Valuation of supply chain flow risks by indexing

The paper is based on a general conceptual supply chain flow risk model developed in an earlier paper, a literature review and case studies. The paper has the title "Developing a supply chain risk model" and is reported as a final paper at the NOFOMA 2005 conference. The literature review has been focusing articles and reports/books on supply chain management. Some of its findings have earlier been reported in a book chapter in Brindley (2004). There is one main case-study, presented here as case Beta and two minor cases (Alfa and Gamma). The author spent five weeks during the autumn of 2004 on the floor in two of the factories of Beta. That resulted in three internal reports to Beta and a lot of experience and ideas about supply chain flow related risks including the valuation of risks through indexing. Earlier drafts of this paper have on some occasions been tested on risk managers of Beta and developed further based on their feedback. The three cases illustrate the use of the valuation model. Finally is concluded that using indexes can be a way of quickly and with limited resources getting a broad grip of the total risks in the supply chain – not least in new risk situations. The alternative is often not to have any figure at all for the supply chain risks. But we have to be careful because indexes create a new risk – the risk that we believe too much in them.