Bilkent University
14th Annual Workshop on Supply Chain and Logistics (Webinar Series)
June 5, June 12, 2020
Department of Industrial Engineering, Ankara, Turkey
The zoom activity link will be shared with the registered participants on the day of the event via e-mail. There is no need to re-register if you have already registered for the first webinar. (Registration is via https://www.eventbrite.com/e/bilkent-university-14th-annual-workshop-on-supply-chain-and-logistics-webinar-series-registration-86483461361)
The details of the this week’s webinar are provided below.
Webinar 2: “Multi-Tiered Supply Chain Risk Management”
June 5, 2020 at 13:30 (Ankara, GMT +3 hours)
Speaker: Feryal Erhun, University of Cambridge
Please contact the organizers for further questions:
Çağın Ararat cararat@bilkent.edu.tr
Firdevs Ulus firdevs@bilkent.edu.tr
Abstract:
Problem definition: Motivated by Intel’s risk management challenges with its sub-suppliers, we study a multi-tiered supply chain risk management problem. Our stylized model captures a three-tier supply chain consisting of a buyer, a supplier, and a sub-supplier where disruptions of random length occur at the sub-supplier. As is common in supply chains, the buyer has a direct relationship with the supplier but not the sub-supplier; that is, the buyer has limited supply chain visibility. Both the supplier and the sub-supplier can reserve emergency capacity proactively to protect the supply chain from a disruption. Methodology: We study how the buyer and the supplier can guarantee that the correct level of emergency capacity is reserved using a principal-agent model, where the downstream partner is the principal and the upstream partner the agent. Results: Due to two types of inefficiencies—a special form of double marginalization and the substitution effect—the supply chain is misaligned in its decentralized form, leading to either under- or over- reservation of emergency capacity by the sub-supplier depending on the cost structure of the supply chain. Academic/practical relevance: The lack of visibility prevents the buyer from directly contracting with the sub-supplier to eliminate supply chain inefficiencies. Yet, he can coordinate the supply chain through cascading: i.e., contracting with the supplier (using a value-based carrot-and-stick contract), who in turn contracts with the sub-supplier (using a cost-based carrot-and-stick or two-level wholesale price contract, depending on the cost structure of the supply chain). Although the sub-supplier is the source of limited visibility in the supply chain and is the party with private information, the supplier is the one that benefits from this limited visibility and is the party that receives information rent from the buyer. Managerial implications: Effective risk management requires managing risks in a complex multi-tiered supply chain. Due to this complexity, it is difficult for companies, such as Intel, to control their supply chain beyond Tier 1 supply base. Companies often delegate their sourcing either to third parties or to Tier 1 suppliers. Consequently, understanding the risk management implications of this delegation is impactful. (joint work with Georg Schorpp, Hau Lee)
Bio: Feryal Erhun is a Professor of Operations and Technology Management at Judge Business School (CJBS), Cambridge University. She received her PhD in Business Administration, with a concentration in Production and Operations Management from the Graduate School of Industrial Administration, Carnegie Mellon University in 2002. She holds a B.S. (1995) and an M.S. (1997) in Industrial Engineering from Bilkent University, Turkey.
Feryal’s core research area concerns the strategic interactions between stakeholders in supply chains. Within this context, she seeks to answer the following questions: How can supply contracts be used to align the incentives of multiple decision makers in supply chains and mitigate potential demand risks to create resilient supply chains? How can we design effective contracts to tackle this issue? Leveraging her work in supply chain management, her more recent research focuses on the challenges of healthcare operations management to characterize, quantify, and eliminate system-wide inefficiencies in health care delivery using an integrated delivery approach.
Feryal is a strong proponent of practice-based research. Through collaborations with Intel Corporation, Cisco, Stanford University Medical Center and others, she has been able to combine her academic interests with firms’ needs to deliver insights for both communities. At Stanford, her research group designed a decision-support system for optimizing capital investment decisions for firms in capital-intensive industries in collaboration with Intel Corporation, which was selected as one of the finalists in the 2012 Franz Edelman Award. The Award recognizes outstanding examples of innovative operations research that improves organizations; Feryal was inducted as an Edelman Laureate.
Feryal is a board member of POMS, serves in the academic board of the two most prestigious practice-based research paper competitions (POMS and MSOM). She is an editorial board member of the POM and M&SOM.