Wage-Dependent Labor and Supply Chain Networks in the COVID-19 Pandemic and Beyond
Labor is a critical resource for the functionality of supply chain networks. Without labor, products cannot be produced, transported, stored, and distributed to consumers at demand markets. Disruptions to labor in the COVID-19 pandemic have further highlighted its importance with many companies now increasing wages in order to attract workers. In this paper, we construct a computable supply chain network framework that includes labor as a resource, along with (hourly) wages that should be paid. We consider both a single firm and multiple firms with the latter engaged in competition with respect to substitutable products. We provide variational inequality formulations for the models without wage ceilings and with wage ceilings, along with a computational procedure. Numerical examples demonstrate the impacts of the addition of electronic commerce; the use of outsourcing, and competition, along with increases, as well as the tightening of wage ceilings on supply chain network links. The general, flexible, holistic framework reveals some unexpected results and also shows the benefits, in terms of profits, of the free market, with no imposed wage upper bounds