The impact of flexibility and redundancy on improving supply chain resilience to disruptions

Abstract

This paper examines the relative impact on supply chain responsiveness of adding flexibility and redundancy. We seek to investigate the effectiveness of flexibility and redundancy in terms of minimising expected supply chain cost and maximizing expected service delivery when a supply chain is exposed to supplier and environmental disruptions. Compared to a supply chain that uses neither strategy and is exposed to supplier and environmental disruptions, both practices reduce expected lost sales, reduce expected total cost, and increase the expected service level. Our results show that the backup-suppliers practice is more effective than the flexible-suppliers practice, as measured by cost reduction and service-level improvement. In addition, we show that a hybrid practice created by adding some level of flexibility to a backup-suppliers practice is more desirable in terms of lowering pre-disruption investment, increasing the responsiveness of the supply chain, and lowering the expected total cost. Moreover, the result of the simulation shows that on average, the proposed stochastic model could decrease the company's total cost by 5.51%. It also shows that planning and investing in proactive demand management could decrease the company's total cost by 7.87%. Our findings provide insights into the contingencies that support implementation of each practice.

KEYWORDS:

• Supply chain management
• flexibility
• supply network
• enterprise risk management
• operations management

Acknowledgments

This research is based on work supported by the National Science Foundation (NSF) under grant number 1238878. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author(s) and do not necessarily reflect the views of the National Science Foundation.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 From the perspective of resource dependency theory, these two strategies are also referred to as Buffering (keeping additional inventory) and Bridging (establishing strong linkages with the exchange partners); buffering is more externally-oriented, while bridging is more internally-driven (Oliver 1991; Carroll, 1993; Gresov and Drazin 1997; Bode et al. 2011; Talluri et al. 2013). Because both of our mitigation strategies are externally oriented, Redundancy and Flexibility appear to be more suitable terms in this context.

Additional information

Funding

This work was supported by National Science Foundation (NSF) .

Notes on contributors

Masoud Kamalahmadi

Masoud Kamalahmadi is an assistant professor in the Department of Management Science at University of Miami’s Herbert Business School. He received his Ph.D. in Operations Management and Decision Sciences from Indiana University’s Kelley School of Business. He has done extensive research in the field of supply chain risk management. His other research interests are healthcare operations management and behavioural operations management.

Mansoor Shekarian

Mansoor Shekarian is a Ph.D. student in Operations and Business Analytics Department at the University of Oregon. He received his B.S. in Industrial Engineering from Sharif University of Technology and his M.S. in Technology Management from North Carolina A&T State University. His research interest includes service operations management, supply chain management, and applied econometrics. He is a member of the Institute for Operations Research and the Management Sciences (INFORMS), the Production and Operations Management Society (POMS), and the Manufacturing and Service Operations Management Society (M&SOM).

Mahour Mellat Parast

Mahour Mellat Parast is an Eminent Scholar at the Ira A. Fulton Schools of Engineering at Arizona State University. His current research is focused on supply chain risk and resilience management, and process and product innovation. His scholarly works have appeared in several peer-reviewed journals such as Journal of Operations Management, Decision Sciences Journal, International Journal of Production Research, International Journal of Production Economics, International Journal of Logistics Management, International Journal of Logistics Research and Applications, Supply Chain Management: An International Journal, and Production Planning & Control. He is a member of the Decision Sciences Institute (DSI), the Production and Operations Management Society (POMS), and the Academy of Management (AOM). Mahour received his Ph.D. in Industrial & Management Systems Engineering from University of Nebraska-Lincoln, M.S. from Iran University of Science and Technology (Industrial Engineering), and B.S. from Sharif University (Industrial Engineering).