Cost and benefit analysis of supplier risk mitigation in an aerospace Supply chain

Risk identification and risk estimation are important stages of any risk management process. Existing research in Supply chain risk management has mainly focused on these two stages whereas risk evaluation has not been fully explored which is an equally significant stage involving evaluation of different risk mitigation strategies. The main purpose of this paper is to propose a method of evaluating different mitigation strategies through cost and benefit analysis. The proposed method introduces a unique concept of integrating cost and relative impact of different combinations of mitigation strategies within a network setting of interconnected risk triggers, risk factors and risk mitigation strategies. We have applied our method on a case study that was conducted in an aerospace supply chain. Our approach is useful in identifying an optimal combination of mitigation strategies against a given budget constraint. Furthermore, the model can also be used for determining such strategies in relation to a given level of risk exposure. We have incorporated NoisyOR function within the Bayesian Network model in order to reduce the complexity involved in eliciting a huge number of conditional probability values.

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