Modeling the Impact of Supply Chain Resilience Configurations on Operational Performance: A System Dynamics Approach

Abstract

In response to the current global unrest, this study proposes a new system dynamics simulation model to capture the effects of multiple configurations of supply chain resilience (SCRES) on a firm’s operational performance. Instead of using a static, siloed approach to the analysis, this study models system resilience as the dynamic interplay of a system of interconnected building capacities for system \flexibility, \redudancy, \agility, \and \collaboration\ and agility. The simulation attempts to model important feedback loops and non-linear interactions associated with a multi-echelon supply chain and recurring external shocks, such as demand shocks or supply interruptions. The operational performance of the supply chain is modeled as a weighted index of costs, service level, and recovery time. The simulation model is informed by data obtained of a recent manufacturing case study and demonstrates that the best operational performance of a SCRES system is not obtained by the maximizing one building capability of the system. Rather, \the \optimal \performance is spirited by synergistic configurations of several system building capacities. The best collaborative long-term performance is obtained by a \balanced \investment in agility and collaboration to the exclusion of excess reliance on system building redundancy, which stabilizes the system at a very high operational price. The model also identifies SCRES as a non-linear system of collaborative trade, demonstrating that strategic collaboration with critical supply chain partners forms a positive feedback cycle that reduces system building costs of inventory buffers by promoting overall system SCRES. This research is a contribution to operation management theory by offering a comprehensive and dynamic perspective to understand SCRES as a configurational system as opposed to a collection of distinct practices. The outcomes of this research can serve as practical guidelines for managers on how to best use their scarce resources by suggesting a portfolio approach which focuses on adaptive capabilities rather than static redundancies for building a resilient operation.