A Quantitative Analysis of Disruption Risk in a Multi-Echelon Supply Chain

Abstract

We demonstrate how system resilience can be improved by focusing on a supply chain network as a whole. We analyze inventory placement and back-up methodologies in a multi-echelon network and view their effect on reducing supply chain risk. We focus on risk from both supply disruptions and demand uncertainty and compare their impacts and mitigating strategies. A simulation model developed to capture an actual network for a consumer packaged goods company is used for the analysis. We present analysis and insights for multi-echelon networks and show how network utilization and proactive planning enable reductions in supply chain disruption impact.

Keywords: supply chain disruptions, multi-echelon inventory, simulation, supply chain risk management, resilience