Critical demand in a stochastic model of flows in supply networks

TL;DR

This paper investigates the critical demand in supply networks using a stochastic model, highlighting how topology and buffer stocks influence flow stability and proposing that broad, short supply chains are advantageous.

Contribution

It introduces a stochastic model analyzing the impact of network topology and buffer stocks on supply flow stability, emphasizing the importance of connectivity.

Findings

Without stocks, topology is irrelevant; minimal production dominates.

With stocks, memory effects make topology crucial.

Broader, shorter supply chains improve stability.

Abstract

Supply networks are essential for modern production, yet their critical properties remain understudied. We present a stochastic model with random production capacities to analyze material flow to a root node, focusing on topology and buffer stocks. The critical demand, where unsatisfied demand diverges, is examined mostly through numerical simulations. Without stocks, minimal production dictates behavior, making topology irrelevant. With stocks, memory effects arise, making topology crucial. Increased local connectivity is beneficial: firms should favor broad, short supply chains over long, narrow ones.