<p>Contents</p> <p>Foreword xiii</p> <p>Preface xv</p> <p>Acknowledgments xxiii</p> <p>Contributors xxv</p> <p><b>Part ONE</b></p> <p><b>Foundations and Overview</b></p> <p><b>1 Integrated Risk Management: A Conceptual Framework with Research Overview and Applications in Practice 3</b></p> <p>1.1 Introduction, 3</p> <p>1.2 An Action-Based Framework for Supply Chain Risk Management, 4</p> <p>1.3 Risk Mitigation Strategies, 8</p> <p>1.4 Research Opportunities, 10</p> <p>Reference, 12</p> <p><b>2 Risk Management and Operational Hedging: An Overview 13</b></p> <p>2.1 Introduction, 13</p> <p>2.2 Risk Management: Concept and Process, 14</p> <p>2.3 Identification of Operational Hazards, 18</p> <p>2.4 Risk Assessment and Valuation, 22</p> <p>2.5 Tactical Risk Decisions and Crisis Management, 28</p> <p>2.6 Strategic Risk Mitigation, 30</p> <p>2.7 Four Operational Hedging Strategies, 33</p> <p>2.8 Financial Hedging of Operational Risk, 36</p> <p>2.9 Tailored Operational Hedging, 42</p> <p>2.10 Guidelines for Operational Risk Management, 47</p> <p>References, 48</p> <p><b>3 The Effect of Supply Chain Disruptions on Corporate Performance 51</b></p> <p>3.1 Introduction, 51</p> <p>3.2 Sample, Performance Metrics, and Methodology, 53</p> <p>3.3 The Effect of Supply Chain Disruptions on Corporate Performance, 55</p> <p>3.4 Drivers of Supply Chain Disruptions, 63</p> <p>3.5 What Can Firms Do To Mitigate the Chances of Disruptions?, 64</p> <p>3.6 Summary, 72</p> <p>A. Methodology Used To Estimate Stock Price Performance, 73</p> <p>B. Methodology Used To Estimate Changes in Share Price Volatility, 75</p> <p>C. Methodology Used To Estimate Changes in Profitability, 76</p> <p>References, 76</p> <p><b>4 Operational Strategies for Managing Supply Chain Disruption Risk 79</b></p> <p>4.1 Introduction, 79</p> <p>4.2 Stockpile Inventory, 82</p> <p>4.3 Diversify Supply, 86</p> <p>4.4 Backup Supply, 89</p> <p>4.5 Manage Demand, 92</p> <p>4.6 Strengthen Supply Chain, 96</p> <p>4.7 Conclusions, 98</p> <p>References, 100</p> <p><b>5 Beyond Risk: Ambiguity in Supply Chains 103</b></p> <p>5.1 Introduction to Risk and Ambiguity, 103</p> <p>5.2 Ambiguity in a Single Period Newsvendor Setting, 109</p> <p>5.3 Ambiguity in a Supply Chain Inventory Positioning Setting, 113</p> <p>5.4 Conclusions, 120</p> <p>References, 122</p> <p><b>Part TWO</b></p> <p><b>Integrated Risk Management: Operations and Finance Interface</b></p> <p><b>6 Managing Storable Commodity Risks: Role of Inventories and Financial Hedges 127</b></p> <p>6.1 Introduction, 127</p> <p>6.2 Literature Review, 132</p> <p>6.3 Problem Description, 133</p> <p>6.4 Optimal Policy for Single Contract Financial Hedging, 137</p> <p>6.5 Optimal Policy for a Portfolio of Financial Hedges, 142</p> <p>6.6 Role of the Operational and Financial Hedges, 143</p> <p>6.7 Example of Model Application and Results, 150</p> <p>6.8 Managerial Insights and Conclusions, 153</p> <p>References, 154</p> <p><b>7 Integrated Production and Risk Hedging with Financial Instruments 157</b></p> <p>7.1 Introduction, 158</p> <p>7.2 Single Period Models, 159</p> <p>7.3 Multiperiod Models, 177</p> <p>7.4 Conclusion, 192</p> <p>References, 193</p> <p><b>8 Capacity Expansion As A Contingent Claim: Flexibility And Real Options In Operations 197</b></p> <p>8.1 Introduction, 198</p> <p>8.2 A Financial Option Pricing Model: Black Scholes (1973) and Merton (1973) Model, 201</p> <p>8.3 Real Options Valuation (ROV) in Operations, 205</p> <p>8.4 Conclusion, 214</p> <p>References, 215</p> <p><b>9 Financial Valuation of Supply Chain Contracts 219</b></p> <p>9.1 Introduction, 220</p> <p>9.2 Review of Financial Markets, Arbitrage, and Martingales, 223</p> <p><br /> 9.3 A Model for Financial Valuation of Supply Chain Contracts, 226</p> <p>9.4 Dual Formulation, 231</p> <p>9.5 Experimental Study, 234</p> <p>9.6 Conclusion, 243</p> <p>References, 243</p> <p><b>Part THREE</b></p> <p><b>Supply Chain Finance</b></p> <p><b>10 Supply Chain Finance 249</b></p> <p>10.1 Introduction, 250</p> <p>10.2 