Supply chain complexity 'protects big cities from shortages'

Penn State University shows complexity in value chains mimics natural world in making large cities more resilient in times of supply chain problems

Research suggests that complex and diverse supply chains – which are often thought to be problematic – can actually help protect cities in times of shortages. 

Engineering academics at Penn State University developed an algorithm to analyse the impact of two aspects of supply chain complexity: the diversity of sources needed for a product and the volume of that product coming into the city. 

Using a machine-learning algorithm they identified patterns to predict the risk of supply shortages in cities experiencing supply shocks.

The findings fly in the face of accepted wisdom regarding supply chains: that complexity can be problematic.

Report co-author Alfonso Mejia – Associate Professor of Civil and Environmental Engineering – points out that the results mirror a trend that is seen in nature.

"The opposite tends to be true in nature,” says Mejia. “In ecological systems there is a well-known connection between complexity and resilience."

He adds: “Diversity increases complexity, which is a good thing in nature. Having many species that can do various tasks makes that ecosystem less vulnerable in the face of wildfires, floods and other natural disasters.

"The redundancy of multiple species doing the same things in different ways enables an ecosystem to better respond to shocks. If one goes away, the other can continue. We believe that what we learn from nature can be applied to human systems."

Such as supply chains.

To that end, researchers studied supply chains from a complexity perspective, examining whether a supply chain that sources products from many different suppliers makes a city more resilient.

Mejia and his team examined data from between 2012-15 from the US Departments of Transportation and Energy detailing the movement of goods from 39 product categories across 69 major US cities.

Supply complexity protects big cities from shortages

"We found that complexity can be a good thing," Mejia says. "Cities with diverse supply chains appear to be better protected against shocks and experience less-intense shortages."

They found the potential benefits arising from complexity is most evident in medium-size cities, with populations of more between 100,000-500,000 people.

Penn State found that large cities such as New York and Chicago have less dependency on specific supply partners and are less affected by supply chain interruptions.

Medium-sized cities, however, are “hurt by a lack of diversity when sourcing the supplies they need" says Mejia.

He added that the University now plans to test the model with data from more cities over a longer time frame, to cover of pre- and post-pandemic years.

The research was conducted with help from the National Science Foundation – an independent research agency of the US Government – and The Ministry of National Education of Turkey, a Turkish Government body responsible for the supervision of public and private educational systems.

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