Disruption Risk Analysis of Substitutable Dual Product Supply Chain: A System Dynamics Framework

Abstract

Uncertain events such as earthquakes, epidemics, and wars have increased the risk of supply chain disruption. Due to the needs of carbon reduction policies and environmental protection, a large number of enterprises have started to produce both traditional and green products. Studying the issue of supply chain disruption for such enterprises has significant practical significance. We have developed a system dynamics model for a substitutable dual product supply chain with two levels of supply sources. Through simulation analysis, we found that (1) supply chain disruption can cause fluctuations in the manufacturer's inventory, and disruptions from second tier suppliers have a higher impact on the manufacturer's inventory than that from primary suppliers. In addition, the disruption of traditional products will cause consumers to flow to the green product market, resulting in a sudden increase in order for green products and components in a short period of time, causing a delayed impact on the inventory of suppliers and manufacturers of green products. (2) The disruption of upstream suppliers in traditional products causes the highest profit losses for all traditional product suppliers, while the disruption of downstream suppliers in green products causes the highest profit losses for the manufacturer and all green product suppliers. (3) From the perspective of the service level, compared to other components, the disruption of critical components in traditional products poses the highest risk of out of stock in the supply chain, while the risk of out-of-stock in the intermediate component of green product is the smallest. (4) Common sense may suggest that the more the suppliers disrupt, the higher the damage of the supply chain. However, due to the ripple effect, this article finds that from the perspectives of profit, inventory, and service level, multisupplier disruption is not necessarily inferior to single supplier disruption.