Assessment of Green Supply Chain Risk Based on

Circular Economy

Zhen-kun YANG 1, Jian LI 2

I Management school, Tianjin University of Technology, Tianjin, China
2
Management school, Tianjin University of Technology, Tianjin, China
2
C
lijian631219@163.com, yangzk1987@163.com)

Abstract - Circular economy is the main direction of the
development of world economy, and now it is the economy
developing pattern of our country. This paper describes the
operation of green supply chain, and re-assesses the risk
system of green supply chain, and then use Fuzzy-AHP
comprehensive evaluation model to make an
for the Green Supply Chain Risk to provide a reliable basis
and assurance for the Supply chain selection and risk
control of enterprise.
Key words - Circular economy, green supply chain risk,
fuzzy analytic hierarchy process(Fuzzy AHP)
I. INTRODUCT ION
The process of industrialization created the amazing
human social wealth and a high degree of modem
material; However, the subsequent is the world facing the
severe form of the increase of population, shortage of
resources,
evolution
[1 1
environmental pollution and
. To this end,the management of the green
Supply chain risks often cause companies not a
continuous operation, resulting in decreased market share.
If the supply chain risk causes a great loss, it may
endanger the survival and development of enterprises.
Therefore, it is very important for the company to prevent
assessment
risk. If an effective supply chain risk management can be
carried out, then the enterprise will be able to make a
rapid response to the change of the dynamic business
environment. It can not only prevent risks, but also
improve the ability to seize market opportunities, enhance
[31
the overall competitiveness .
Supply chain risk management theory and methods
are divided and developed from general Supply chain risk
[41
management theory .As shown in Figure1 , what the
supply chain risk management system should be included
was summed up according to supply chain management
process elements, combined with the actual situation of
supply chain management.
ecological :
------------------------------------,
, ,

supply chain management is followed by the community's

attention. Supply chain to participate in the main,
!
cross-regional, multi-link feature,the supply chain is
vulnerable to the external environment and internal Risk Risk
entities adverse factors to form the supply chain risk Analysis Identification
because of its feathers of the participation in the main,
cross-regional and multi-link. In recent years, most
scholars focus on the research, production and operation
of green supply chain model, corporate relations and
performance evaluation, only a small amount of research
on green supply chain management and related issues
discussed. This paper will apply model to assess the risk
to green supply chain risk for and provide a reliable basis
for the company's green supply chain choices and risk ,
,------------------------------------
,

control and assurance.

Fig!: Management of Supply chain risk process

II. METHODOLOGY
III. OPERATION MODE

Supply chain risk management is to identify

Cycle logistics system is composed of forward and
potential risks and take appropriate action to avoid or
reverses interconnected green supply chain interconnected.
eliminate the risk. It can be defined as aiming to reduce
The development of the forward green supply chain as
the vulnerability of the whole supply chain through the
well as the reverse supply chain green Composed by the
collaboration between members of the supply chain to
waste materials recovery, recycling of renewable
identify and manage internal and external risks of the
,,[21 resources, Forming a closed-loop supply chain
supply chain .
management model from the Green Design-Green
978-1-4244-6484-5/1 0/$26.00 ©2010 IEEE

1276
Purchasing of raw materials-products green landfilled, making a good Effort to make the sound back
production-green marketing and green recycling, in order to nature and ecosystems. Decomposition link recovery is
to achieve optimal in the entire supply chain in the
reverse recovery of green supply chain activities, namely
harmonization of environment-friendly management
system environment through the production chain recycling logistics

between enterprises and between enterprises within the

[51
sector to work closely • The operation mode of green
supply chain Based on the theory of circular economy IV. RISK ASSE SSMENT OF GR EEN SUPPLY CHAIN
was shown in Figure2. MANAGEMENT

Recycling principles A. Setting principles of index system

<,-------> Recycling of raw materials

Green Supply Chain is a large complex system with
the features of many complex variables. For the
,,------------------------------------------------------------,
,, ,,
,, ,
,,
realization of the purpose and right risk state's describe
! rp�rt�-r�l���--------------------------------: i the evaluation, monitoring and early warning and
i i Product Recycling Ii planning regulation, and other basic functions of the
Index System, and the existence of problems in risk
assessment index system, the design of green supply
chain Risk V aluation Index System should be followed as
0-
g " on � ;:;:
"
»

"on
�

0; .!: scientific rationality, feasibility, hierarchy, independence

;;: 'fi U "c
Q.

