Out of Sight, out of Mind? Modeling the Impacts of Financial Squeeze on Extended Supply Chain Networks

Abstract

Firms increasingly put financial pressure on their suppliers, also called squeezing. Suppliers react and adapt to financial squeeze as autonomous agents, causing complex ripple effects across the extended supply chain network. To capture intertwined and highly interactive effects among suppliers, we use agent-based models. We explore the impact of financial squeeze on supply chain network structure and operational outcomes. Results suggest that financial squeeze affects the stability of the supply chain network and the effect varies depending on the location of the suppliers. Firms located at the bottom of the supply chain network suffer most from financial squeeze, and the magnitude of the effect increases as one goes further upstream. In addition, as existing suppliers exit the network and new suppliers enter, three network archetypes (Empty Nest, TransitUp, and StableDown) emerge. We identify the condition and operational consequences associated with these three archetypes. Our findings are informative to managers at buyer firms about the impacts of squeezing strategy on their extended supply chain partners, who often times are out of their immediate purview. This is a postprint of the published article.

This is the peer reviewed version of the following article: Li, M., Alam, Z., Bernardes, E., Giannoccaro, I., Skilton, P.F. and Rahman, M.S. (2021), Out of Sight, out of Mind? Modeling the Impacts of Financial Squeeze on Extended Supply Chain Networks. J Bus Logist, 42: 233-263. https://doi.org/10.1111/jbl.12265, which has been published in final form at https://doi.org/10.1111/jbl.12265. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.