Abstract
Despite the recognised great importance and theoretical diffusion of supply chain management strategies to mitigate risk, their application is still limited or, when present, it reveals somewhat effective or not effective at all. This research investigates the effectiveness of different supply chain risk management (SCRM) strategies by evaluating how they perform in mitigating disruption risks and how such performance varies when strategies are applied under different conditions of supply disruption risks. We use a novel approach based on Real Options theory to model the managerial flexibility of deciding whether exploiting or not the mitigation strategies if and when disruptions occur, and whenever such strategies prove valuable based on information available at that time. A computer simulation study is used to observe the impact of the adoption of four SCRM flexibility-driven strategies on overall net profit under varying conditions of supply disruption risks.
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