American Consequences - May 2020

R etailers are frequently running out of everything from flour and fresh meat to toilet paper and pharmaceuticals as supply chains hammered by the coronavirus struggle to keep up with stockpiling consumers. Although out-of-stock products are usually replenished within a day or two, the sight of bare shelves typically prompts more hoarding as people fear the supply of the goods they need may be cut off. This vicious cycle is a direct result of shortcomings of modern supply chains, which most companies, regardless of industry, now use. As an expert on supply chain management, I believe three main characteristics of today’s supply chain are largely to blame... 1. SUPPLY CHAINS HAVE BECOME VERY COMPLEX. Fundamentally, a supply chain links a series of companies that make, transport, refine, and deliver the finished product you buy at a retailer, restaurant, or anywhere else. Consider a cup of coffee from Starbucks. Your coffee might begin as a pile of coffee beans grown and picked by a farmer in Guatemala. They’re then shipped to a coffee roaster, say in Seattle, who then sends them on to a distributor near where you live, who sells them to your local Starbucks.


A shutdown anywhere along the supply chain in any of these locations stops this flow and could prevent you from enjoying your morning brew. While a coffee supply chain may be relatively simple and linear, it can quickly get complicated for products that have many parts, such as an Apple iPhone. Apple actually has suppliers in more than 40 countries, and tracing the journey of any one component is difficult. For example, one of the chips that run an iPhone is designed in California but made in Taiwan, tested in the Philippines, and then added to Apple products in China. And many companies often share the same supplier, such as Intel for processors or Kimberly-Clark for the fiber in toilet paper. So a hiccup in one link in the supply chain can have ripple effects across companies around the world. The result is that the vast majority of global companies don’t fully grasp their risk exposure. Few, if any, have complete knowledge of the locations of all the companies that provide parts to their direct suppliers.

American Consequences


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