Monday, February 23, 2015

Supply Chain Performance Assessment - Identifying the Importance of Components, Suppliers, and Firms in the Network Economy

This morning, in sunny and warm Florida, my doctoral student Dong "Michelle" Li will be presenting one of our latest supply chain papers at the World Congress of Global Optimization.

The paper is: Supply Chain Performance Assessment and Supplier and Component Importance Identification in a General Competitive Multitiered Supply Chain Network Model, Dong Li and Anna Nagurney.

 The full presentation can be downloaded here.

 Research on the topic was inspired, in part, by discussions and talks at the fabulous Workshop on Vulnerability and Resilience of Supply Chains in Zurich, Switzerland in September 2013 at which I had the pleasure of being an invited speaker. It was also great to see Dr. Yossi Sheffi of MIT, the author of The Resilient Enterprise,  there. I could not resist hugging him, since he was my host at MIT when I held an NSF Visiting Professorship for Women there in the Center for Transportation and Logistics.

Given that the number of disasters is growing, as well as the number of people affected by disasters, it makes sense to capture the interdependencies in today's complex supply chain networks and their roles in the Network Economy. Our research reported on the above paper and talk develops a multitiered competitive supply chain network game theory model, which includes the supplier tier. The firms are differentiated by brands and can produce their own components, as reflected by their capacities, and/or obtain components from one or more suppliers, who also are capacitated. The firms compete in a Cournot-Nash fashion, in quantities,  whereas the suppliers compete a la Bertrand, in prices.

All decision-makers seek to maximize their profits with consumers reflecting their preferences through the demand price functions associated with the demand markets for the firms’ products. We construct supply chain network performance measures for the full supply chain and the individual firm levels that assess the efficiency of the supply chain or firm, respectively, and also allow for the identification and ranking of the importance of suppliers as well as the components of suppliers with respect to the full supply chain or individual firm. The framework is then  illustrated through a series of numerical supply chain network examples.

The framework allows for the identification of the importance of components and suppliers to the individual firm supply chains and to the supply chain network of multiple firms.  The latter can be very useful to policy makers in determining the impact of the removal of nodes from an industry supply chain due to natural disasters, business failures, etc.