Supply chain stress tests for critical inputs: A proof-of-concept
Béatrice Dumont  1, 2@  , Xose-Luis Varela  3, *@  
1 : College of Europe
2 : Chaire économie du climat
Chaire économie du climat
3 : European Commission - DG GROW
* : Corresponding author

This article aims to develop a ‘proof of concept' for testing the resilience of sectoral supply chain networks at firm level against an exogenous shock to critical inputs. The rationale for implementing supply chain resilience testing at the sector level is that outsourcing may be individually rational at the company level, but collectively suboptimal in terms of risk management at the supply chain level. The analysis focuses on the wind power sector in Europe using data from the FactSet Supply Chain Relationships database. The methodology is based on the construction of a matrix of resilience coefficients linking upstream and downstream firms, and affecting the diffusion of shocks. We implement Monte Carlo simulations and examine how idiosyncratic shocks propagate from firms to firms. Our findings show that supply chain stress tests can help identifying relatively weaker firms or more exposed sectors/countries and that the lack of critical inputs (downstream shock) can translate onto an upstream shock for suppliers of complementary inputs. At a more detailed level, our results show that the specificities of each firm network of suppliers-customers are a strong determinant of their resilience.


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