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Systemic Risk and the Ripple Effect in the Supply Chain

In: Handbook of Ripple Effects in the Supply Chain

Author

Listed:
  • Kevin P. Scheibe

    (Iowa State University)

  • Jennifer Blackhurst

    (The University of Iowa)

Abstract

Supply chains are highly complex systems, and disruptions may ripple through these systems in unexpected ways, but they may also start in unexpected ways. We investigate the causes of ripple effect through the lens of systemic risk. We derive supply chain systemic risk from the finance discipline where sources of risk are found in systemic risk-taking, contagion, and amplification mechanisms. In a supply chain context, we identify three dimensions that influence systemic risk, the nature of a disruption, the structure, and dependency of the supply chain, and the decision-making. Within these three dimensions, there are several factors including correlation of risk, compounding effects, cyclical linkages, counterparty risk, herding behavior, and misaligned incentives. These factors are often invisible to decision makers, and they may operate in tandem to exacerbate ripple effect. We highlight these systemic risks, and we encourage further research to understand their nature and to mitigate their effect.

Suggested Citation

  • Kevin P. Scheibe & Jennifer Blackhurst, 2019. "Systemic Risk and the Ripple Effect in the Supply Chain," International Series in Operations Research & Management Science, in: Dmitry Ivanov & Alexandre Dolgui & Boris Sokolov (ed.), Handbook of Ripple Effects in the Supply Chain, pages 85-100, Springer.
    • Handle: RePEc:spr:isochp:978-3-030-14302-2_4
    DOI: 10.1007/978-3-030-14302-2_4
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    Cited by:

    1. Iftikhar, Ilaria Giannoccaro & Anas, 2023. "Mitigating ripple effect in supply networks: the effect of trust and topology on resilience," OSF Preprints 2spt3, Center for Open Science.
    2. William Schueller & Christian Diem & Melanie Hinterplattner & Johannes Stangl & Beate Conrady & Markus Gerschberger & Stefan Thurner, 2022. "Propagation of disruptions in supply networks of essential goods: A population-centered perspective of systemic risk," Papers 2201.13325, arXiv.org.

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