Quantifying supply chain disruption risk using Monte Carlo and discrete-event simulation

Abstract

We present a model constructed for a large consumer products company to assess their vulnerability to disruption risk and quantify its impact on customer service. Risk profiles for the locations and connections in the supply chain are developed using Monte Carlo simulation, and the flow of material and network interactions are modeled using discrete-event simulation. Capturing both the risk profiles and material flow with simulation allows for a clear view of the impact of disruptions on the system. We also model various strategies for coping with the risk in the system in order to maintain product availability to the customer. We discuss the dynamic nature of risk in the network and the importance of proactive planning to mitigate and recover from disruptions.