Supply Chain Risk Management In Consumer Goods Industries

Due to the frequent variation of demand, demand risk creates larger impact on consumer goods firms than on industrial goods companies. Thus, it is more difficult to manage a consumer goods supply chain. The solution is an effective supply chain risk management mechanism. Along with the increase of average income per inhabitant and the implementation of various mechanims for stimulating consumption, the purchasing power in the consumer goods market is rapidly increasing, which makes it increasingly important to managing consumer goods supply chain effectively.Up until this moment, the operations management problem in consumer goods industry has witnessed breakthroughs in various aspects, such as risk management and supply chain coordination. However, the research and application in this field still leaves various limitations. First, the relationships among demand risk, risk management strategies and firm performance are the most important. Second, although companies have had effective strategies for dealing with overall demand level uncertainty, they still are unfamiliar with the strategies for dealing with consumer strategic behavior, especially in the context of open innovation firms. Third, there lacks quantitative studies on coordinated forecasting. Forth, the impact of channel selection behavior on multiple channel coordination lacks research.For tackling with the aforementioned gaps, this thesis constructs the theoretical framework of consumer goods supply chain risk management, and studies three critical problems in this framework. Through literature review, the thesis finds that the key mechanisms for dealing with supply chain demand risks include information sharing, operational flexibility and demand adjustment. Meanwhile, demand risks include demand level uncertainty and consumer strategic behavior.The thesis begins with a study on supply chain risk management theory, and then it selects three typical problems for study. It explores the relationships among demand risk, risk management strategies and firm performance in these problems. The first problem is the interactions between open innovation companies and consumers in fashion industry. The second problem is the game between supplier and downstream partners regarding wether CPFR should be invested in. The third one is the introduction of mobile channel in consumer goods supply chain. The first and third problems involve consumer strategic behavior; while the first and second ones involve demand level uncertainties.(1) The first problem investigates how the open innovation firms deal with two types of demand risks. The thesis bases on Nash equilibrium and newsvendor model, and compares open innovation mode with closed innovation mode. First, the thesis explores the effect of combining open innovation and several other management strategies, which include quick response, further improvement over externally generated designs, and enhancing the absorption of externally generated designs. Through simulations, it is found that when strategic behavior and demand uncertainty are significant, open innovation may perform inferior to close innovation, and these two strategies may not complement each other well. Second, it is found that the complex strategies could lead to dramatic performance increase. Especially, quick response is significantly complementary with open innovation, and the resulting complex strategy performs well when demand uncertainty is significant.(2) The second problem investigates the adoption of CPFR with the precence of demand uncertainty. CPFR is a mechanism for coordinating the planning, forecasting and replenishment activities of upstream and downstream supply chain partners. The thesis explores the conditions that favor the active participation of CPFR program by various partners. Based on Nash equilibrium and newsvendor model, by considering information sharing costs, arbitary investment level and three-level supply chain, the thesis analyzes the conditions that favor the active participation of CPFR program by various partners. The thesis demonstrates that, when considering the three aformentioned situations, when the forecasting abilities of all the parties are at medium levels, it is relatively easy for them to co-implement CPFR.(3) The third problem involves another strategic consumer behavior, which is channel selection behavior. This part investigates the factors influencing the introduction of mobile channel into retail supply chain. By introducing mobile supply chain, channel coordination becomes more complex. Through numerical experiments, we find that as mobile channel becomes more distinct from existing channels and becomes cheaper, consumers and manufacturer will be better off. We also find the manufacturer's inclination to mobile channel will not eliminate the traditional channel. However, the manufacturer's mobile channel has to keep a balance between attracting consumers for retailers and for itself.Based on the several studies, this thesis forms an analytical framework for supply chain risk management in consumer goods industry, and quantitatively analyzes strategy choice problems for several typical supply chain risk management problems in consumer goods industry. This study not only is a further development of supply chain management theory, but also is meaningful to supply chain risk management in consumer goods industry in practice.