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Managing disruption risk / Lingxiu Dong in Management science, Vol. 58 N° 10 (Octobre 2012) 

Public ISBD [article]  in Management science > Vol. 58 N° 10 (Octobre 2012) . - pp. 1898-1915 Titre : Managing disruption risk : The interplay between operations and insurance Type de document : texte imprimé Auteurs : Lingxiu Dong, Auteur ; Brian Tomlin, Auteur Année de publication : 2012 Article en page(s) : pp. 1898-1915 Note générale : Management Langues : Anglais (eng) Mots-clés : Disruptions  Inventory  Insurance Résumé : Disruptive events that halt production can have severe business consequences if not appropriately managed. Business interruption (BI) insurance offers firms a financial mechanism for managing their exposure to disruption risk. Firms can also avail of operational measures to manage the risk. In this paper, we explore the relationship between BI insurance and operational measures. We model a manufacturing firm that can purchase BI insurance, invest in inventory, and avail of emergency sourcing. Allowing the insurance premium to depend on the firm's insurance and operational decisions, we characterize the optimal insurance deductible and coverage limit as well as the optimal inventory level. We prove that insurance and operational measures are not always substitutes, and we establish conditions under which they can be complements; that is, insurance can increase the marginal value of inventory and can increase the overall value of emergency sourcing. We also find that the value of insurance is higher for those firms less able to absorb financially significant disruptions. As disruptions become longer but rarer, the value of emergency sourcing increases, and the value of inventory and the value of insurance increase before eventually decreasing. ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/10/1898.abstract [article] Managing disruption risk : The interplay between operations and insurance [texte imprimé] / Lingxiu Dong, Auteur ; Brian Tomlin, Auteur . - 2012 . - pp. 1898-1915. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 10 (Octobre 2012) . - pp. 1898-1915 Mots-clés : Disruptions  Inventory  Insurance Résumé : Disruptive events that halt production can have severe business consequences if not appropriately managed. Business interruption (BI) insurance offers firms a financial mechanism for managing their exposure to disruption risk. Firms can also avail of operational measures to manage the risk. In this paper, we explore the relationship between BI insurance and operational measures. We model a manufacturing firm that can purchase BI insurance, invest in inventory, and avail of emergency sourcing. Allowing the insurance premium to depend on the firm's insurance and operational decisions, we characterize the optimal insurance deductible and coverage limit as well as the optimal inventory level. We prove that insurance and operational measures are not always substitutes, and we establish conditions under which they can be complements; that is, insurance can increase the marginal value of inventory and can increase the overall value of emergency sourcing. We also find that the value of insurance is higher for those firms less able to absorb financially significant disruptions. As disruptions become longer but rarer, the value of emergency sourcing increases, and the value of inventory and the value of insurance increase before eventually decreasing. ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/10/1898.abstract