Analysis of the Effect of Trading Quantity Bound Setting on Supply Chain Disruption Risks

Abstract

In recent years, the impacts on the manufacturing industry of natural disasters and rapid changes in market environments, which affect procurement and supply activities that are essential for production, have caused an increase in the importance of supply chain disruption risk management. This study proposes a cooperative supply chain model that focuses on the trading conditions between manufacturers and suppliers under uncertain fluctuations in component procurement and product supply. Based on this model, the present study develops a discrete-event simulation that incorporates supply chain disruption risks that arise from insufficient procurement quantities caused by natural disasters or unexpected demand surges. The simulation is used to examine the impact of such disruptions on overall supply chain profits and to analyze how setting upper and lower bounds on trading quantities influences supply chain disruption risks.