Research On Supply Chain Risk Structure And Management Mechanism Based On Fractal Theory

Since the end of the last century, Supply chain management has become an important access to achieving competitive advantage and enhancing competitiveness,Network has become an integral part of the strategy method for enterprises responding faster to changing market. Network members become partnership and rely on each other by cooperating closely and integrating inseparably. Reducing transaction costs, focusing on core competencies, accessing to key technologies and sharing the risk have become the key to success for supply chain management. Supply chain takes competitive advantage to enterprises at the same time, it also brings potential risks. People increasingly concerned about supply chain risk, when they researched on supply chain network design, supply chain coordination and contract, supply chain inventory issues, supply chain performance measurement and supply chain information flow and value.Although we have an extensive research on the supply chain risk management, the literature rarely studies the supply chain as a whole using non-linear complexity theory. This paper from the perspective of fractal theory study the supply chain structure of the overall risk and risk management issues, using nonlinear analysis tools. As some initial exploration, the paper work and the main conclusion of the study are as follows:1. It elaborated the supply network vulnerability, supply network elasticity, supply network robustness, supply network flexibility, supply network reliability, supply chain agility, supply network architecture, supply chain complexity and so on relative concepts, analyzed their relationship with supply chain risk. It systematically summarized the domestic and foreign literature about supply chain risk management and carried on the brief summary to the present research.2. It proposed the fractal characteristic supply chain optimized the information space dimension, optimized the information efficiency. Through the analysis to the universality of supply chain risk factors and the complexity of the participants, it pointed out the huge information need for supply chain risk management. In order to whole effective control the supply chain risk, it must seek the effective information mechanism to enhance the information efficiency and achieve active control and management with the smallest information need.Analyzing on Tian Guoqiang's decentralized information mechanism and Tian theorems, it obtained that the economic environment information space possesses fractal characteristics, which has the most superior information efficiency and the most superior resources deployment. So unifying the information mechanism and fractal theory analysis, it proposed to restructure supply network and establish fractal characteristic supply chain risk structure, then improved information efficiency of supply chain risk management.3. The paper highlighted the significance of restructuring fractal characteristic supply chain, and studied the restructuring theory and practice method. Basing on fractal theory, it provided suggestion to compress complex enterprise and supply chain into fractals with self-similarity schemas, so reduced the information dimension and decreased supply chain risk, people can manage and control more large-scale enterprise and longer supply chain only using lesser information. First, from the perspectives of competition efficiency, motivating mechanism and self-organization theory, we studied the significance of the restructuring fractal characteristic supply chain. Self-organization, self-adaptation and self-optimization results from self-similarity, it enhances supply chain efficiency and competency. Then the paper discussed practice and theory restructuring method for the supply chain risk structure. Theoretically , by the principal components analytic method it mainly selected key irrelative aspects of outstanding individual, therefore restructured supply chain with self-similarity characteristic according to such key aspects as standard core schemas. Practically, it restructured supply chain core enterprise with fractal characteristic according to six configurable aspects, such as organization structure, policy and procedure, monitoring system, enterprise culture, employee development system and information system. The paper proposed that the application of normalized schemas are expanded and penetrated to core enterprise interior and all kinds of suppliers and supplier's suppliers, it suggested that individual organizations operate by similar mechanism, select and manage suppliers by similar mechanism, cooperate with multi-layer partner by similar mechanism, manage interior units by similar mechanism, hence we compress core enterprise and supply chain into fractals with self-similarity.4. Supply chain risk structure and its characteristic parameters were focus of this dissertation. It researched supply chain nested structure based on value activity, abstracted supply chain risk factors pursuant to the nested fractal structure, provided the framework of supply chain risk index system. It discussed the analytic theory for researching supply chain risk structure, and pointed out that fractal theory is the good tools to feature the supply chain risk structure. In the view of fractal theory, the paper described the calculation method of fractal dimension of value activity risk structure and of partial fractal dimension of multi-layer supply chain risk structure. It also studied the singularity spectrum of multifractals and characteristic parameters of supply chain risk structure. Multifractal spectrum uncovered diversity, irregularity, nonuniformity and complexity of risks from supply chain different area. Moreover, by changing fractal scale, people can analyze and manage supply chain risk structure from different scale and different scope. Finally, it gave an example to calculate the value of supply chain fractal dimension and characteristic parameters of supply chain multifractals. This article extended the supply chain risk management from two-layer to multi-layer, expanded visual field of supply chain risk management, refined new theory relevant to real-world supply chain risk, and established framework of supply chain risk management in whole view.5. This article has established models to simulate the diffusion and convergence of supply chain risk, and studied the management mechanism. Because of supply chain complexity and non-linear interrelation of supply chain core enterprise interior and between the supply chain level, we utilized the non-linear model of complex theory to research the process of diffusion and convergence of supply chain risk. Four kinds of models have been founded, when there are no interference of supply chain members, or there are, and when there are interference with time lag but no parameters disturbance, or when there are parameter disturbance but no interference time lag. These models emphatically analyzed the supply chain risk factors how to exist in the supply network and what are their styles of coming into being, conducting, diffusing, shaking, converging, and the stable state movement way. The essential model parameters include the diffusion and convergence parameter of supply chain risk, the average responsive time and the parameter of risk managing and controlling capacity.In