Over the last 30 years supply chains have become increasingly global. This change has been caused by the increase in the number of trade-able goods and services. Goods with high value relative to their size and shipping cost makes sense to manufacture them in a low-cost region and ship them. A steady decline in those costs has encouraged many companies to shift to a global sourcing model which allows them to take advantage of lower costs for labor, materials, land and many other things. Subcontracting makes it difficult for companies to have visibility into who all their suppliers actually are and is why we continue to have surprises when a major disruption occurs. The combination of lean production and global multistage supply networks is leading to crises.
Reassessing Supply Chain Risk
- Consider regionalization
- Develop second sources or additional safety stocks
- Rethink scale and product mix