Supply chain dynamics beyond optimization: Metabolism of regional inter-firm networks

Sustainable supply chain networks are critical to the survival of companies in interconnected business ecosystems. Today's rapidly changing market conditions require firms to restructure their network resources flexibly. In this study, we quantitatively investigated how firms' ability to adapt to the turbulent market depends on the stable maintenance and flexible recombination of inter-firm relationships. Using the proposed quantitative index "metabolism," we measured the micro-level dynamics of the supply chain, which represents each firm's average replacement rate of business partners. We applied this index to longitudinal data on the annual transactions of about 10,000 firms from 2007 to 2016 in the Tohoku region, which was affected by the 2011 earthquake and tsunami. The distribution of metabolism values differed across regions and industries, indicating differences in the adaptive capacity of the corresponding firms. We also found the typical balance between supply chain flexibility and stability for successful companies that have survived in the market for a long time. In other words, the relationship between metabolism and duration was not linear but U-shaped, indicating an appropriate metabolism value for survival. These findings provide a deeper understanding of supply chain strategies for adapting to regional market dynamics.