System Dynamics Analysis of Retailer's Emergency Strategies When Facing Irrational Demand and Supply Disruption

Emergency events, such as epidemics, typhoons and floods, can lead to increased demand instability, resulting in a higher risk of supply and demand imbalances in supply chains. Companies often face challenges in managing irrational demand and supply disruptions due to their limited experience. In a three-level supply chain, this study utilizes the SIR epidemic model and system dynamics to analyze irrational demand and three emergency strategies (pricing, transshipment, and hybrid) while considering the effects of supply disruption. Retailers may choose delayed or non-delayed delivery mechanisms based on various external supply scenarios, including sufficient, stable, and learning types. The results show that the upsurge of irrational demand following an emergency outbreak is usually short-lived. A higher level of panic effect leads to increased irrational demand, while a stronger conformity effect results in faster increases and declines of such demand during early and later stages, respectively. Furthermore, the emergency strategies should aim to mitigate the negative impacts of the disruption on the retailer's operations and improve the retailer's emergency capabilities. Numerical analysis indicates that the retailer can increase its profit in the sufficient-type external supply scenario by adopting a pricing strategy that incorporates a delayed delivery mechanism. When facing an stable-type external supply scenario, the recommendation is to opt for the hybrid strategy. In a learning-type external supply scenario, the retailer should consider using the hybrid strategy with non-delayed delivery as the default option, but use a pricing strategy if delayed delivery is necessary