Stress Testing On A Supply Chain

This thesis is concerned with the stress testing theory in supply chain risk management. Stress testing, one of the financial risk quantitative techniques, is mainly used in risk analysis for extreme scenarios (events with small probability but serious consequences), reflecting loss under extreme events. In essence, stress testing is to estimate potential loss under certain scenario by means of calibrating stress scenarios, using determined valuation model. In response to the similarity in risk management theory, this thesis makes stress testing that be originally used in financial system a key tool in assessing supply chain risks, with characteristics of supply chain, and study on the following core issues:First, A theory of stress testing in supply chain is established. The focus casts on theory introduction. The thesis demonstrates the supply chain risk transmission map, after with necessity and feasibility analysis, and on which basis, applies stress testing into risk measurement of supply chain. The paper initiates the concept of stress testing a supply chain by defining and specifying some relevant contents, followed by establishing a general theoretical framework. Meanwhile, this paper clears the relationship between this new concept and Existing supply chain risk management theory.Second, the implementation process of stress testing in supply chain is explored. The thesis discusses prerequisites for successful implementation, including institutional and technical support, and after that, elaborates nine elements of the process and follow-ups, with a supplement for difficulties and challenges in the process, question on stress tests and other relevant contents."What's stress testing in supply chain?", "Why we should use stress testing as one of the risk measurement tools?", and "How to implement stress tests in supply chain?" After answering those questions, the paper applies the above theory into practice to study the stress tests on supply disruption separately. The thesis analyzes sources, manifestations and mechanism of the supply risk. Afterwards, a decision framework towards supply risks is built and supply risk transmission map and risk factor assessment models are launched in detail.According to different source of supply risk, two risk measurement models reflecting risk preferences of decision makers are established:market expectations model and worse case model. Market expectations models are established by the mathematical methods according to different risk transmission maps. The model focuses on single-cycle supply chain decision making problem of short-life-cycle products in the Stackelberg game. The worse case model is built by means of computer simulation. The paper provides the general idea of model simulation of this kind and simulates operating results over time of a small and medium circuit board manufacturing enterprises affected by human disturbance events. The model casts on multi-period decision-making problems with more uncertainties in consideration, in order to assess the operations conditions under upstream disruption. In addition, the paper indicates the role and inspiration of stress tests on supply risks.