The moderating impact of supply network topology on the effectiveness of risk management

Abstract

While supply chain risk management offers a rich toolset for dealing with risk at the dyadic level, less attention has been given to the effectiveness of risk management in complex supply networks. We bridge this gap by building an agent based model to explore the relationship between topological characteristics of complex supply networks and their ability to recover through inventory mitigation and contingent rerouting. We simulate upstream supply networks, where each agent represents a supplier. Suppliers' connectivity patterns are generated through random and preferential attachment models. Each supplier manages its inventory using an anchor-andadjust ordering policy. We then randomly disrupt suppliers and observe how different topologies recover when risk management strategies are applied. Our results show that topology has a moderating effect on the effectiveness of risk management strategies. Scale-free supply networks generate lower costs, have higher fillrates, and need less inventory to recover when exposed to random disruptions than random networks. Random networks need significantly more inventory distributed across the network to achieve the same fill rates as scalefree networks. Inventory mitigation improves fill-rate more than contingent rerouting regardless of network topology. Contingent rerouting is not effective for scale-free networks due to the low number of alternative suppliers, particularly for short-lasting disruptions. We also find that applying inventory mitigation to the most disrupted suppliers is only effective when the network is exposed to frequent disruptions; and not cost effective otherwise. Our work contributes to the emerging field of research on the relationship between complex supply network topology and resilience.

A relational view of climate adaptation in the private sector: How do value chain interactions shape business perceptions of climate risk and adaptive behaviours?

“…Had there been alternative (or stock-piled) grain supplies, or a substitute value chain in the domestic or international market to supply inputs for feed pellets, the sensitivity of the tilapia value chain and of Aquaculture Jamaica Limited would have been lower. This case illustrates how network structural attributes (such as network connectivity and network redundancies) may influence on risk propagation mechanisms and on the ability of actors and entire value chains to respond to systemic risks -a factor that only very recent explorations have tackled (see Han & Shin, 2016;Helbing, 2013;Ledwoch, Yasarcan, & Brintrup, 2018;Otto et al, 2017;Scheibe & Blackhurst, 2018).…”

Insights on Multi-Agent Systems Applications for Supply Chain Management

“…As a direct consequence of the globalization and the interconnection of SCN nodes, they became less resilient to unexpected disruptions, and a failure in one SCN entity can potentially cascade across the whole network. Several authors have investigated this phenomenon in order to determine what factors make SCNs resilient and to propose mitigation strategies (see, e.g., [99][100][101][102][103][104][105][106]).…”

Tools for reconstructing the bilateral trade network: a critical assessment

“…The global agro-trade system can be seen as a multi-layer network, also known as a world trade web (e.g. Ledwoch et al, 2018), where countries are represented through nodes and commercial relations through weighted and directed links (i.e. represented by a cell entry).…”

“…The last decades have witnessed the emergence of a large body of literature addressing international-trade issues from a complex-network perspective (e.g. Serrano and Boguñá, 2003;Ledwoch et al, 2018) to predict the evolution of the key topological properties (Fracasso, 2014;Tuninetti et al, 2017) based on different methods, such as: observed links and attributes of nodes (e.g. Getoor and Diehl, 2005), time-series link prediction (Huang and Lin, 2009), and country's fitness (Vidmer et al, 2015).…”