Disruptions in tightly coupled supply chain networks: the case of the US offshore oil industry

Abstract

Managers have paid increasing attention to the exposure of their supply chains to disruptions and seek ways to mitigate supply chain vulnerability. The interconnectedness of tightly coupled supply chain networks makes this a challenging task, because interconnectedness and tight coupling of nodes in the network lead to an amplification of the actual risk exposure. This phenomenon can be attributed to the propagation of losses through the network, which exhibits certain dynamics. In order to investigate this mechanism, we studied the complex supply chain network of the oil industry in the Gulf of Mexico. Our results provide an estimate of the economic impact of eventual random and hurricane-related disruptions and can be used as a decision support tool for risk management of supply disruptions in interconnected supply chain networks.

Keywords:

• supply chain risk management
• supply chain networks
• structural analysis
• complexity
• oil industry

Acknowledgements

The authors thank Joachim Butz, Norbert Knechtle and Stephan Schreckenberg from Swiss Re for their generous contribution and the valuable input.

Notes

Notes

1. On 21st June 2010, the MMS was reorganised and renamed the BOEMRE, which on 1st October 2011 was again replaced by the BOEM and the Bureau of Safety and Environmental Enforcement as part of a major reorganisation. Since our research was done in 2010, we refer to the organisation as BOEMRE.

2. The Deepwater Horizon offshore oil drilling rig exploded and sank in April 2010 while drilling an exploratory well at the Macondo oil field. The resultant oil spill lasted for several months and the damage to flora and fauna was widespread in the GoM and will last for decades.