Using transaction-level simulation to prepare for and recover from supply-chain disasters

When hit by catastrophes, such as the March 2011 Japanese tsunami or the floods in Thailand in late 2011, companies with damaged or destroyed supply chains often must scramble to determine what happened, how they are affected, and what they must do to recover and restore operations. Frequently, commonalities and interdependencies among supply-chain vendors and service providers threaten to disrupt supplies much more than anticipated, leading to plant closings, shrinking inventories and lost sales. It can take companies weeks or months to determine the full impact of catastrophes. In this paper, we propose a supply-chain simulation model derived from the successful DECIDE-FS^® model used by U.S. financial-services firms.¹ The model simulates interactions and interconnectivity among supply-chain entities at the transaction level. It facilitates identification of many significant components and dependencies across global supply chains serving individual organizations, industry sectors, government agencies, geographic regions, etc. By modeling transactions among entities, players can determine the impact of major disruptions and can work out, in advance, their responses and recovery strategies. The DECIDE model enables players to examine the potential impact of a wide variety of “injects” affecting the continuity and resiliency of supply chains and the viability of both customer and supplier organizations. Consequently, contingency plans can be prepared to address potential disasters ranging from a fire or flood at a single facility to national and regional natural events, such as earthquakes, tsunamis, floods, volcanic eruptions, hurricanes, tornadoes, etc. Other types of incident include acts by terrorists, nation states, and organized criminals. We compare DECIDE-FS^® with the Homeland Security Exercise and Evaluation Program (HSEEP) requirements, and discuss linking the DECIDE model to emergency and fir- t-responder operations, conforming to standards of the Standard Unified Modeling, Mapping and Integration Toolkit (SUMMIT) using the National Information Exchange Model (NIEM). The paper discusses how the DECIDE model could be adapted to other segments of the economy and to operational use in emergency command centers in the event of real-world disasters.