Adapting to Disruptions: Flexibility as a Pillar of Supply Chain Resilience

Abstract: Supply chain disruptions cause shortages of raw material and products. To increase resilience, i.e., the ability to cope with shocks, substituting goods in established supply chains can become an effective alternative to creating new distribution links. We demonstrate its impact on supply deficits through a detailed analysis of the US opioid distribution system. Reconstructing 40 billion empirical distribution paths, our data-driven model allows a unique inspection of policies that increase the substitution flexibility. Our approach enables policymakers to quantify the trade-off between increasing flexibility, i.e., reduced supply deficits, and increasing complexity of the supply chain, which could make it more expensive to operate.