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Disruption and Rerouting in Supply Chain Networks

Author

Listed:
  • John R. Birge

    (Booth School of Business, University of Chicago, Chicago, Illinois 60637)

  • Agostino Capponi

    (Industrial Engineering and Operations Research Department, Columbia University, New York, New York 10027)

  • Peng-Chu Chen

    (Department of Industrial and Manufacturing Systems Engineering, The University of Hong Kong, Pokfulam, Hong Kong)

Abstract

We study systemic risk in a supply chain network where firms are connected through purchase orders. Firms can be hit by cost or demand shocks, which can cause defaults. These shocks propagate through the supply chain network via input-output linkages between buyers and suppliers. Firms endogenously take contingency plans to mitigate the impact generated from disruptions. We show that, as long as firms have large initial equity buffers, network fragility is low if both buyer diversification and supplier diversification are low. We find that a single-sourcing strategy is beneficial for a firm only if the default probability of the firm’s supplier is low. Otherwise, a multiple-sourcing strategy is ex post more cost effective for a firm.

Suggested Citation

  • John R. Birge & Agostino Capponi & Peng-Chu Chen, 2023. "Disruption and Rerouting in Supply Chain Networks," Operations Research, INFORMS, vol. 71(2), pages 750-767, March.
    • Handle: RePEc:inm:oropre:v:71:y:2023:i:2:p:750-767
    DOI: 10.1287/opre.2022.2409
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    Citations

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    Cited by:

    1. Alikhani, Reza & Ranjbar, Amirhossein & Torabi, S. Ali & Zobel, Christopher W., 2025. "Performance evaluation of concurrent supply chain resilience strategies," International Journal of Production Economics, Elsevier, vol. 279(C).
    2. Le Sun & Tze San Ong & Boon Heng Teh & Assunta Di Vaio, 2024. "Sustainable performance measurement through digital transformation within the sustainable development framework: The mediating effect of supply chain concentration," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(6), pages 5895-5912, December.
    3. Sun, Kaili & Wang, Haohan & Ye, Shengchao, 2025. "How does digital transformation enhance industrial chain resilience? Evidence from China," Finance Research Letters, Elsevier, vol. 75(C).
    4. Luo, Lan & Li, Xiangyong & Zhao, Yuxuan, 2025. "A two-stage stochastic-robust model for supply chain network design problem under disruptions and endogenous demand uncertainty," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 196(C).
    5. Niu, Baozhuang & Deng, Xinhai & Xie, Fengfeng & Shen, Zifan, 2025. "Dual sourcing hurts supply chain viability? The value of brand-owners’ cooperation under single sourcing," Omega, Elsevier, vol. 133(C).
    6. Zhang, Shushan & Gu, Cheng & Zhang, Peiwen, 2025. "Alleviating dependence: High-speed rail opening and firms' supply chain dependence," Transport Policy, Elsevier, vol. 167(C), pages 116-129.
    7. Fu, Michael C. & Li, Bingqing & Li, Fei & Wu, Rongwen, 2025. "Contagion network, portfolio credit risk, and financial crisis," European Journal of Operational Research, Elsevier, vol. 321(3), pages 942-957.
    8. Çömez-Dolgan, Nagihan & Tanyeri-Günsür, Başak & Mai, Feng & Zhao, Xuying & Devaraj, Sarv, 2025. "Lean operations and firm resilience - contrasting effects of COVID-19 and economic recession," Omega, Elsevier, vol. 135(C).
    9. Zhou, Caibo & Song, Wenyan & Wang, Huiwen & Wang, Lihong, 2025. "Resilience Assessment of Supply Chain Networks Considering Continuously Varying Sates of Firms in Ripple Effect: A Comprehensive and Dynamic Operational-Structural Analysis," Omega, Elsevier, vol. 135(C).

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