Recycled vs. Virgin Materials in Additive Manufacturing: Assessing the Risk Mitigation Potential in Uncertain Supply Scenarios

The principles of Additive Manufacturing (AM) and Circular Economy (CE) are characterized by significant potential in mitigating supply chain disruptions. However, a dearth of efficacious decision-support tools hinders the formulation of strategic responses. This study seeks to address this gap by developing a computational model that integrates Real Options Valuation (ROV) and Monte Carlo Simulation (MCS) to assess the financial and strategic implications of switching between recycled and virgin materials for AM. We have applied the model to a case study in the furniture industry, so as to provide a comprehensive analysis of the risks and benefits associated with adopting AM in uncertain supply environments, showcasing the potential to enhance supply chain responses to disruptions. The contribution of this research lies in offering a practical tool that assists companies in managing material shortages, optimizing operational costs, and making well-informed decisions regarding the adoption of AM and CE strategies in volatile market conditions.