How to build more secure, resilient, next-gen U.S. supply chains
December 3, 2020
Eleftherios Iakovou and Chelsea C. White
Beginning in the 1990s and accelerating after the inclusion of China in the World Trade Organization in 2001, many companies globalized their sourcing and production and embraced lean manufacturing techniques to reduce costs. As supply chains moved abroad, global trade jumped from 39% of global GDP to 58% between 1990 and 2019. But this move toward globalization exposed companies to a plethora of supply chain risks, such as extreme weather events, labor disputes, cyberattacks, and supplier disruptions. Growing awareness of these risks slowed globalization―a phenomenon sometimes called “slowbalisation”―and between 2008 and today global trade as percentage of GDP shrunk from 61% to 58%. The COVID-19 pandemic and the economic crisis accompanying it has only accelerated these trends and revealed additional supply chain risks.
COVID-19 is not the first epidemic to disrupt supply chains―SARS, measles, swine flu, Ebola, and avian flu all resulted in business interruptions―but none of these epidemics disrupted global trade and domestic supply chains as much as COVID-19. The ongoing pandemic has highlighted structural problems in global supply chains. Chinese manufacturing of essential medical goods and equipment has revealed what some regard as a dangerous over-reliance on products critical to national health and economies. Surging customer demand for some goods (healthcare products and equipment, groceries, and household products) that often shifted geographically―moving from hotspot to hotspot―and dramatic decreases in demand for other goods (essentially everything non-healthcare) exposed the inability of supply chains to quickly shift production and logistics in response.
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