Track: Systems Dynamics

Abstract

Using system dynamics modeling and simulation on a moroccan retail industry, we investigate wether and how delay in payment enhance supply chain resilience. Potential risks for the retailer’s resilience performance include the possibility of a mismatch between supply and demand, as well as serving the store inefficiently and causing on-shelf stock-outs due to the lack of cash-flow, Thus, resilience is determined by investigating the dynamic behaviour of stocks, shipment responses, cash in hand, and invoices payments. We show that retailer’s that face liquidity shocks are more likely to default on their market response, especially when the shocks are unexpected, supply chain partners with little liquidity, are likely to be credit constrained or are close to their debt capacity. Credit constrained firms would thus pass one their liquidity shocks on to their suppliers down the trade credit chain,we show that firms provide liquidity insurance to each other and that this mechanism is able to alleviate credit constraints. The method allows insights into the system structures that would not be evident using simulation alone, including a better understanding of the influence of control parameters on dynamic behaviours, and the impact of payment delays on supply chain resilience.