QUANTIFICATION OF RIPPLE EFFECT UNDER SUPPLIER UNCERTAINTY

Abstract

The supply chain is a network comprising all the people and businesses involved in producing a product and getting it to the final consumer. The raw material producers are the first link in the supply chain, and the last link is when the retail stores deliver the final product to the customer. A supply chain disruption is a stoppage in the flow of a process involving any of the organizations involved in the manufacturing, distribution, and sales of certain products or services. When an unfavorable occurrence has impacts that spread and have further effects, this is referred to as "Ripple Effect" in supply chain management. Since it is so delicate and unexpected, a company will suffer a huge loss that is practically unmanageable when this happens. It is difficult to create an updating procedure that can keep up with the constant demand in the supply chain (SC) while it is being planned. Previous approaches were based on the potential maximum loss where a model was used to evaluate the ripple effects of a supplier disruption. In this research, a new model is created to analyze and simulate real company data for understanding the effect of supplier disruption on supply chain management which causes the ripple effect as well as determine the performance impact of a disrupted supplier. In addition, our model allows the available inventory including backlog, service level by products, inventory spend at suppliers and daily revenue to measure of ripple effect more effectively and uses this as a forward action to avoid the propagation of uncertainty through the SC levels. Also, anyLogistix, a multimethod software for SC simulation and optimization is used for simulating and analyzing the ripple effect. We integrate constant demand by applying a design and planning model for observing ripple effect and assess this ripple effect of supplier disruption based on operational and investment cost considering ‘with disruption’ and ‘without disruption’ in this study by creating a map of the supply chain network. In a firm, managers can analyze the impact of disruption propagation and determine the most important sources to include in the disruption risk analysis by using the performance impact that have been suggested in our study.