The effects of network relationships on global supply chain vulnerability

Abstract

In this chapter, we analyze the effects of levels of social relationship on the global supply chain networks vulnerability. Relationship levels in our framework are assumed to influence transaction costs as well as risk for the decision-makers. We propose a network performance measure for the evaluation of the global supply chain networks efficiency and vulnerability. The measure captures risk, transaction cost, price, transaction flow, revenue, and demand information in the context of the decision-makers behavior the network. The network consists of manufacturers, retailers, and consumers. Manufacturers and retailers are multicriteria decisionmakers who decide about their production and transaction quantities as well as the level of social relationship they want to pursue in order to maximize net return and minimize risk. The model allows us to investigate the interplay of the heterogeneous decision-makers in the supply chain and to compute the resultant equilibrium pattern of product outputs, transactions, product prices, and levels of social relationship. The results show that high levels of relationship can lead to lower overall cost and therefore lower price and higher product transaction. Moreover, we use the performance measure to assess which nodes in the supply networks are themost vulnerable in the sense that their removal will impact the performance of the network in the most significant way. © 2009 Springer London.