Modeling and Evaluation of Vulnerabilities in a Supply Chain

Risks have recently emerged as a key issue for the life cycle of a supply chain. Operations risks are particularly important because of the propagation of their effects. An ARIMA model of a supply chain is proposed to represent flow dynamics in a network of enterprises and their responses to strong disturbances from the demand and/or the offer side. When the amplitude of product flows variations gets high, some thresholds or boundary levels may be hit and saturation functions need to be incorporated in the system model. In turn, saturation effects tend to amplify the deviations of flow and inventory variables, with increased risks of instability. An elementary stage with one retailer and one supplier is studied under a non stationary random demand pattern represented by an ARIMA model. Ordering and inventory variables are simulated under two ordering policies. As a result of the comparison, some measures of the system vulnerabilities caused by demand disturbances are proposed.