.� 0; "0 .§
" "»
VJ

and the principle of representation of wedlock, in addition

0
] "'§ e
>

::; g g [61
0

� .�E "
Q.
.0
ii '"
.

�" to the following principles in particular Emphasized •

0 e .� � ii "
� 00 is 1) The overall principle. We should select indicator
'" .5
.

� system from the perspective of system theory to supply

chain operations, risks involved in all aspects of
information reflects, Then according to the methods need

I
<
Reduction principle
>I < Re-use principles
Fig2: The operation mode of green supply chain Based on
circular economy
It is shown in Figure2, Green supply chain operation
can be summarized as: Manufacturers
manufacturing, production of green products flow through
the process, to reach consumers, and green consumption.
This is the positive Green supply chain logistics activities
required to achieve resource use reduction. Green supply
chain Reverse logistics activities refers to the products,
resources which do not meet requirements of Green
consumers, marketing back to the manufacturer hands ,it
was called The return logistics. when Green products was
used by the Green Consumer, after Recycling of waste
products was inspected and sorted, the products which
still has use value were reusable link back to marketing, a
fixed value of the waste, can then create links back to
marketing, the products which can not be repaired or
re-manufactured products enter into the material cycle
link; to achieve recycling of resources in the form of
resources available to the Green Procurement In the
material reduction session of Useful materials. After
detection and selection, the useless
> to adopt certain key risk factors are extracted into the
target system. Hence, the ideal result is an index system
meets the design representation, but also to meet the
comprehensive.
2) Dynamic principle. Supply chain risk assessment
itself is a dynamic process, an objective requires the
establishment of the dynamic nature of the index system.
The choice of indicators should not only reflect the status
of green of supply chain risk, but also on the risk to predict future
changes in trends. In addition, the index system should
also be flexible enough to adapt to the changing needs of
78
business reality [ - 1•
B. Risk evaluation index system
Different companies have different risk preferences.
The same risk was not at the same level to the enterprises
which have different risk preference. Enterprise's
Preference to the risks can be divided into three categories:
Risk-loving type, risk aversion type, risk-neutral type.
The same risk may be considered acceptable risks in the
risk-loving type of supply chain; however, it may be
considered a very serious risk in the risk aversion type.
Because of the presence of risk preference, when we carry
out supply chain risk index assessment, different supply
chain risk assessment on the same choices may be
different results. In The following, we combine the actual
situation, given a more integrated system, a reasonable
supply chain risk assessment system, Specific indicators
include:
Organizations risk: supply chain management
was burned or
emphasizes the system optimization, but due to goal

