Global Supply Chains At Risk
Five years ago, the idea of moving business to China was considered progressive. It meant lower cost sourcing, and it leveraged the “World is Flat” model. Today however, many businesses should reconsider this strategy. For what was once the land of opportunity is quickly becoming the land of unseen risk and exposure.
The reason for this about-face is simple; the economic recession has spread around the world, and the land of opportunity China represented is now exposed, with factories shutting their doors daily. In fact, The Economist reports that upwards of one-third to one-half of all factories in China have closed their doors in recent months. Suddenly, supply chains that were optimized for their cost effectiveness are vulnerable.
What is the solution?
The challenge is real; supply chains can unravel and become dysfunctional overnight. Author Rodney Johnson refers to such occurrences as “Without Warning” events. These events tend to be highly disruptive and costly. Johnson professes that these events can be avoided if early warning signs are heeded. In the case of supply-chain vulnerabilities, he encourages businesses to:
- Reconsider every aspect of the supply chain, placing a risk rating on each component.
- Secure alternate or backup sources of supply where risks are elevated.
- Identify and establish domestic suppliers where feasible.
- Reestablish relationships with suppliers and their key employees.
The room for error in a down economy is miniscule. Exposure to a supply chain disruption could be critical. Every business must have a backup plan so they aren’t exposed to a “Without Warning” event.
