Disruption tails and revival policies: A simulation analysis of supply chain design and production-ordering systems in the recovery and post-disruption periods

Abstract

Abstract We study production-ordering behaviour in a supply chain (SC) with disruption risks in recovery and post-disruption periods and the influence of severe disruptions on production and distribution network design. A real-life case-study of a disruption in a SC is considered and investigated with the help of discrete-event simulation blended with network optimisation in anyLogistix. Two novel findings are presented. First, disruption-driven changes in SC behaviour may result in backlog and delayed orders, the accumulation of which in the post-disruption period we call “disruption tails”. The transition of these residues into the post-disruption period causes post-disruption SC instability, resulting in further delivery delays and non-recovery of SC performance. Second, a smooth transition from the contingency policy through a special “revival policy” to normal operations mode partially mitigates the negative effects of disruption tails. The results show that isolated production and distribution network design optimisation can lead to severe decreases in performance in the event of SC disruptions. Contingent recovery policies need to be applied during the disruption period along with a revival policy in the post-disruption period to avoid disruption tails. These revival policies must be developed for the transition from the recovery to the disruption-free operations mode. A revival policy is meant to mitigate the negative impact of disruption tails and stabilise the ordering control policies and performance in the SC. Thus, recovery policies should not be limited to the disruption period only. They should also consider the post-disruption period and be included in SC design decisions. The revival policy should be included in the SC resilience framework.