Geographic Diversification of the Supply Chains of Japanese Firms

Todo, Yasuyuki; Inoue, Hiroyasu

doi:10.1111/aepr.12337

Cited by 16 publications

(20 citation statements)

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“…Indeed, Todo and Inoue (2021) touch on the possibility that the keiretsu-type relationships would help improve resilience in the case of knowledge-intensive goods. It would be insightful if Todo and Inoue could elaborate on the implications of geographical diversification for the robustness and resilience of supply chains with more careful consideration of the two related but distinct concepts.…”

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confidence: 99%

“…In particular, internationalized production has been blamed for working as a propagation mechanism in the worldwide spread of negative shocks. Todo and Inoue (2021) extensively review existing studies that have examined the shock propagation through supply chains and what characteristics of supply chains enhance or mitigate the propagation, in the cases of previous crises and the current COVID‐19 crisis. Based on their literature review and the data observations on the current characteristics of Japan's supply chains, Todo and Inoue highlight the need for more geographical diversification in suppliers and clients of Japanese firms to build robust and resilient supply chains and improve the firms' performance.…”

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Comment on “Geographic Diversification of the Supply Chains of Japanese Firms”

Obashi

2021

Asian Economic Policy Review

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The worldwide COVID-19 outbreak has impacted on the domestic and international supply chains of Japanese firms. In particular, internationalized production has been blamed for working as a propagation mechanism in the worldwide spread of negative shocks. Todo and Inoue (2021) extensively review existing studies that have examined the shock propagation through supply chains and what characteristics of supply chains enhance or mitigate the propagation, in the cases of previous crises and the current COVID-19 crisis. Based on their literature review and the data observations on the current characteristics of Japan's supply chains, Todo and Inoue highlight the need for more geographical diversification in suppliers and clients of Japanese firms to build robust and resilient supply chains and improve the firms' performance.In the face of the COVID-19 crisis, there has arisen a renewed argument that shorter and simpler supply chains and reshoring production back to the domestic economy would be less vulnerable to shocks. Against this kind of turning-inward policy argument, Todo and Inoue emphasize the potential benefits from supplier substitutability and international knowledge diffusion through geographically diversified supply chains, which is quite meaningful.Nevertheless, I suspect that geographical diversification of trading partners is not the only way to build a resilient supply chain. A firm's optimal strategy for resilience might not coincide with that for robustness. The concept of system resilience was originated in the ecology literature and was applied to the risk management literature. In the light of supply chain management, resilience can be the ability to resume normal operations after an acceptable period of disruption, while robustness is the ability to maintain operations amid a crisis (Miroudot, 2020).Supplier substitutability appears to be a key to achieving robustness. Maintaining geographically diversified suppliers or alternative locations of production would enable firms to withstand a location-specific supply shock, which leads to the greater robustness. To improve resilience, on the other hand, a firm might rather prefer to develop a

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Comment on “Geographic Diversification of the Supply Chains of Japanese Firms”

Obashi

2021

Asian Economic Policy Review

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“…These risks include exogenous shocks brought about by natural disasters and pandemics. Todo and Inoue (2021) provide a review of the empirical evidence of how supply chain participation and diversification affect firms when they experience such shocks (directly or indirectly).…”

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Comment on “Geographic Diversification of the Supply Chains of Japanese Firms”

Lee

2021

Asian Economic Policy Review

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Supply chains have evolved into ever more complex networks of buyers and sellers over time. A key property of these networks is the interconnectedness of firms. This property is a double-edged swordwhile firms benefit from participating in such networks, their very interconnectedness to other firms also exposes them to additional risks. These risks include exogenous shocks brought about by natural disasters and pandemics. Todo and Inoue (2021) provide a review of the empirical evidence of how supply chain participation and diversification affect firms when they experience such shocks (directly or indirectly).The lessons drawn from the literature make sensereducing the degree of supply chain concentrationwhether through increasing substitutability and diversificationcan improve the robustness and resilience of supply chain firms.An intriguing finding highlighted by Todo and Inoue ( 2021) is the impact of geographical diversification of supply chains on the robustness and resilience of firms in the short term and medium/long term. That locally concentrated supply chains are superior to more diffused ones in the medium/longer term seems to suggest that agglomeration economies could be an important element. There are hints in the paper, but the relationship between agglomeration economies and supply chain networks is not fully fleshed out. It is an essential point as agglomeration economies are not just a high concentration of local supply chains.This leads to the question of the micro-foundations of supply chain networks. Todo and Inoue (2021) have been pioneers in using agent-based models to simulate the propagation of shocks from natural disasters through supply chain networks in Japan (Inoue & Todo, 2019a, 2019b. The one-off impacts of these shocks have been studied using models in which firms are embedded in networks (calibrated with real data) and follow fixed rules on production, inventory as well as sale. These are essentially percolation models which are very useful in estimating the immediate damage from natural disasters. Modeling and simulating longer term effects of shocks will require more malleable firm behavior. Otherwise, the impact of natural disasters might

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“…Watanabe (2021), Kawaguchi et al (2021), and Armstrong (2021) examine monetary policy, labor market outcomes, and economic diplomacy, respectively. Todo and Inoue (2021) focus on the supply chains of Japanese firms and seek to evaluate recent government policies and provide policy suggestions for creating robust, resilient, and performance-enhancing supply chains. Shen et al (2021) provide an evaluation of the impact of the lockdown enforced by the Abe Government in April and May 2020 as a result of the spread of the COVID-19 virus on various types of crime victimization rates and the suicide rate.…”

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“…Shen et al (2021) provide an evaluation of the impact of the lockdown enforced by the Abe Government in April and May 2020 as a result of the spread of the COVID-19 virus on various types of crime victimization rates and the suicide rate. Both Kawaguchi et al (2021) and Todo and Inoue (2021) contain discussions of the impact of the COVID-19 pandemic on labor markets and supply chains, respectively.…”

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