Supply Chain Resilience: Reducing Vulnerability to Economic Shocks, Financial Crises, and Natural Disasters

340 Pages·2020·11.345 MB·English

by  Venkatachalam Anbumozhi, Fukunari Kimura, Shandre Mugan Thangavelu

Venkatachalam Anbumozhi
Fukunari Kimura
Shandre Mugan Thangavelu Editors
Supply Chain
Resilience
Reducing Vulnerability to Economic Shocks,
Financial Crises, and Natural Disasters
Supply Chain Resilience
Venkatachalam Anbumozhi Fukunari Kimura
(cid:129) (cid:129)
Shandre Mugan Thangavelu
Editors
Supply Chain Resilience
Reducing Vulnerability to Economic Shocks,
Financial Crises, and Natural Disasters
123
Editors
Venkatachalam Anbumozhi FukunariKimura
Economic ResearchInstitute Economic ResearchInstitute
for ASEANandEast Asia for ASEANandEast Asia
ERIA ERIA
Gelora BungKarno,Senayan Gelora BungKarno,Senayan
Jakarta, Indonesia Jakarta, Indonesia
Faculty of Economics
Shandre MuganThangavelu
KeioUniversity
Jeffrey Cheah Institute for Southeast Asia
Tokyo,Japan
SunwayUniversity
Selangor, Malaysia
Institute for International Trade
University of Adelaide
Adelaide, SA,Australia
ISBN978-981-15-2869-9 ISBN978-981-15-2870-5 (eBook)
https://doi.org/10.1007/978-981-15-2870-5
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Foreword
Globalisation has integrated societies, countries, and economies through various
channels. The emergence of global supply chains as a main channel has improved
connectivity and facilitated cross-border trade, foreign direct investment, interna-
tional knowledge, and technology flows. It is essential to understand how global
supplychainswork,howtheyaffecteconomicperformance,andwhatpolicieshelp
to derive greater benefits from them. Global supply links and geographically con-
centrated production due to increasing specialisation also result in greater risks. In
an interconnected production system characterised by strong economic links, the
failure of a single entity or cluster of entities may result in cascading disruptions
that can bring down the entire supply chain or a large part of it.
Theglobalsupplychainisaparadigmaticexampleofasocio-economicstructure
in which the impacts of unexpected events propagate rapidly through the system.
This was vividly illustrated by the compound effects of Japan’s triple disaster
earthquake and Thailand’s severe floods in 2011. Moreover, incidents like the
seemingly unlikely volcano eruption in Indonesia in 2015 make companies and
policymakersrealiseofhowlittlecontroltheyhaveovermanyofthevulnerabilities
they are confronted with while managing the supply chain risks. Still, some com-
munities appear to be able to cope with disastrous events more effectively than
others and return to normality or to a new state from which they can operate.
Natural disasters and man-made financial crises, which affect integrated pro-
duction processes, have become important factors influencing the efficiency of the
present global supply chains. Although advanced and developing countries are
exposedtothesametypesofdisasterrisks,theconsequencestendtobemoresevere
in developing countries, where disasters disproportionally affect the marginalised
peopleandfirms.Understandingandaddressingtheserisksalongthesupplychain,
where it has become a growing threat to prosperity, have thus become a critical
challenge in research, policy, and business practices.
Over the last decade, a series of studies have been conducted by the Economic
Research Institute for ASEAN and East Asia (ERIA) to investigate the direct
impacts of natural and man-made disasters on specific geographical areas.
However, only a few analyses have sought to quantify the cascading economic
v
vi Foreword
effects of extreme weather events coupled with economic shocks on the global
supply chain. The great complexity of the global economic system in conjunction
withmethodologicalanddatagapsmakesitdifficulttoestimatethedominoeffects
of unexpected disaster events and economic shocks along regional value chains.
The impacts of disasters on supply chains are highly diverse. They affect dif-
ferent entities and production systems in different ways, and they may extend well
beyond the here and now. When the disaster impacts spill across space and time,
theymaybeeitherrestrainedoramplifiedthroughsocio-economicnetworks.They
maybeinfluencedbymarketmechanismsoperatedthroughinsurance,government
action in the forms of infrastructure investment, early warning systems and
recovery assistance, and actions of individuals as they strengthen business conti-
nuity plans.
Lookingattheshiftingriskmanagementstrategies,therecoveryphaseisoftena
window of opportunity to learn from experience, mitigate future vulnerability and
exposure,andenhance resilience. Itisimportant,inaworldwhereextremeshocks
and weather events are expected to become more frequent and severe, that poli-
cymakers and affected communities and business entities resolve to build better,
inclusive, and resilient value chains.
Thevulnerabilitiesoftheglobalsupplychainintermsofgeography,timescale,
climate change, natural disasters, and economic shocks are diverse and difficult to
understandconsequencesforgovernmentsandthebusinesscommunity.Thisbook
providesatimelyexplorationofmacroeconomicapproximationsconnectedtosuch
