System dynamics modeling and robustness analysis for capital-constrained supply chain under disruption

Abstract

PurposeThe purpose of this study is to explore mitigation measures for cash flow interruption during the epidemic and provide decision support to ensure the regular operation and robustness of the supply chain (SC).Design/methodology/approachConsidering the scenarios of production capacity and demand disruption during the epidemic, the authors adopt system dynamics (SD) to construct a three-echelon SC financial system consisting of a core manufacturer, a capital-constrained retailer and the customer. In different interruption scenarios, through the decision adjustments of stakeholders, the differences in performance are compared to explore solutions for SC robust optimization.FindingsThe results show that partial credit guarantee (PCG) could solve cash flow interruption and maintain the regular operation of the SC. During epidemic, with the product price increases, the revenue of stakeholders and the robustness are generally negatively correlated. But when the manufacturer's production capacity is fully interrupted, increasing product price is the right decision for the retailer and could simultaneously promote performance and robustness.Originality/valueThis paper primarily focuses on the PCG under the cash flow interruption caused by epidemics. The authors adopt the supply chain finance (SCF) theory and SD method to supplement and expand existing research on interruption management of SC. It is a pioneering study to explore the robustness of the SC financial system under disruptions.

Disruption Risk Analysis of Substitutable Dual Product Supply Chain: A System Dynamics Framework

“…Zhang et al [18] considered a closed-loop supply chain with supply disruption and employed SD to model the dynamics of a Stackelberg game. Zhang et al [8] used SD to study the fnancial system of a three-echelon supply chain during the epidemic. Lai et al [9] used system dynamics simulation and game theory to study the supply interruption and international trade risks of ofshore global production networks, established a system dynamics simulation model considering supply interruption risks, evaluated the impact of diferent supply interruption modes on OEM profts, and fnally proposed dynamic and static penalty mechanisms.…”

“…(ii) Current literature on supply chain disruptions primarily examines single disruption modes [8][9][10][11], neglecting the complexity of mixed interruptions involving various levels and products. In contrast, our study delves into these intricacies and demonstrates that the impact of multisupplier disruption may be less severe than that of single supplier disruption.…”