. Research on Diffusion Mechanism of Emergency in Supply Chain. Shang Hai: Shanghai Jiao Tong University. 2008. [25] Shang Hong-yan. A Research on Mechanism and Risk Integrated Assessment of dangerous goods in transportation. Chang'an University, 2009.

(1) Empirical research of supply chain disturbance origins, and this is the basis work of disturbance prevention. (2) Modeling studies about the evolution mechanism of supply chain disturbance,
ill

order

to

reveal

the

characteristics of disturbance evolution and improve the efficiency of emergency control. (3) Integrating the process of disturbance prevention, control and emergency management so as to form an integrated management of supply chain disturbance.
REFERENCES
[1] Jukka Hallikas, Veli-Matti Virolainen, Markku Tuominen. Risk analysis and assessment in network environments: A dyadic case study. International Journal of Production Economics, 2002,78(1): 45-55. [2] Sheffi Y. Supply chain management under the threat of international terrorism. The International Journal of Logistics Management, 2003, 12:1-11. [3] Sunil C, ManMohan S S. Managing risk to avoid supply chain-breakdown. MIT Sioam Management Review2004, (f all):53-61.

52