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Fragmentation of production amplifies systemic risks from extreme events in supply-chain networks.

ABSTRACT: Climatic and other extreme events threaten the globalized economy, which relies on increasingly complex and specialized supply-chain networks. Disasters generate (i) direct economic losses due to reduced production in the locations where they occur, and (ii) to indirect losses from the supply shortages and demand changes that cascade along the supply chains. Firms can use inventories to reduce their risk of shortages. Since firms are interconnected through the supply chain, the level of inventory hold by one firm influences the risk of shortages of the others. Such interdependencies lead to systemic risks in supply chain networks. We introduce a stylized model of complex supply-chain networks in which firms adjust their inventory to maximize profit. We analyze the resulting risks and inventory patterns using evolutionary game theory. We report the following findings. Inventories significantly reduce disruption cascades and indirect losses at the expense of a moderate increase in direct losses. The more fragmented a supply chain is, the less beneficial it is for individual firms to maintain inventories, resulting in higher systemic risks. One way to mitigate such systemic risks is to prescribe inventory sizes to individual firms-a measure that could, for instance, be fostered by insurers. We found that prescribing firm-specific inventory sizes based on their position in the supply chain mitigates systemic risk more effectively than setting the same inventory requirements for all firms.

SUBMITTER: Colon C

PROVIDER: S-EPMC7769560 | biostudies-literature | 2020

REPOSITORIES: biostudies-literature

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Fragmentation of production amplifies systemic risks from extreme events in supply-chain networks.

Colon Célian C Brännström Åke Å Rovenskaya Elena E Dieckmann Ulf U

PloS one 20201228 12

Climatic and other extreme events threaten the globalized economy, which relies on increasingly complex and specialized supply-chain networks. Disasters generate (i) direct economic losses due to reduced production in the locations where they occur, and (ii) to indirect losses from the supply shortages and demand changes that cascade along the supply chains. Firms can use inventories to reduce their risk of shortages. Since firms are interconnected through the supply chain, the level of inventor ...[more]

PMID: 33370350

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Project description:This study assessed the veterinary drug supply chain in Uganda, the constraints faced by the actors, and how the challenges influence the use of antimicrobial (AMs) by livestock farmers. We carried out stakeholder consultation workshops, key informant interviews and a knowledge, practices, and awareness survey with actors of the veterinary drug supply chain. We also profiled drugs stored in 23 urban and peri-urban drug shops in Lira and Mukono districts to record the commonly sold drugs. The veterinary drug supply chain is made of several actors including wholesalers, retailers, Animal Health Service Providers (AHSP) and farmers. Nearly ninety per cent of drug retailers and veterinary practitioners did not receive specialized training in veterinary medicine, and most of veterinary practitioners have been in the drug business market for more than 10 years. Antibiotics and anti-helminthics were the most stocked drugs by retailers, with antibiotics ranking highest in terms of contribution to annual financial profits, accounting for 33%. The choice of a drug by veterinary practitioners was mainly informed by past success with efficacy of the drug, and financial capacity of the client (the farmer) to meet the treatment cost. Many veterinary practitioners were not conversant with veterinary drug policies of the country, with Mukono having a higher number (72%) compared to Lira (37%). Veterinary practitioners from Lira district compared to Mukono and those mainly serving small scale farmers relative to large scale smallholders were more knowledgeable about antibiotics and AMR. Several supply chain constraints were identified as potential drivers of misuse of antibiotics that could contribute to AMR. These included low level of education of supply chain actors, particularly drug retailers, poor handling of drugs at purchase and administration practices, low enforcement of policies and regulations, and lack of awareness of stakeholders about policies that regulate drug use. Thus, future interventions to reduce misuse of AM drugs in livestock production systems in Uganda such as capacity building, should also target veterinary input suppliers, and deliberately involve a strong policy advocacy component.

Project description:In this paper, we study the topological properties of the global supply chain network in terms of its degree distribution, clustering coefficient, degree-degree correlation, bow-tie structure, and community structure to test the efficient supply chain propositions proposed by E. J.S. Hearnshaw et al. The global supply chain data in the year 2017 are constructed by collecting various company data from the web site of Standard & Poor's Capital IQ platform. The in- and out-degree distributions are characterized by a power law of the form of γin = 2.42 and γout = 2.11. The clustering coefficient decays [Formula: see text] with an exponent βk = 0.46. The nodal degree-degree correlations 〈knn(k)〉 indicates the absence of assortativity. The bow-tie structure of giant weakly connected component (GWCC) reveals that the OUT component is the largest and consists 41.1% of all firms. The giant strong connected component (GSCC) is comprised of 16.4% of all firms. We observe that upstream or downstream firms are located a few steps away from the GSCC. Furthermore, we uncover the community structures of the network and characterize them according to their location and industry classification. We observe that the largest community consists of the consumer discretionary sector based mainly in the United States (US). These firms belong to the OUT component in the bow-tie structure of the global supply chain network. Finally, we confirm the validity of Hearnshaw et al.'s efficient supply chain propositions, namely Proposition S1 (short path length), Proposition S2 (power-law degree distribution), Proposition S3 (high clustering coefficient), Proposition S4 ("fit-gets-richer" growth mechanism), Proposition S5 (truncation of power-law degree distribution), and Proposition S7 (community structure with overlapping boundaries) regarding the global supply chain network. While the original propositions S1 just mentioned a short path length, we found the short path from the GSCC to IN and OUT by analyzing the bow-tie structure. Therefore, the short path length in the bow-tie structure is a conceptual addition to the original propositions of Hearnshaw.

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Fragmentation of production amplifies systemic risks from extreme events in supply-chain networks.

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Fragmentation of production amplifies systemic risks from extreme events in supply-chain networks.

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