A Network-Based Impact Measure for Propagated Losses in a Supply Chain Network Consisting of Resilient Components

Jesus Felix Bayta Valenzuela,Gaoxi Xiao,Rick Siow Mong Goh,Xiuju Fu

doi:10.1155/2018/1724125

Jesus Felix Bayta Valenzuela, Gaoxi Xiao + Show 2 more

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https://doi.org/10.1155/2018/1724125

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Abstract

The topology of a supply chain network affects the impacts of disruptions in it. We formulate a network-based measure of the impact of a disruption loss in a supply chain propagating downstream from an originating node. The measure takes into account the loss profile of the originating node, the structure of the supply network, and the resilience of the network components. We obtain an analytical expression for the impact measure under a beta-distributed initial loss (generalizable to any continuous distribution supported on the interval 0,1), under a breakthrough scenario (in which a fraction of the initial production loss reaches a focal company downstream as opposed to containment upstream or at the originating point). Furthermore, we obtain a closed-form solution for a supply chain network with a k-ary tree topology; a numerical study is performed for a scale-free network and a random network. Our proposed approach enables the evaluation of potential losses for a focal company considering its supply chain network structure, which may help the company to plan or redesign a robust and resilient network in response to different types of disruptions.

Highlights

The mitigation of production losses arising from upstream disruptions is an important aspect of their management
Another important aspect is identifying which components of the network are bound to play a key role in either spreading or mitigating such an impact, based on their positions in the network as well as their inherent risk profiles; a component’s critical position in the supply chain network may amplify the effects arising from its disruption
Implicit in the acyclic formulation of a supply chain network is the assumption that the processing of a material at a given stage would not require material from downstream inputs, that is, from further processed stages of the material produced in the same supply network

Summary

Introduction

The mitigation of production losses arising from upstream disruptions is an important aspect of their management. Another important aspect is identifying which components of the network are bound to play a key role in either spreading or mitigating such an impact, based on their positions in the network as well as their inherent risk profiles; a component’s critical position in the supply chain network may amplify the effects arising from its disruption. The impacts of disruptions on supply chain networks can be seen in the aftermath of the floods which affected Thailand in 2011 and the earthquake and tsunami which affected the Tohoku region of Japan in the same year. The frequency of events costing the same amount increased over the same period (23% in 2017; 9% in 2016)

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