Highlights
The COVID-19 pandemic has had a major effect on the global supply chain because of the high dependencies on Chinese manufacturers play in the total supply chains. The disruption has resulted in acute shortages in the electronics and auto industries, affecting pharmaceuticals, and a wide range of consumer and industrial products, including surgical masks and personal protective equipment. The growth of globalization has seen a significant increased use of subcontracting, including the increased sophistication of components, manufacturing processes that require specialists, and the desire on the part of primary producers to have more flexible capacity that can be turned on and off depending on demand.
The result is deeper tiering of supply chains in particularly in China, whereby suppliers draw upon their suppliers who in turn draw on their own networks of suppliers in multi-stage production networks. In fact, it isn’t uncommon to have four or more tiers of suppliers. This complex “fan out” means it’s extremely difficult for companies to have visibility into which all their suppliers actually are. This is one of the reasons we continue to have surprises when a major disruption occurs.
a) In your critical evaluation, how did the global supply chains end up with such complex interdependencies?
b) What are your recommendations to overcome such challenges?
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