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Industry Updates

First Comes the Wake-Up Call. Next, Your New Best Practices

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We’ve had earthquakes, hurricanes, trade wars and real wars. All have disrupted global supply chains to some extent, but none has had the impact of coronavirus.

“The disruption unleashed by the new coronavirus is different in that it has highlighted country risk at an unprecedented scale,” notes a new article from MIT Sloan Management Review. “Nobody could have foreseen what would happen when the world’s second-largest economy went offline and completely shut down external logistics connections. And because of supply chain tiering and the delays inherent in ocean container shipping, many companies are only now coming to grips with the depth of their dependencies.”

In a piece titled (we have to assume rhetorically) “Is it Time to Rethink Global Supply Chains?” the author lists several best practices to help organizations navigate through the current crisis and prepare themselves for future disruptions.

“For many companies, the combination of lean production and global multi-stage supply networks is leading to crises,” writes Willy Shih, the Robert and Jane Cizik professor of management practice in business administration at Harvard Business School. (We couldn’t help note that he used the plural “crises.”) “This should be a wake-up call for managers who need to understand their supply chain’s strategic vulnerabilities.”

To manage this wake-up call, Shih recommends:

  • Localizing your supplier base;
  • Developing second sources or additional safety stocks; and
  • Rethinking your scale and product mix.

“The [current] disruption to supply chains is likely to continue for many months, and it will be exacerbated by fear, shortage gaming, and the difficulty of restarting logistics and raw-materials suppliers,” Shih says. “Managers should consider the extraordinary costs they are facing and identify actions now that will improve their resilience to future shocks.”

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