1277
conflicts, the interests of all members of the supply chain Fig3: Supply chain risk evaluation index system
must be contradictions. Organizations risk includes the C. Fuzzy--AHP Comprehensive Evaluation Model
risk of major structural design risk, members of the
strategic bias risk, relationship risk and moral hazard. Analytical Hierarchy Process(AHP) classify the
System of control risk: try to ensure the supply chain factors contained according to the nature and
in good control policies and procedures, these policies requirements of problem, and form a hierarchical
and procedures have also been a good implementation. structure on target, rule, and sub-criteria layer, then
Internal control risk improper factors include inventory determine the relative weight on the target layer through
control risk, financial control and taxation risk, the comparing with the factors within the same level. Go
information risk management, risk and emergency control on analysis until the last layer. All factors are given
risk should be so. relative to the overall objectives, and then make a sort
Market risk: the industry's turmoil will run a risk the according to the level of importance of them. Its main
ownership of the industry'S supply chain, the competitive feature is that it is reasonable to combine qualitative and
situation between the supply chains to supply chain will quantitative decision-making, making decision-making
greatly influence survival. When the competitor is better Hierarchical, quantitative in accordance with the thinking,
than their operating efficiency and cost, then the business the law of the psychological. Fuzzy comprehensive
risk increased. evaluation is a very effective of multi-factor and
Supply risk: the risk of supply mainly come from the decision-making methods to make a comprehensive
uncertainty of suppliers and logistics distribution, assessment to those things affected by many factors.
including supplier quality risk, the risk of purchasing Characterized by evaluation results are not absolutely
[9 01
costs, risks and key logistics provider risk of failure - I . positive or negative, but in a fuzzy set to represent. Its
Demand risk: in the pull-based supply chain, demand feather is that evaluation results are not absolutely
determines production, too large or small demand will run positive or negative, but in a fuzzy set to represent. In this
a crucial impact on the supply chain or even on survive. paper, green supply chain risk is assessed by the analytic
From the nature of risk, demand risk is divided into hierarchy process and fuzzy comprehensive evaluation
market forecast risk, distributor selection risk, the risk of methods; we established the model Evaluation System
the bullwhip effect and key customers risk of failure. The according to the Evaluation System.
risk factors above can be expressed in figure 3. 1) Establish index set B= BI ,B2 ,B3 ,B4 { },
Design Risk El l
{ } , B2= { E21 ,E22 ,E23 ,E24 } ,
B1 = El l ,E12 ,El3 ,EI4

Members' the strategic bias

B3= { E3"E32 ,E33 ,E34 } , B4= { E4"E42 ,E43 ,E44 } '
risk EI2

Partnership risks E 13
B5= { E5"E52 ,E53 ,E54 } ,V IS the reviews set,

Moral hazard E14 V= { V"V2 ,V3 ,V4 ,Vs J ,in which V

I
represent Very high

Inventory control risks E21 risk,V 2 represent High risk,v 3 represent General risk,V 4

financial and taxation control

represent Low risk,V 5 represent Less risk.
fisk E22
2)Comprehensive Evaluate For each Bi
Infannation control risks E23
Ci=1,2,3,4) ,because Eij can not have direct access to the
Risky emergency control risks raw data of quantitative, judging the level rij of Eij
E24
belonging to Vij conducted by the Delphi method or a
.�
�

'5 random survey according to reviews set V, and thus

§
1--+---1 .�C3
"'

:g
�
Competing risks E32

Supplier quality risk E41

construct Matrix Ri.

=
n['o'121
'112

'122
'113

'123
'114

'124 '125
Procurement costs risk E42

Distribution Risk E43

Key suppliers railure risk E44

RI

[ '131

'141
rw
r221
'132

'142
r212

r222
'133

'143
r213

r223
'134

'144
r214

r224
'0"]
'135

'145

r225
,

=
Market Forecast risks E51

Distributors Select risk E52

Bullwhip effect risks E53

R2

R3 -
_
[
r231

r241

r211

r221
r232

r242

r212

r222
r233

r243

r213

r223
r234

r244

r214

r224
",,]] ,
r235

r245

r215

r225
,

key customers' failure fisk

1278
 R4--
l r..

r
,

421
r

r
422
412
r

r
423
413
r

r
424
414
r,,,

1425
,
Low risk, Less risk, recording as 10,9,8,7 and 6,Vector
was obtained by V =(10,9,8,7,6).Assuming Evaluation

r r r r r results was S, so S=QXV.9< S:,(10 represent V ery high

l r

r
431

441
r

r
432

442
r

r
433

443

r
r
434

444

""
r
435

445
risk; 8< S:'( 9 represent High risk;
�: 7< S:'( 8 represent

R5--
r

r
m

521

531

541
r
512

'5 22
532

'5 42
r

r
513

523

533

543
r
514

'5 24
534

'5 44
r

r
1525

535

545
General risk;

represent Less risk.

