A System Dynamics Approach to Investigate the Effects of Disruption on the Supply Chain with A Mitigation Strategy

Abstract

In this paper, a system dynamics approach is used to simulate a three stages supply chain system experiencing supply disruption. The supply chain system consists of single supplier, manufacturer and retailer. The model is developed suggesting backlogged and inventory as the primary performance measure. The model is tested under three conditions, which are normal condition, disruption condition and disruption with a mitigation strategy. The main findings from the study are lead time changes on the entire system directly impact the inventory of the entire stages in the system. Furthermore, the disruption occurence produces an adverse effect on supply chain performance for a period longer than the actual period of the disruption and likewise, influence system performance. The study further identifies that by incorporating safety stock as a mitigation strategy in the event of a supply disruption, will significantly reduce the disruption impact. The proposed simulation model and experimental findings are important to assist management in their inventory and risk control decision-making in the event of disruptions.