Tracing the propagation of disruptions in supply chain scenarios: A case study of photovoltaics diversification
Year: 2024
Type: article
Abstract: • This paper assesses the impact of diversification on countries’ exposure to supply disruptions. • A fragility ratio metric is introduced to quantify the downstream shortage resulting from a supply disruption. • A friendshoring modelling approach is proposed based on the United Nations General Assembly voting data. • The case study shows the benefits and limits of reshoring and friendshoring for key PV markets. • Suggestions are provided to improve proxy indicators and realistically model diversification in supply risk research. Diversifying supply chains through reshoring and friendshoring is increasingly proposed as a key strategy for supply security and resilience. Quantitative analyses characterizing to what extend diversification shield countries from supply disruptions remain however scarce. In this paper, we present a methodology to assess the supply risk exposure of countries in different supply diversification scenarios – business-as-usual, reshoring, friendshoring. For each scenario, the propagation of three types of upstream disruptions – supply shortage, export restriction, bilateral trade conflict – is simulated. A fragility ratio metric is introduced to quantify the potential downstream shortages caused by these disruptions. A novel friendshoring modelling approach is also proposed. It consists in determining risk-optimized trade relations based on criteria such as supply concentration and UN voting similarity. The Python-based model is tested on the case of diversified photovoltaics supply chains, e.g., if the US, EU, and India increase domestic production from polysilicon to module. Beyond building up manufacturing capacities, choosing between vertical integration and trade is highly determinant in risk exposure. Each diversification scenario shows pros and cons depending on the country and process considered. Overall, this paper underlines the need for supply risk research to nuance diversification recommendations. It would be particularly helpful to improve indicators accounting for a region's technical and economic ability to supply a given product, and to realistically model the challenges of reshoring.
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $4,520
OpenAlex ID: W4403289547