American Consequences - May 2020

On the plus side, this has allowed many companies to reduce the number of links in their supply chains – or at least shrink the distance between them – by relying primarily on a smaller number of sources that are concentrated in a specific geographic area. But in this quest to lower operating costs, including labor and overhead, more companies have put too many of their “eggs” in one basket. Certain industries have favored certain regions, with the auto, tech, and agricultural industries favoring China. India, on the other hand, has become the primary source for generic drugs. As a result, disruptions in a single country become even more severe. In January, well before the U.S. and other countries in Europe had coronavirus outbreaks of their own, Western companies and retailers were already bracing for severe supply chain problems after China’s economy went into lockdown. And the impacts are still being felt several months later on all kinds of products, from toys and TV screens to sponges and ink cartridges, and could even extend into Christmas. GETTING READY FOR THE NEXT CRISIS Of course, it makes sense that companies would do all they can to reduce costs and make

their supply chains as efficient as possible. That has made them incredibly vulnerable to disruptions, even minor ones. And the coronavirus pandemic is a disruption like no other, and undoubtedly people will continue to see temporary and longer shortages of essential goods as long as it lasts. My biggest concern is that if COVID-19 continues to spread throughout the U.S., devastating the ranks of large meat packing plants and other factories and farms, Americans will begin to experience severe scarcity of foods and other goods. While it’s probably too late to do much about the current crisis, I hope companies learn these lessons and adopt better strategies to manage their supply chains risks, like by putting more backup suppliers in place and building up more inventory. Maybe then more of them will be ready for the next disruption. © The Conversation But in this quest to lower operating costs, including labor and overhead, more companies have put too many of their “eggs” in one basket.

Nada R. Sanders is a Distinguished Professor of Supply Chain Management at Northeastern University. She has written more than 100 scholarly articles in top- tier journals, as well as seven books. Since the coronavirus pandemic, she has been interviewed by numerous news outlets for her expertise relating to global supply chain disruption, including the New York Times , Bloomberg, Boston Herald , and the Boston Globe .

American Consequences


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