D.
6< S:'( 7 represent Low risk;

Application examples
� O< S:'( 6

3) Determine weights set W = {wI' W2"",w n}

Take the indicators and score as shown in figure 3
through AHP. According to scaling theory, establish the
for example to make a comprehensive evaluation of The
(Aij )nxn ,and Normalize the matrix

[ ]
Matrix A= by the
Green Supply Chain risk. Under Expert score, two index
column ,Row-sum
i=l
weight coefficient matrix:
� � �
= t bij (i, j = 1,2,.··, n)
0.8
0.9
,
Ci
�
O
,And normalization were R
j=l 1 -
,_

004 0.6 ° °

l
0.5 0.5 ° °
Wi = Ci / t Ci (i = 1,2"", n) ,Wi is an approximate value
i=l o.8 0.2 0 0
R '= 0.8

J]
for the feature vector, which scores the relative 0.1 0.1 0 0 ,
2
importance of evaluation factors. 0.4 0.5 0.1 0 0
4) Making a consistency test, if the consistency test 0.5 0.5 0 0 0

OJ
pass, Wi shall be the feature vector obtained, which is the
R ,=
0.2 [ 0.2 0.3 0.1 0.2 ,

,
relative weight of this level of evaluation factors to the 3
0.1 0.1 0.3 0.2 0.3
last layer of the evaluation factors. Error consistency
0.3 0.3 0.1

l[ n]
ax -n
index CI = Am III which
R
0.2 0.4 0.3 0.1
n-l 4 -
,_

0.1 0.2 0.3 0.3

Amax = .!.
n
L[( 1 AW)i
W;
.Random consistency ratio
0.5
0.1
0.5
0.1
0
0.1
0
004 0.3
R
0.2 0.3 0.3 0.1 0.1 ,
CR = CI ,in which Rl is the average consistency index, 5 -
,_

0.1 0.2 0.3 0.3 0.1

RI
when CR<O.I, Judgement consistency was acceptable. 0.2 0.2 0.2 0.2 0.2
5) Obtain comprehensive evaluation model through What Can be drawn from the Qi = WiR'i
[i=l, 2, 3, 4, 5] is:
the synthesis of operation by fuzzy matrix, then make the
Ql= [0.69, 0.31, 0, 0, 0];
whole supply chain risk management assessment. Make a
Q2=[0.63, 0.33, 0, 0, 0 ];
fuzzy computing to the fuzzy evaluation matrix R and the Q3= [0.15, 0.15, 0.3, 0.15, 0.25];
factor weight matrix W and the fuzzy operations are Q4= [0.26, 0.35, 0.27, 0.11, 0.01];

normalized, obtain the quality of the fuzzy comprehensive Q5= [0.385, 0.238, 0.228, 0.27, 0.150].
And because W=[O.2, 0.15, 0.35, 0.2, O.1],we obtained
evaluation.

Q = WxR=(l-tj,w2,"wn)x
l ;�:: �:l
l'il
r
�l
Q = W x ( RI,R2, R3, R4, R5 ) T
Q=WxR= [0.2 0.15 0035 0.2 0.1]
0.69 0.31
0.63 0.33
0
0
0
0
x 0.15 0.15 0.3 0.15 0.25
0
0

0.26 0.35 0.27 0.11 0.01

�l �2 �m 0.385 0.238 0.228 0.27 0.15
= (0.66 0.45 0.41 0.34 0.15)
Determine the rating level based on the weighted
From the above model, we can see that
average, it is assumed that implementation of supply
Organizations risk is the most reliable Throughout the
chain risk evaluation is the system of 10 points, including supply chain, Enterprises should be strengthened in the
the evaluation of V ery high risk, High risk, General risk, Demand risk 's input and improvement.

1279
 V. CONCLUSION

Green Supply Chain Risk assessment is an important

part of supply chain management, the services it provides
is still a lack of norms to be followed. The green supply
chain risk assessment system mentioned in this paper
designed the objectification of subjective estimates
through the use of AHP and fuzzy evaluation method of
combining, improve risk assessment of green supply
chain accuracy considered all things from a system point
of view. Provide decision makers with the risk of the
current status of each link, realize the stability of the
supply chain, what can provide the most direct reference
for enterprises whether to join the supply chain, or to
detect and replace high-risk enterprise, against any part of
the supply chain problems. With these as a improve
production efficiency and product efficiency indicators,
creating the industry's products regulate and promote the
healthy development of the industry in the focus of
recycling economy and making the continuous
improvement of the green supply chain.

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