Improving supply chain resilience through investment in flexibility and innovation

Abstract

This study examines how a firm can improve its resilience to respond effectively to supply chain disruptions through investment in flexibility and innovation. There are several approaches and conceptualizations of flexibility and innovation in the operations and supply chain management literature. Nevertheless, how flexibility and innovation can enhance an organisational response to disruptions has not received much attention. We extend the research in supply chain resilience by investigating the relationships between flexibility, innovation, and resilience under disruption risk. The findings show that innovation and flexibility have a positive impact on resilience. A numerical example based on these relationships shows significant differences between optimum values of objective functions when we have high disruption risk versus low disruption risk imposed on the system. By developing a novel multi-objective mixed-integer linear programming, the findings reveal that disruption risks affect resilience and firms’ ROI, so investing in improvements in flexibility and innovation decreases the impact of disruptions.