Measuring supply chain resilience for informed resilience strategy investment

Existing supply chain resilience (SCR) research lacks a clear, holistic method to quantify resilience. This paper provides an improved SCR metric while exploring the inherent tradeoff between investments in inventory and production capacity to yield the most resilient supply chain network given budget constraints. Discrete event simulation is used to develop a generalizable metric to provide insight into how supply chain design and investment determine a network's response to a disruption. The developed resilience capability metric (RCM), utilizing area under the curve, measures the cumulative performance level of the system from disruption to a predetermined endpoint, representing how much of the system demand can be served by different network designs. Results indicate inventory and production have different effects on how a system behaves postdisruption, but that the two SCR investments should not be viewed independently since optimal performance is connected to coordinated adjustments to both. Additionally, the use of the RCM shows that a key factor in a supply chain's resilience is the speed of the response. By measuring the cumulative performance over the total event, RCM provides managers with the ability to truly compare different SCR investments to see which has the greatest impact on overall resilience.