A flexible time-to-build model of supply chain disruptions.

This article analyzes the effects of temporary supply chain disruptions using a general equilibrium model with a flexible time-to-build (FTTB) technology that captures multiple sequential production stages for capital goods. Calibrated to durable goods manufacturing data during the Covid-19 pandemic, the model replicates key empirical patterns such as prolonged declines in shipments and elevated ratios of unfilled orders to shipments following a one-month upstream production shock. The study extends the model to incorporate work-in-process (WIP) inventories, showing that while WIP dynamics introduce some smoothing and delay in production responses, their quantitative impact on short-term disruptions is limited. The findings suggest the model's potential utility for analyzing various supply chain shocks and informing risk management strategies, including inventory policies and vertical integration, in manufacturing sectors characterized by complex, multi-stage production processes.