Supply Chain Resilience

Global supply links and geographically concentrated production networks allow a local events such as natural disasters to become a global disruption or global events such as financial crisis have pervasive impact on local economies. While global supply chains can not be the cause of adverse shocks, they act as effective transmission mechanism. Greater connectivity initially decreases risk through risk dispersing and diversification and increase the overall robustness of the supply chain. However, beyond a certain threshold, it increases the supply chain’s fragility and thus systemic risks. Resilience address the supply chain’s ability to cope with the consequences of an avoidable risk events in order to return to its original operations. The chapters in the book are divided into two parts. Part one deals with the assessment methods and quantitative impacts of vulnerable supply chains. Part two discuss resilience mechanism, risk management strategies of global supply chains, and enabling policy frameworks. The combined effects of disasters and economic shocks underlines the growing importance of informing the market players and the policy makers of risk management and hot spots of supply chain resilience as well as technical assistance programs.

This chapter studies effects of economic shocks on the productive performance of manufacturing firms at Vietnam using the firm level data from 2004 to 2008. The chapter also examines the effects of economic shocks on the productive performance of firms in terms of access to linkages, spillovers, and ownership structures in terms of foreign, private and public ownership. The economic shocks such as global financial crisis tends to have greater impact on domestic firms and SOEs. The findings suggest that the local private enterprises did not receive positive foreign horizontal and backward spillovers from the MNEs, while SOE horizontal linkages also failed to contribute to the improvement in output productivity.

Intricate trading networks have emerged in East Asia. They are associated with technology transfer, mushrooming productivity growth, and tumbling prices for final goods. This chapter recounts the emergence and evolution of manufacturing production networks in the region. It then documents the burgeoning surpluses between Asia and the rest of the world in goods produced within these regional value chains. Empirical evidence indicates that exchange rates throughout the supply chain affect these surpluses. Given intense pushback against globalization, as evidenced by the British vote to exit the European Union, a harmonized appreciation of Asian currencies would be desirable to reduce the risks of protectionism. To increase the resilience of supply chains, Asian countries should also improve infrastructure, fight corruption, strengthen protections for intellectual property rights, improve the supply of electricity, and invest in the health and education of its people.

This chapter examines the economic impact of the disaster in the supply chain of electronic products, transportation equipment and machinery sectors in Asia . A Multi-region static CGE model based on GTAP v.9.0 is used to capture full-fledged propagation effects stemming from natural disaster to seven economies in Asia. Three hypothetical disaster cases are simulated based upon the collapse rates estimated: Tokyo earthquake, Taipei earthquake and Thailand floods. The simulation results confirmed that the economic impacts of the natural disaster are propagated to other countries in the region through changes in the production volumes and prices response. Economic impacts stemming from neighbouring economies can be positive or negative depending on the production and trade structure defined by the supply chain network. Increased resilience to the disaster will have an implication for increased macroeconomic stability by reducing propagation of the disaster impacts.

Palm oil industry is one of the main contributors to the economic development in Indonesia. It has experienced rapid growth in recent decades, and become a significant contributor to the world market for vegetable oils. Oil palm plantations produce crude palm oil (CPO) used as raw material by downstream industries to provide many types of derivative products such as in food and oleochemicals. In consequence, managing value chains are vital to gain sustainable palm oil development considering the increasing competitiveness and needs to maintain mutual partnerships among stakeholders. This chapter analyzed possible external shocks that would give potential impacts to value chains of the palm oil industry in Indonesia and recommends what the policymakers should do to anticipate the negative implications. We found that some variables show elastic values represented by the world price of CPO, the export price of Indonesian CPO and the exchange rate to the export quantity of Indonesian CPO. Based on our simulation, the export tax policy of palm oil has caused negative impacts both to the small scale (farmers) and the big scale industries in the form of decreasing FFB price and exported quantity of CPO, respectively.

This chapter studies the impacts of market concentration on risk-prevention incentives by closely observing the changes in the price and quantity in the hard disk drive (HDD) industry before and after the 2011 Thailand floods. The combination of high price and low quantity persisting after the floods indicates that the floods triggered the formation of a de facto cartel, and a shift in demand for hard disk drives alone is unable to explain the observed combination.

The chapter explains the structural change in the global auto industry and the current situation of Korean auto industry, followed by the risk management of supply chain. This chapter uses the cases of recent disasters to understand the interactions and impacts along the global value chain. In addition, several strategies to minimize the risk of supply chain are proposed: First, Build strong and flexible procurement system; Second, Risk Mitigation with diversification of supply sources; Third, Information network across the supply chain; Fourth, Build a real-time risk evaluation system with quantifiable index and training; Fifth, Minimize the damage with a business continuity plan (BCP).

