The Supply Chain Disruption Framework Post COVID-19: A System Dynamics Model
| Author | Debasri Dey,Virupaxi Bagodi,Deepankar Sinha |
| Published date | 01 November 2020 |
| Date | 01 November 2020 |
| DOI | 10.1177/0015732520947904 |
| Subject Matter | Articles |
The Supply Chain
Disruption Framework
Post COVID-19: A
System Dynamics
Model
Deepankar Sinha1, Virupaxi Bagodi2
and Debasri Dey3,4
Abstract
The COVID pandemic seems to have raised the question, ‘whether existing supply
chain (SC) disruption philosophies and strategies continue to remain valid?’. This
article assesses the differences in the business scenarios pre-and post-COVID.
The authors capture the mathematical and operational relationships amongst the
relevant factors and propose a System Dynamics (SD) model to carry out the
simulations. The approach considers the impact of the force majeure condition,
that is, COVID period on individuals’ income, prices and demand of goods, cost
of input and supply of finished goods. The results show that earnings may increase
demand but, disruption in supplies of raw materials and finished products nullify
the effect. On the other hand, even if flow returns to normal, reduced income
affects normal goods businesses.
JEL Codes: R41
Keywords
COVID pandemic, force majeure condition, supply chain (SC) disruption, demand,
system dynamics model, policy and strategy experimentation
Article
1 Indian Institute of Foreign Trade, Kolkata, West Bengal, India.
2 Government Engineering College, Talakal, Koppal, Karnataka, India.
3 Lady Brabourne College, Kolkata, West Bengal, India.
4 NSHM Knowledge Campus, EDI-Kolkata, IGNOU-RC-Kolkata, Kolkata, West Bengal, India.
Corresponding author:
Deepankar Sinha, Indian Institute of Foreign Trade, Kolkata Campus, 1583 Madurdaha, Kolkata, West
Bengal 700107, India.
E-mail: dsinha@iift.edu
Foreign Trade Review
55(4) 511–534, 2020
© 2020 Indian Institute of
Foreign Trade
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DOI: 10.1177/0015732520947904
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512 Foreign Trade Review 55(4)
Introduction
On 30th January 2020, the World Health Organization (WHO) declared the CO-
VID-19 as a public health emergency of internal concern (PHEIC). By the end
of March 2020, affected countries in the EU, China and India were all under
lockdown. At this time production stopped, movement of goods curtailed and
the industry remained perplexed. The outbreak of this disease marked the begin-
ning of a new era demanding re-thinking of business forms and management. It
stopped the world from moving, and disrupted ow/network of ows of goods.
The demand for shipping reduced and at the same time, the freight rates went up.
This trend is unusual compared to the pre-COVID period. Figure 1 shows that be-
fore 2019 the volume of container trafc and shipping freight moved in a similar
direction. That is, as the trafc grew, the rates also increased. Whereas, post-2019,
the freight saw rise even when the trafc came down.
Figure 2 shows the drop in monthly vessel traffic across two crucial ship routes
between January 2020 and May 2020. There was no vessel movement in March
and April 2020. The container traffic in the world’s largest container port, namely
dipped by 40 per cent in March 2020 compared to July 2019 (Figure 3). The port
of New York handled zero traffic in May 2020. The total traffic in Chinese ports
dipped by 39 per cent from September 2019 to February 2020.
Although the basic definition of disruption of the supply chain remains
unchanged, the previous researchers did not imagine this situation. This time the
disruption is a global phenomenon.
Schmidt & Raman (2012) defined disruption as an ‘unplanned event that
adversely affects a firm’s normal operations’. The instances of disorders showed
regional focus such as natural-hazards, terrorist attacks and political disturbances.
The present situation seems to have dis-proven the previous observation—
‘disruptions have a significant impact on the least-developed country (UN, 2012)’.
Figure 1. Year-on-Year Change of Container Traffic in TEUs and Price Index
Source: Created by author on data from Bloomberg.
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