Who is the weakest link? A better understanding of global supply chains
New study finds that large, multi-national organizations are not always crucial to local supply chains

Date:
September 22, 2020
Source:
University of Sydney
Summary:
The COVID-19 pandemic has caused 'kinks' in the movement of
goods and services around the globe, but how important a role do
multinational companies play in local economies and supply chains?


FULL STORY ==========================================================================
From toilet paper to industrial chemicals, there's no doubt the COVID-19 pandemic has been disruptive to global supply chains.


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But how important are large, multinational companies in maintaining
both local and international logistic networks and should governments
be so focused on maintaining larger organisations through subsidies and bail-outs over their smaller counterparts? A new network analysis by researchers from the University of Sydney's School of Project Management
and the Centre for Complex Systems within the School of Civil Engineering
has found that large, multi-national organisations are not always as
crucial to local supply chains, and that it's sometimes the smaller
operators that can deliver the hardest logistic shocks to a community
when disrupted.

"In the current context where a pandemic is spreading in the world,
industry output has already been severely impacted and supply chains
have been disrupted. The full effect of this will only become apparent
in coming months and years, but it's clear that COVID-19 has already
caused 'kinks' in the movement of goods and services around the globe,"
said lead author Dr Mahendra Piraveenan from the Faculty of Engineering.

"Our study has sought to understand whether types of businesses play
more central or local roles, and how shocks might cascade along the
chain of firms.

"Governments often provide bail-out packages to large organisations in
a bid to save jobs. However, organisations which are central to supply
chains should also be supported, even if they are relatively small,
because they may be more important to a country's economy.



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"For example, there is no point bailing out a car manufacturer if many
of the companies that supply the necessary parts go bankrupt -- that
will mean the car manufacturer cannot get back on its feet regardless."
School of Project Management academic, Dr Petr Matous said that when
the operations of some organisations are disrupted by social distancing policies, they may send shocks "downstream" to their clients who cannot
access their components, which in turn triggers disruptions to the
clients of clients.

"However, how much a failure of one firm affects economies around the
world depends on multiple factors, it's not so simple that a disruption
of a larger firm would always cause more losses. The structure of the international supply networks plays a role in this," said Dr Matous.

Organisations deliver supply chain shocks like COVID-19 super-spreaders "Similarly to COVID-19 "super-spreaders," organisations that can
facilitate the spread of supply chain shocks are not always the biggest
ones nor necessarily the ones with the most supply chain connections,"
said Dr Matous.



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"We identified when supply chain clusters overlap with country boundaries
but often they don't and in such cases and industries, fast international contagion of shocks is possible," he said.

The researchers also found that organisations that originate from
a certain country, but register themselves elsewhere, are often less
central to the supply chain network of the country in which they are registered, yet are more central in the global supply chain network due
to their international roots.

For example, a Chinese packaging group that was registered in the United
States was found not to be important to their supply chains but was
important on a global scale.

Strength in numbers The study found that structural clustering --
known as community structures - - of global supply chains are strongly influenced by the industries that organisations belong to.

"We identified industry sectors and countries which tend to form
strong communities in terms of supply chains, and are therefore are
less vulnerable to fluctuations in the global supply chain network,
such as finance, insurance, real estate, transportation, construction, manufacturing," said Dr Piraveenan.

How the Research Worked Working alongside Professor Yasuyuki Todo from
Waseda University, the researchers created a supply chain network
that analysed 154, 862 organisations of ten countries, which were
selected due to high representation in the dataset and regional economic importance. These countries including the United States, Russia, China,
India, United Kingdom, France, Canada, Australia, Japan and Singapore.


========================================================================== Story Source: Materials provided by University_of_Sydney. Note: Content
may be edited for style and length.


========================================================================== Journal Reference:
1. Mahendra Piraveenan, Hongze Jing, Petr Matous, Yasuyuki
Todo. Topology of
International Supply Chain Networks: A Case Study Using
Factset Revere Datasets. IEEE Access, 2020; 8: 154540 DOI:
10.1109/ACCESS.2020.3015910 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2020/09/200922093419.htm

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