Quantifying Outsourcing Risk Arising from Product Interdependencies in Supply Networks

Recent studies have shown that the topological structure of complex supply networks has a direct impact on the robustness of these networks against disruptions. Majority of these studies have characterised topology aggregated at the firm level. We argue that this approach, while valuable, lacks specificity when used to understand the impact of disruptions on individual product lines. In this study, we propose a novel, product-specific perspective to investigate how disruptions in supply networks can impact the final assembly of products. In particular, we consider the interdependencies between the individual products contained within the portfolios of each company embedded in a network of outsourcing relationships. We first show how such product-interdependencies can be estimated from firm level relationships, and next, we show how the estimated interdependencies can be used to quantify the outsourcing risk associated with a given company's product portfolio.