System Dynamics Modeling-based Study of Contingent Sourcing under Supply Disruptions

Abstract

In this paper, using the methodology of system dynamics modeling, we separately build two models for a supply chain under two circumstances of supply disruptions, without backup supplier, and with a contingent supplier. The retailer's total profits are also compared under these two circumstances of supply disruptions to help the decision-makers better understanding the backup purchasing strategy. The supply chain studied only involves one retailer and two independent suppliers that are referred to as major supplier and backup supplier. The paper contributes to the literature by providing a better understanding of the impacts of supply disruptions on the system performance and by shedding insights into the value of a backup supply.