Supply Chain Coordination and Performance Management with Real Options Based Relationships

Abstract

A company’s operating capabilities, performance and risk are determined by its supply chain, the complex set of activities spread across internal functions and external partners that together enable it to deliver its products. Supply chains have traditionally been coordinated with deterministic plans together with inventory buffers added to accommodate uncertainty. More recently, substantial investments have been made in supply chain information sharing, collaboration, and responsiveness initiatives to enable supply chains to react more rapidly to the outcomes of key sources of uncertainty as they become known. To date, however, capabilities that enable supply chain uncertainty to be identified and evaluated before the fact, and its performance impact proactively quantified and managed, have been absent, and as a result offer the potential for significant further improvements in performance and control.