In many industries, future demand is driven by past sales, and the inability to sell today can decrease future market size. While the dependence of demand on sales has been addressed in several streams of Operations literature, such a setting has not been studied in the disruptions literature....

We focus on the optimal use of risk mitigation inventory (RMI) and reserve capacity to manage disruption risk in serial multi-stage supply chains where product transformation occurs at each stage. We find that under reasonable conditions it is better to hold more RMI downstream than upstream...