view of the three essential model parameters, the article has discussed how supply chain risk structure affects the diffusion and convergence parameter of supply chain risk, and suggested the method of reducing supply chain complexity to decrease supply chain risk. It has discussed how supply chain agility influences the average responsive time of supply chain, and analyzed the evaluation model of supply chain agility and the method of improving supply chain agility. Eventually, it had discussed how performance measurement mechanism works on the parameter of risk managing and controlling capacity, and proposed the method of making good use of performance measurement mechanism to improving willingness of risk managing and controlling.We have discussed that supply chain with self-similarity can transmit accurate information in good time, and adapt easily to quick changing environment by self-organization and self-optimization, so the fractal characteristic supply chain can improve diffusion and convergence parameter of supply chain risk and reduce average responsive time, at the same time, mitigate the risks with small structure changes. The self-similarity of supply chain is propitious to compare performance of members, to select suitable performance evaluation mechanism. So the fractal characteristic supply chain can improve the three parameters of above-mentioned model, can enhance the ability of supply chain to avoid risks, mitigate risks, and eliminate risks.6. In this article, we have studied how the self-similarity of the fractal supply chain influences the income of supply chain members. It proved that the normalized schemas and self-similar structure induce strong pertinence relation between supply chain interior because of restructuring supply network based on fractal theory. Nevertheless, self-similarity of supply chain has two-sided function to risks, on the one hand, the self-similarity causes self-relation and enhances risk, on the other hand, self-similarity causes self-optimization and decreases risk, it is the two powers to affect risk evolution.The dissertation referred to Babich(2003) supplier credit risk correlation model and Martin A. Lariviere & Evan L. Porteus(2001) price-only contracts newsvendor model. The synthesis influence on the income of supply chain members has been researched from both self-relation and self-optimization functions resulting from self-similarity of supply chain. The paper disclosed the synthesis self-similarity influence separately from longitudinal and latitudinal direction in the supply chain, when manufacture and solo supplier are longitudinally similar and when manufacture and multi suppliers are latitudinally similar. Moreover, it analyzed the compositive result on the income of supply chain members under deterministic and nondeterministic demand.With one supplier and under uncertainty demand, the optimum equilibrium order quantity and profit of the integrated supply chain increase while product default risk decreases, the optimum equilibrium order quantity, supplier profit and manufacture profit of the non-integrated supply chain all increase while product default risk decreases. Because self-similarity of supply chain causes self-optimization and decreases the product default probability, so self-similarity of supply chain is useful to improve the income of both integrated and non-integrated supply chain.With two suppliers and under certainty demand, when the effect of self-optimization caused by self-similarity is greater to some extent, the optimum profit of manufacture and the supply chain increase while self-similarity improves. The effect on suppliers'profit is uncertainty, the profit of suppliers increase only when supplier product default probability is very high.With two suppliers and under uncertainty demand, by analyzing examples with exponential distribution demand curve or normal distribution demand curve, and with symmetrical suppliers, the optimum profit of manufacture and the whole supply chain increase while self-similarity of supply chain improves and when the effect of self-optimization caused by self-similarity achieves certain level, nevertheless, the optimum profit of suppliers drop.Because the profit of the whole supply chain goes up when self-similarity improves, supply chain coordination can inspirit suppliers.7. This article made case study about supply chain risk structure and management mechanism with fractal characteristic. First, it carried on the brief summary to development situation of franchised enterprises with higher self-similarity. Their good trend demonstrates that enterprises and supply chains with fractal characteristic can adapt fiercely changing and intensively competitive business environment, simultaneously control and keep away risks more easily and develop well. Then it analyzed two domestic representative snack enterprises which one operates Chinese food and the other operates west food, elaborated their structure features and management principles, calculated the fractal dimension of supply chain value activity, analyzed the singularity index and the singularity spectrum, depicted their difference of supply chain risk structure, calculated the relative value of their diffusion and convergence parameter of supply chain risk. With the thorough analysis of 2002 and 2007 year in several significant crisis events, the actual operation data of two enterprises proved that the more greater value the parameter of risk managing and controlling capacity is, the more lower risk the supply chain moves stable in. Though the relative parameter value of diffusion and convergence is bigger, so long as the relative average responsive time is short and respond quickly, risk crisis of supply chain can be effectively managed and come back to stable state. Through comparing many years actual operation data of enterprises, the result is found that the higher self-similarity enterprise grow up persistently and get higher income growth. Although higher self-similarity cause higher self-relation, it also produces strong capacity of self-organization, self-optimization, mitigating and keeping away risks.This article has mainly conducted following several innovation researches in view of supply chain risk management:1. It proposed that fractal characteristic supply chain optimizes the information space dimension, optimizes the information efficiency. Then it highlighted the significance of restructuring fractal characteristic supply chain, studied the restructuring theory and practice method.2. Based on fractal theory, it researched supply chain risk structure and its characteristic parameters. This article extended the supply chain risk management from two-layer to multi-layer, expanded visual field of supply chain risk management, and established framework of supply chain risk management in whole view.3. This article has established non-linear models to simulate the diffusion and convergence of supply chain risk according to complex theory, and studied models under four situation.4. The paper studied how the self-similarity of the fractal supply chain influences the income of supply chain members. The self-similarity of supply chain causes self-relation of supply chain risk, and causes self-optimization of supply chain. It established model to analyze the influence on income and equilibrium of manufacture, suppliers and the whole supply chain.