Efficiency and resilience: Key drivers of distribution network growth
Distribution networks, which supply goods from manufacturers to final buyers, are crucial for a functioning economy. A network model is proposed to describe the emergence and growth of these networks. The model considers two firm-level practices: centralization and multi-sourcing. Centralization enhances network efficiency by using short distribution paths, while multi-sourcing fosters resilience by providing multiple distribution paths. The model was validated using data on drug shipments in the US, and it successfully replicates several structural features of the empirical networks, including their out-degree and path length distributions, as well as their resilience and efficiency properties. The findings suggest that the proposed firm-level practices effectively capture the network growth process that leads to the observed structures.
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