vulnerabilities,aswellasinnovativeideastomeasureresiliencethroughnumerical
indicators. The chapters in the book offer insights into the challenges and oppor-
tunities for global supply chains, with a particular focus on entry and upgrading
possibilities. Business continuity plans and related challenges are also examined,
and the book offers concrete policy recommendations and suggests a number of
inventions that would allow developing countries to better harness the benefits of
disasterrecovery.Thisvolumeisausefultoolforanyoneinterestedinglobaltrade,
supply chains, business, and disaster resilience issues.
May 2020 Hidetoshi Nishimura
President
Economic Research Institute
for ASEAN and East Asia
Jakarta, Indonesia
Contents
Part I Understanding the Vulnerability of Asian Value Chains:
Assessment Methods and Quantitative Impacts
1 Global Supply Chain Resilience: Vulnerability and Shifting Risk
Management Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Venkatachalam Anbumozhi, Fukunari Kimura
and Shandre Mugan Thangavelu
2 Economic Shocks and Uncertainties: How Do Firm
Innovativeness Enable Supply Chain and Moderate
Interdependence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Shandre Mugan Thangavelu and Venkatachalam Anbumozhi
3 Supply Chain Resilience in the Global Financial Crisis:
An Empirical Study on Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Willem Thorbecke
4 How Do Production Networks Affect the Resilience of Firms
to Economic and Natural Disasters: A Methodological Approach
and Assessment in Japan, Taiwan and Thailand . . . . . . . . . . . . . . 77
Michael C. Huang and Atsushi Masuda
5 Economic Risk Characteristics of an Indonesian Palm Oil
Value Chain and Identifying Sources of Uncertainty
in Policy Making. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
A. Faroby Falatehan and Budi Indra Setiawan
6 RobustnessofProductionNetworksAgainstEconomicDisasters:
Thailand Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
Hiroyuki Nakata, Yasuyuki Sawada and Naoki Wakamori
vii
viii Contents
Part II Resilience and Recovery of Global Value Chains
and Production Networks: Policy Frameworks
and Risk Management Strategies
7 Complexities in Supply Chain Resilience Against Economic
Shocks and Forming Public Private Partnerships: Korean
Automotive Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Venkatachalam Anbumozhi and Ji Hong Kim
8 A Contingent Resource-Based Perspective of Tourism Value
Chain and Robustness: European Experiences . . . . . . . . . . . . . . . . 185
Meinhard Breiling
9 Assessing the Competitive Advantage of Public Policy Support
for Supply Chain Resilience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
Eiji Yamaji
10 Achieving the Resilience of Production Networks During
Economic Crisis: The Case of Chinese SMEs . . . . . . . . . . . . . . . . . 239
Minquan Liu and Hang Tai
11 Stranded Assets and Protecting Value of Food Value Chain
from Disasters and Other External Shocks. . . . . . . . . . . . . . . . . . . 281
Vangimalla R. Reddy, Venkatachalam Anbumozhi
and Mura Jyostna Devi
12 Regional Frameworks for Advancing Supply Chain Resilience
and Business Continuity Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307
Venkatachalam Anbumozhi and Fukunari Kimura
Index .... .... .... .... .... ..... .... .... .... .... .... ..... .... 339
Part I
Understanding the Vulnerability
of Asian Value Chains: Assessment
Methods and Quantitative Impacts
Chapter 1
Global Supply Chain Resilience:
Vulnerability and Shifting Risk
Management Strategies
VenkatachalamAnbumozhi,FukunariKimura
andShandreMuganThangavelu
Abstract Globalsupplylinksandgeographicallyconcentratedproductionnetworks
allowalocaleventssuchasnaturaldisasterstobecomeaglobaldisruptionorglobal
eventssuchasfinancialcrisishavepervasiveimpactonlocaleconomies.Whileglobal
supplychainscannotbethecauseofadverseshocks,theyactaseffectivetransmission
mechanism.Greaterconnectivityinitiallydecreasesriskthroughriskdispersingand
diversification and increase the overall robustness of the supply chain. However,
beyondacertainthreshold,itincreasesthesupplychain’sfragilityandthussystemic
risks. Resilience address the supply chain’s ability to cope with the consequences
ofanavoidableriskeventsinordertoreturntoitsoriginaloperations.Thechapters
inthebookaredividedintotwoparts.Partonedealswiththeassessmentmethods
and quantitative impacts of vulnerable supply chains. Part two discuss resilience
mechanism,riskmanagementstrategiesofglobalsupplychains,andenablingpolicy
frameworks.Thecombinedeffectsofdisastersandeconomicshocksunderlinesthe
growingimportanceofinformingthemarketplayersandthepolicymakersofrisk
managementandhotspotsofsupplychainresilienceaswellastechnicalassistance
programs.
· · ·
Keywords Riskmanagement Resilience Transmissionchannel Vulnerability
· ·
JELClassification F64 L5 Q27
B
V.Anbumozhi( )·F.Kimura
EconomicResearchInstituteforASEANandEastAsia,Jakarta,Indonesia
e-mail:[email protected]
F.Kimura
KeioUniversity,Tokyo,Japan
S.M.Thangavelu
JeffreyCheahInstituteforSoutheastAsia,SunwayUniversity,Selangor,Malaysia
e-mail:[email protected]
InstituteforInternationalTrade,UniversityofAdelaide,Adelaide,Australia
©SpringerNatureSingaporePteLtd.2020 3
V.Anbumozhietal.(eds.),SupplyChainResilience,
https://doi.org/10.1007/978-981-15-2870-5_1