A Decision Framework to Mitigate Supply Chain Risks: An Application in the Offshore-Wind Industry 

Dr Riccardo Mogre, Lecturer at Durham University Business School and his co-authors Professor Sri Talluri (Michigan State University) and Dr Federico D’Amico (EDF Energy) published the article “A Decision Framework to Mitigate Supply Chain Risks: An Application in the Offshore-Wind Industry” in the academic journal IEEE Transactions on Engineering Management. The authors received support for their work by the European Union Seventh Framework Programme under the Logistic Efficiencies and Naval Architecture for Wind Installations With Novel Developments (LEANWIND) Project Agreement SCP2-GA-2013-614020. 

The paper is motivated by capacity improvements of recent offshore wind farm projects. These result from employing larger turbines and installing more turbines per farm, with the aim of gaining efficiency in energy generation and also achieving economies of scale. However, larger offshore-wind farms make their construction project extremely complex to coordinate, particularly as they inevitably move into deeper waters and further from shore. In summary, the increased complexity of offshore-wind projects lead offshore-wind supply chains to face increasing exposure to risks. 

With this motivation in mind, the authors aimed at designing a decision support system to mitigate the supply chain risks in the offshore-wind industry by choosing appropriate governance structures. The decision support system employs the supply chain risk management process, which calls for a holistic view of the supply chain and its risks. It improves and extends previous decision support systems by 1) proposing a method for estimating probabilities from expert judgments; 2) considering the relationships among risks and mitigation measures; and 3) modelling the selection of mitigation measures leading to the lowest supply chain risk profile. 

By applying the decision support system to the offshore-wind supply chain, the authors contributed to the limited literature available on the supply chain of this expanding industry. For a supply chain characterised by medium exposure to risks, supplying a farm with capacity of 630 MW, the risk-profile-minimising governance structure is EPC (Engineering, Procurement, Construction), followed by multi-contracting and project alliance. The sensitivity analysis suggests that multi-contracting could be more effective than EPC for an offshore-wind farm characterized by low exposure to risks. Project alliance could be more effective than EPC only if the cost to set up this structure is relevantly reduced. 

Read the full paper on IEEEXplore 

Contact: Dr Riccardo Mogre