Assessing the benefits of supply chain trust: NK simulation-based methodology and application

Previous literature has emphasized that developing trust among supply chain (SC) firms is a critical element in achieving SC effectiveness. Since developing trust is an expensive task, however, making an informed decision whether to invest or not in trust requires careful assessment of trust benefits. Therefore, we advance a simulation-based methodology to quantify performance improvements associated with trust in SCs. We develop an NK simulation model of a generic SC that captures the SC dynamics under two alternative scenarios, characterized by the presence and absence of trust respectively. A procedure is then illustrated to quantify the benefits of trust in the SC. We also apply our proposed methodology to a real-world SC. Results show that, when trust is pervasive across the SC, performance increases at both the levels of the overall SC and its leading firm.