Critical risks in global supply networks: A static structure and dynamic propagation perspective

The global fragmentation of supply networks results from outsourcing and offshoring strategies. Supply networks outsource segments to specialized suppliers, thereby leveraging their enhanced adaptability and reduced costs. These practices have produced intricate interdependence patterns, facilitating the spread of disruption risk. Although risk management provides extensive toolsets for addressing critical risks at the dyadic level, there has been a lack of emphasis on evaluating the efficacy of these tools in the context of complex global supply networks. Research generally concentrates on the topological properties of global supply networks while largely ignoring the underlying risk propagation process in identifying critical risks. This paper develops a comprehensive view of the supply network through detailed subtier mapping and a mathematical formulation that overcomes the limitations of the current approaches. The proposed formulation model incorporates the doing business environment of each country and reproduces the spread of disruption risks under three disruption risk scenarios in global supply networks. This paper illustrates the proposed formulation by analyzing the critical risks of global flat panel display supply networks. The results suggest that these networks are robust to random disruption but susceptible to target disruptions. Additionally, disruptions in European and Asian countries have detrimental effects on the overall operation of supply networks.