Effectiveness of Response Strategies on Supply Chain Failure Periods

Abstract

Today supply chains have become more complex and exposed to more diverse risks due to globalization. It is essential for the supply chain to choose and implement a response strategy that fits the characteristics of the risk. In particular, it is necessary to use appropriate response strategies according to the period of failure. Based on literature research, this study presented hypotheses on the effectiveness of the response strategy on the failure period and tested the hypotheses using simulation and regression analysis. As for the response strategy, we investigated surplus inventory strategy, multiple sourcing strategy, and contingent rerouting strategy. As a result, the longer the failure period of the supply chain, the lower the effect of the surplus inventory strategy, while the effect of the multiple sourcing strategy increased. The contingent rerouting strategy showed a lower effect than non-response when the failure period was short, but when the failure period was long, it showed the best effect among the three strategies. Furthermore, the effect of the surplus inventory strategy further decreased as the demand increased sharply, and the effect of the multiple sourcing strategy further increased. The contingent rerouting strategy has seen a dramatic increase in response effects as the failure period increases when market demand increases sharply.