Enhancing Resilience: Model-based Simulations

Purpose – In light of the recently experienced systemic shocks (the COVID-19 pandemic and the war in Ukraine) we investigate supply chain robustness. We aim to understand the potential consequences of uncertain events or adversary’s action on critical supplies in the Alliance. Design/methodology/approach – We leverage a parsimonious supply chain model and investigate the relationship between upstream supplier concentration/diversification and the supply chain’s robustness (survival probability) in presence of uncertain systemic shocks. In several scenarios of shock events we simulate alternative input sourcing strategies in the presence of uncertainty. Findings – A firm-level cost-focused optimisation may lead all upstream suppliers to concentrate in one location which – when subsequently hit by a shock – would result in a disruption of the entire supply chain. A chain-level forward-looking optimisation diversifies the upstream supplier location and sourcing decisions. As a result, the supply chain’s survival probability is maximised, and critical supplies will continue even under the most demanding circumstances. Practical implications – Our findings encourage political and strategic decision makers to enhance upstream supply chain robustness in critical and strategic sectors. Originality/value – The paper shows formally why a market-based global input sourcing strategy may be efficient from an individual firm's perspective but may be suboptimal from a societal resilience perspective.

KANCS D'Artis; 

2024-11-06

EMERALD GROUP HOLDINGS LTD.

JRC139272

2399-6447 (online),   

https://publications.jrc.ec.europa.eu/repository/handle/JRC139272,   

10.1108/JDAL-01-2023-0001 (online),