Conceptualizing the Broader Impacts of Industry Preparedness Strategies with a Risk-Based Input-Output Model

Supply chain risk management has become a popular topic among both practitioners and researchers, and different models have been proposed to help companies prepare for and react to a disruption in their supply chain. However, less attention has been given to exploring the regional economic impact of these strategies following a disruptive event. This paper examines three different strategies a firm may choose in order to continue production operations should one of its suppliers suffer a disruption. A firm may: (i) maintain inventory, (ii) purchase from an alternate supplier, and/or (iii) substitute for another type of input. We integrate the firm’s risk management strategy into a risk-based input-output model that quantifies the economic impact of each strategy. We deploy the model with a data-driven case study addressing the multi-state impacts of a supply shortage at a single firm.