L22_Risk - Lecture 22 Risk Management Slide 1...

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Slide 1 Lecture 22 Risk Management
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Slide 2 Learning Objectives Understand the key drivers of supply chain risks Understand the frameworks of different risk hedging techniques
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Slide 3 Risk Drivers and Risk Pooling
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Slide 4 Global Supply Chain
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Slide 5 Drivers Increasing interconnections and complexity (e.g., outsourcing,  consolidation, specialization) Decreasing centralized control (e.g., decreasing vertical integration) Decreasing slack, time-inventory, and supplier buffers (e.g., JIT) Increasing value of responsiveness and customization  Increasing risk of moral hazard and adverse selection  Moral hazard  is the name given to the increased risk of problematic (immoral)  behavior, and thus a negative outcome ("hazard"), because the person who  caused the problem doesn't suffer the full (or any) consequences, or may  actually benefit. Such a concern typically arises in the context of a contract. Adverse selection  refers to a market process in which bad results occur due to  information asymmetries between buyers and sellers: the "bad" products or  customers are more likely to be selected. 
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Slide 6 Risk Management The objective of a  risk pooling strategy  is to redesign the supply chain, the  production process or the product to either reduce  the uncertainty the firm  faces or to hedge  uncertainty so that the firm is in a better position to  mitigate the consequence of uncertainty.
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Slide 7 Risk Pooling   Examples
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Slide 8 HP Case   3 Building Blocks of Delayed Differentiation Modular product design Easy, fast, and inexpensive final assemble/configure Marketing, research and development, manufacturing, finance  coordination Production process Modularizing subprocesses Resequencing subprocesses Separate test process Agile supply networks Location decisions balancing response time and transportation costs Performing light manufacturing in down-stream    --  by Feitzinger and Lee, HBR  Mass customization at HP: the Power of Postponement
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Slide 9 Delayed Differentiation with Process Re-sequencing Benetton Dyed Yarns Knitting Finished Sweaters Dyeing Finished Sweaters Knitting Dyeing White Garments
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Slide 10 Example: T-Shirts Production alternatives Produce 150 of each color ahead of time
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This note was uploaded on 10/16/2011 for the course OM 335 taught by Professor Jonnalagedda during the Fall '08 term at University of Texas at Austin.

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L22_Risk - Lecture 22 Risk Management Slide 1...

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