TheModel Setting, Common Notation and Assumptions, 253</p> <p>10.3 Bankrupt-Prone Supply Chains under Wholesale Price Contracts, 255</p> <p>10.4 Financing the Bankrupt-Prone Newsvendor with Trade Credit Contracts, 272</p> <p>10.5 Conclusions and Future Research, 285</p> <p>References, 286</p> <p><b>11 The Role of Financial Services in Procurement Contracts 289</b></p> <p>11.1 Introduction, 290</p> <p>11.2 Model Description, 294</p> <p>11.3 Wholesale Contract with a Budget Constraint (wT,QT), 298</p> <p>11.4 Equilibrium Under a Credit Contract (QI,wI, ²I), 299</p> <p>11.5 Equilibrium with External Financing (QE,wE), 307</p> <p>11.6 Computational Experiments, 310</p> <p>11.7 Concluding Remarks and Extensions, 315</p> <p>References, 324</p> <p><b>12 Production/Inventory Management and Capital Structure 327</b></p> <p>12.1 Operations and Finance, 327</p> <p>12.2 The Model, 329</p> <p>12.3 Structural Properties of an Optimal Policy, 333</p> <p>12.4 Characterization of the Optimal Policy, 337</p> <p>12.5 Long-Term Decisions on Capital Structure, 346</p> <p>12.6 Extensions and Variations of the Basic Model, 354</p> <p>12.7 Concluding Remarks, 357</p> <p>12.8 Bibliographical Notes, 358</p> <p>References, 360</p> <p><b>13 Bank Financing of Newsvendor Inventory: Coordinating Loan Schedules 363</b></p> <p>13.1 Introduction, 364</p> <p>13.2 The Stackelberg Game, 366</p> <p>13.3 A Numerical Study, 370</p> <p>13.4 Coordinating Loan Schedules, 377</p> <p>13.5 Concluding Remarks, 380</p> <p>References, 384</p> <p><b>Part FOUR</b></p> <p><b>Operational Risk Management Strategies</b></p> <p><b>14 Decentralized Supply Risk Management 389</b></p> <p>14.1 Introduction, 389</p> <p>14.2 Literature Taxonomies, 394</p> <p>14.3 Misalignment of Incentives, 398</p> <p>14.4 Competing Suppliers, 398</p> <p>14.5 Competing Manufacturers, 408</p> <p>14.6 Asymmetric Information, 413</p> <p>14.7 Conclusions, 419</p> <p>References, 421</p> <p><b>15 Using Supplier Portfolios to Manage Demand Risk 425</b></p> <p>15.1 Introduction, 426</p> <p>15.2 Literature Review, 428</p> <p>15.3 A Static Model, 430</p> <p>15.4 A Dynamic Model with Progressive Demand Revelation, 436</p> <p>15.5 Conclusions, 442</p> <p>References, 443</p> <p><b>16 An Opportunity Cost View of Base-Stock Optimality for the Warehouse Problem 447</b></p> <p>16.1 Introduction, 448</p> <p>16.2 A Simple Motivating Example, 449</p> <p>16.3 Model, 450</p> <p>16.4 Base-Stock Optimality, 452</p> <p>16.5 Managerial Aspects, 457</p> <p>16.6 Conclusions, 460</p> <p>References, 460</p> <p><b>Part FIVE</b></p> <p><b>Industrial Applications</b></p> <p><b>17 Procurement Risk Management in Beef Supply Chains 465</b></p> <p>17.1 Introduction, 465</p> <p>17.2 Literature Review, 470</p> <p>17.3 Model Description, 473</p> <p>17.4 Computational Experiments for the Beef Supply Chain, 477</p> <p>17.5 Discussion, 491</p> <p>References, 493</p> <p><b>18 Risk Management in Electric Utilities 495</b></p> <p>18.1 Introduction, 495</p> <p>18.2 Price Risk, 497</p> <p>18.3 Volume Risk, 501</p> <p>18.4 Other Risk Examples, 507</p> <p>18.5 Summary, 511</p> <p>References, 511</p> <p><b>19 Supply Chain Risk Management: A Perspective from Practice 515</b></p> <p>19.1 Defining Supply Chain Risk Management, 516</p> <p>19.2 Understanding Your Supply Chain, 517</p> <p>19.3 Developing SCRM Capabilities, 518</p> <p>19.4 Process Approach to Supply Chain Risk Management, 523</p> <p>19.5 Case Study: Cisco Responds to the Sichuan Earthquake, 527</p> <p>19.6 The Importance of an International Standard in SCRM, 534</p> <p>19.7 Conclusion, 534</p> <p><b>20 A Bayesian Framework for Supply Chain Risk Management Using Business Process Standards 537</b></p> <p>20.1 Introduction, 538</p> <p>20.2 Related Literature, 541</p> <p>20.3 A Framework for Supply Chain Risk Categorization, 543</p> <p>20.4 Risk Quantification through Bayesian Learning, 545</p> <p>20.5 Case Study: Risk Modeling for a Global Supply Chain, 550</p> <p>20.6 Summary, 561</p> <p>References, 562</p> <p>Index 565</p>