Tourism is worldwide one of the fastest growing economic activities. Enormous value is built up. So far tourism growth was not sensitive to economic shocks. This may change in the future due to many factors that are under change within and between links in the tourism value chain. Here we want to give insights in six chapters: (i) the global tourism value chain, (ii) international factors making an impact on the tourism value chain, (iii) impacts on the national tourism value chain in Austria, (iv) case study of food pleasure tourism destinations in Austria, (v) impacts on tourism value chain in Southeast Asia and (vi) altering the tourism value chain in Southeast Asia by employing experience from Austria.

This chapter deals with the supply chain resilience of agricultural products in Japan. First, the food flow of Japan is explained. Japanese farmers and fishers produce and sell their products, receiving 9.4 trillion Japanese yen (¥). At the same time, Japan imports raw products and processed food. The fresh products move through the market to the eating out sector, the processing sector, and consumers. During this process, the value of agricultural products increases, and consumers pay ¥73.5 trillion. Food flow sometimes suffers disasters, such as heavy rains, flooding, low temperatures, strong winds, volcanic eruptions, earthquakes, and tsunamis. In April 2016, a strong earthquake hit the Kumamoto area, severely affecting the production and supply of watermelons. To increase the resilience of the agricultural supply chain, the sixth industrialisation is effective and well established. Japan’s sixth industry contains 60,000 businesses. Most of them are food processing and direct shop businesses. Direct shops are operated by farmers, farmers’ groups, farmers’ companies, municipalities, cooperatives, and producers’ groups. They sell mostly vegetables, fruits, and processed food. Direct shop K is located on the urban fringe of Chiba prefecture. Since it was established in 2004, the shop has become very popular in the region. However, it has had to overcome two crises: the effect of the radioactive fallout from the Fukushima nuclear power plant accident and contamination by residual agricultural chemicals. The manager had a large role in the recovery, but Japan’s agricultural policy also provided direct and indirect support at the national and local levels. Public policy supports the resilience of the agricultural supply chain through measures such as agricultural land use planning, agricultural improvement projects, rapid reconstruction following damage, and improvement of agricultural resources.

This chapter reviews and analyzes the effects of rising labor costs, CNY appreciation, and the 2008 Global Financial Crisis on the performance of Chinese SMEs. Chinese SMEs have spearheaded the integration of the Chinese economy with the world economy through their involvement and partnership with the Asian regional and global production networks and supply chains. While they have acted as important linkages for the national economy with the world economy, they have also become important conduits of the impact of world events on the national economy. This chapter focuses on the impact of the 2008 Global Financial Crisis against the background of rising labor costs and currency appreciation that had already been exerting great strains on SMEs in China.

Stranded assets are those that have suffered unanticipated or premature write-downs, lost value or turn into liabilities due to external shocks. Environmental risk factors such as natural disasters, climate change, water scarcity etc. that could cause asset stranding of agriculture are poorly understood in the context of food value chain (FVC). The value at risk (VaR) globally is significant in agriculture due to over-exposure to stranded assets throughout our financial and economic systems. Our objective is to discuss the issue of stranded assets and the environmental risks involved with agricultural value chains. This chapter provides an overview of the environmental risk disasters and climate change as agriculture asset stranding in FVC. We present the impact of disasters triggered by natural hazards on the economic losses of the agricultural value chain and loss of value-added growth with further discussion on the principles of effective disaster risk reduction in FVC. Disaster, when combined with climate change, poses challenges by creating fluctuations in yields, supply shortfalls, subsequent global trading patterns, and substantial effects on FVC. Finally, we present strategies for building resilient FVCs in partnership with communities.

Disaster risk and losses are of greater concern for policy makers, governments and business communities, since they have increased in recent decades and are expected to further increase as combination of projected demographic development, industrial growth and economic integration progress in Asia. The cause and consequences of disasters do not exist in isolation, however, but are bound to up instead in the ongoing dynamics of existing and emerging supply chains along which they occur. This chapter analyze the direct, indirect and spillover effects of disasters and climate change on global value chains. Key economic trends and multi-dimensional challenges to disasters risk reduction and supply chain resilience is discussed with various levels of governance system and business continuity plans. Supply chain resilience could be advanced through regional cooperation frameworks. Strengthening legal frameworks for improved coordination along the supply chain is critical for transferring the risks to market forces. Capacity of local business along the supply chain could further be enhanced by investing in innovative financial mechanisms including indexed based insurance instruments and catastrophic risk pooling at regional level in a coordinated way.