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The role of supply chain diversification in mitigating the negative effects of supply chain disruptions in COVID-19

The role of supply chain diversification in mitigating the negative effects of supply chain... This study examines the firm-level financial consequences caused by supply chain disruptions during COVID-19 and explores how firms' supply chain diversification strategies, including diversified suppliers, customers and products, moderate the negative effect on firm performance.Design/methodology/approachBased on data drawn from 222 publicly traded firms in China, the authors use event study methodology to estimate the effects of supply chain disruptions on the financial performance of affected firms. Regression analyses are conducted to examine the moderating effects of supply chain diversification.FindingsFirms affected by supply chain disruptions during COVID-19 experienced a significant decline in shareholder value in two weeks and a subsequent decrease in operating performance in one year. Diversified suppliers, customers and products act as shock absorbers to alleviate the negative effects. Further regression shows a substitution effect between customer and product diversification. Cross-industry comparisons reveal that service firms experienced more loss than manufacturing firms. Customer diversification mitigates the adverse effects of supply chain disruptions for both manufacturing and service firms. Supplier diversification exerts a noteworthy role in manufacturing firms, while product diversification is beneficial for service firms.Originality/valueThe study provides empirical evidence on the magnitude of financial consequences of supply chain disruptions during COVID-19 in both the short term and long term and enriches the current understanding of how to build resilience from the supply chain diversification perspective. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Operations & Production Management Emerald Publishing

The role of supply chain diversification in mitigating the negative effects of supply chain disruptions in COVID-19

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References (132)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0144-3577
DOI
10.1108/ijopm-09-2022-0567
Publisher site
See Article on Publisher Site

Abstract

This study examines the firm-level financial consequences caused by supply chain disruptions during COVID-19 and explores how firms' supply chain diversification strategies, including diversified suppliers, customers and products, moderate the negative effect on firm performance.Design/methodology/approachBased on data drawn from 222 publicly traded firms in China, the authors use event study methodology to estimate the effects of supply chain disruptions on the financial performance of affected firms. Regression analyses are conducted to examine the moderating effects of supply chain diversification.FindingsFirms affected by supply chain disruptions during COVID-19 experienced a significant decline in shareholder value in two weeks and a subsequent decrease in operating performance in one year. Diversified suppliers, customers and products act as shock absorbers to alleviate the negative effects. Further regression shows a substitution effect between customer and product diversification. Cross-industry comparisons reveal that service firms experienced more loss than manufacturing firms. Customer diversification mitigates the adverse effects of supply chain disruptions for both manufacturing and service firms. Supplier diversification exerts a noteworthy role in manufacturing firms, while product diversification is beneficial for service firms.Originality/valueThe study provides empirical evidence on the magnitude of financial consequences of supply chain disruptions during COVID-19 in both the short term and long term and enriches the current understanding of how to build resilience from the supply chain diversification perspective.

Journal

International Journal of Operations & Production Management – Emerald Publishing

Published: Jan 2, 2024

Keywords: Supply chain disruption; COVID-19; Supplier diversification; Customer diversification; Product diversification; Event study

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