Mitigating International Supply-chain Risk with Inventories and Fast Transport

This project will study how firms prepare for and adjust to the risks involved in trading with distant suppliers and the associated lengthy transit times. We will focus on the role of both idiosyncratic supply and demand risks as well as aggregate risks. We will study the ways that firms differ in their abilities to make investments to mitigate these risks. Our analysis will focus on the use of inventories and alternative modes of transport to smooth out supply disruptions and take advantage of surges in demand. Inventories and mode of transport have been key margins of adjustment during recent large supply disruptions. Our work will generalize the lessons learned from these experiences and apply them to a broad range of supply-chain risks.