Can the localization ratio be considered as a resilience indicator in the supply chain?

Abstract

Supply chain resilience is concerned with establishing disruption-resistant operational practices and ensuring the achievement of some planned performance responding to shocks. Thus, resilience is both a quality and a quantity. The existing literature is rich in analyzing each of these two parts separately. However, studies connecting quantity and quality perspectives are rare. We position our study in the context of debates about the impact of localization on supply chain resilience. We depart from some industrial practices that use a localization degree to measure resilience. Two substantial contributions emerge from this study. First, we define a localization index of manufacturing activities in the supply chain. Second, we test two hypotheses using a discrete-event simulation model in anyLogistix: (i) Does a localization ratio impact supply chain resilience, and (ii) what role does the severity of shocks play in the impact of localization on supply chain resilience? Our findings suggest that localization impacts supply chain resilience. A positive effect of localization can be observed in scenarios with short-term disruptions, and it decreases with an increase in shock duration and severity. A mixed strategy combining local and global footprints can be recommended as a resilient supply chain strategy.