Nikolay Osadchiy - Emory University, Goizueta Business School. Atlanta, GA, US

Nikolay Osadchiy Nikolay Osadchiy

Associate Professor of Information Systems & Operations Management | Emory University, Goizueta Business School

Atlanta, GA, US

Supply network structure and systemic risk

Supply network structure and systemic risk 2018-07-24
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Nikolay Osadchiy

Demand uncertainty can present a serious challenge for any business, especially when it comes to managerial decisions on inventory. But when an economic downturn happens, the challenge becomes systemic. According to research by Nikolay Osadchiy, assistant professor of information systems & operations management, and coauthors Vishal Gaur (Cornell U) and Sridhar Seshadri (Indian School of Business), systemic risk is more greatly felt depending on where a company sits in the supply chain. The trio discovered that while an economic downturn presented a serious hurdle for retailers, wholesalers, and manufacturers alike, manufacturers were more prone to systemic risk given their placement upstream in the supply chain. Manufacturers had “a more dispersed customer base,” which the authors noted was more closely “associated with higher systematic risk.” Manufacturers also experienced greater systemic risk due to the effect of aggregation of orders over time. They wrote, “A market shock in one period may affect sales over several periods due to lead times and time lags in managerial decision making.”

Source:
papers.ssrn.com

Systematic risk in supply chain networks

Industrial production output is generally correlated with the state of the economy. Nonetheless, during the times of economic downturn some industries take the biggest hit, while at the times of economic boom they reap most benefits. To provide insight into this phenomenon we map supply networks of industries and firms and investigate how the supply network structure mediates the effect of economy on industry or firm sales.

papers.ssrn.com