Optimisation of recovery policies in the era of supply chain disruptions: a system dynamics and reinforcement learning approach

Incidents like the COVID-19 pandemic or military conflicts disrupted global supply chains, causing long-lasting shortages in multiple sectors. This so-called ripple effect denotes the propagation of disruptions to further elements of the supply chain. Due to the severity of the impact that the ripple effect has on revenues, service levels, and reputation among supply chain entities, it is essential to understand the related implications. Given the unpredictable nature of disrupting events, this study emphasises the value of a reactive development of effective recovery policies on an operational level. In this article, a system dynamics model for a supply chain is used as framework to investigate the ripple effect. Based on this model, recovery policies are generated using reinforcement learning (RL), which represents a novel approach in this context. As main findings, the experimental results demonstrate the applicability of the proposed approach in mitigating the ripple effect based on secondary data from a major aerospace and defence supply chain and furthermore, the results indicate a broad applicability of the approach without the need for complete information about the disruption characteristics and supply chain entities. With further refinement and real-world implementation, the presented approach provides the potential to enhance supply chain resilience in practice.