Global Supply Chains in Outbreaks: Who Are the Weaknesses?

From toilet paper to industrial chemicals, the new crown outbreak has undoubtedly disrupted global supply chains. In this context, how important are large multinationals in maintaining local and international logistics networks? Is the government too focused on subsidizing large companies to stay afloat and neglecting smaller ones? To that end, researchers at the School of Project Management and the Centre for Complex Systems, part of the School of Civil Engineering at the University of Sydney, have conducted a new online study that has found that large multinationals are not always critical in the local supply chain, but rather that small businesses sometimes have the strongest impact on the supply chain when they encounter obstacles.

"Industrial capacity has been severely affected and supply chains have been disrupted at a time when the epidemic is spreading around the world. The impact of this situation will not be felt until months or even years from now, but it is clear that the new crown outbreak has become a 'stumbling block' to global movement of goods and services," said lead author Dr Mahendra Piraveenan of the University of Sydney's School of Engineering.

"Our study attempts to understand the different roles played by different types of businesses and how the impact of the outbreak will have a ripple effect through the industry chain. To secure jobs, the government often offers bail-outs to large institutions. However, organizations at the centre of supply chains should also be supported, even if they are relatively small, but they may be more important to a country's economy. For example, if many companies that provide the necessary parts go bankrupt, it won't help to bail out carmakers, because the lack of the necessary parts means they can't get a foothold anyway. "

Dr Peter Matous, of the University of Sydney's School of Project Management, said: "When the operations of some businesses are disrupted by social distance policies, they may shift the impact to customers who are 'downstream' who cannot access their components, which in turn can be disruptive to their customers." However, the extent to which a company's failure affects the global economy depends on a number of factors, and the failure of a large company does not necessarily result in additional losses, as the structure of the international supply network plays a role. Dr. Matous said.

"Just like the 'super-transmitters' in the new crown outbreak, companies that can deliver supply chain shocks are not always the biggest, and they don't necessarily have the most supply chain connections. We have found that when supply chain clusters overlap national borders (usually not), the impact has the potential to spread rapidly internationally. "

In addition, the study found that the structure of global supply chain clusters (i.e., social structure) is largely influenced by the industry in which the enterprise belongs. "We have identified industries that are vulnerable to strong networks in the supply chain, such as finance, insurance, real estate, transportation, construction, manufacturing, etc., that are not vulnerable to fluctuations in the global supply chain network." Dr. Piraveenan said.

The researchers, together with Professor Yasuyuki Todo of Waseda University, analyzed 154,862 businesses from 10 countries, including the United States, Russia, China, India, the United Kingdom, France, Canada, Australia, Japan and Singapore, which are highly representative in terms of data and regional economic importance.