Modelling disruption ripple effect in the three-stage supply chain

A major disruption in the supply chain causes a shutdown or reduction in capacity. A disruption at any point in the supply chain spreads as a ripple effect to other members, causes a reduction or interruption in production and makes distributors unable to respond to customers with a lack of inventory or affects the lead time. The present research introduces and quantitatively shows the ripple effect of the disruption of the supply chain. To describe supply chain recovery and vulnerability, we integrated a discrete-time Markov chain with a Bayesian network model for simulating the propagation behaviour of supply chain interruptions. After that, we provided a set of standards for estimating the knock-on effects of a supply disruption on the supplier,manufacturer and distributor in terms of delivery lead time and revenue loss. We made a comparison between the results of the manufacturer disruption and the supplier disruption. Results indicate that this model can show the result of disruption and high-risk paths in the supply chain so that we can estimate the supply chain vulnerability before disruption. If a disruption occurs at one point in the supply chain, other members will be subject to disruption, and each member closer to the disruption point will receive a larger blast wave. The novelty of the present study is the quantitative estimation of the risk of a long-time disruption ripple effect based on the lead time and lost sales for a three-tier supply chain and compared the ripple effect of the manufacturer disruption with the ripple effect of the supplier disruption.