Risk management in supply networks using Monte-Carlo simulation

Trends such as (1) globalization, (2) heavy reliance on transportation and communication infrastructures, and (3) lean manufacturing have led to an increase in the vulnerability of supply networks. Due to a large number of interrelated processes and products, disruptions caused by these vulnerabilities propagate rapidly. Firms, however, can partially control the robustness and resilience of their supply networks through strategic and tactical decisions. Therefore, a decision-support tool that assists managers to evaluate the risk exposure of their supply networks can considerably increase the robustness/resilience of these networks. In this study, we present a Monte Carlo simulation based tool designed to assess uncertainty in supply networks. We describe its application and discuss the possible drawbacks of our approach.