If Covid-19 has taught us nothing else, it is that our supply chains, both local and global, have been weighed, measured, and found wanting. For the first time in modern history, the entire world has been thrown into a maelstrom of panic buying and hoarding, resulting in empty shelves at retailers and the inability of the population to source the most basic of needs. Both the public and private sectors are now forced to review the cost savings and variety of a globalized supply chain against the speed to market and consumer confidence of a domestic-based system.
Low-cost global sourcing allows high-cost countries to offer a variety of goods at a lower price point by leveraging resource-rich yet low-cost countries' natural resources, production capability, and innovation. In spite of the clear benefits of a global supply chain, it was perhaps put best by economist Leonard P. Ayres, “It is an immutable economic fact that there is no such thing as a free lunch.” Political instability, shipping costs, lead time, and yes, global pandemics can and will cause disruption and cessation of the movement of products.
Domestic sourcing offers suppliers a shorter lead time, inspires consumer confidence, and a stronger relationship with the local manufacturer. This being said a domestic sourcing chain can suffer from the immutable fact that domestic suppliers have a higher cost, may lack the natural resources, capability, and efficiency, or be restricted by local regulation from manufacturing the product to be sourced. So, what should we do in the market to mitigate the risks of both domestic and global supply?
As with most problems an ounce of prevention is worth a pound of cure. Recognize risk factors whether environmental, social, or political before they affect the supply chain. Evaluate geographic coverage and source from multiple suppliers. Build-in transport flexibility. While more economical sound to deal directly with carriers it leaves little flexibility to shift capacity when needed. Leverage technology. Some supply chains are using social networking to identify problems with suppliers before shortages are felt downstream in the chain. Finally, lean on third-party logistics providers who have the knowledge and on the ground resources to execute contingencies and minimize your risk.
By weighing the pros and cons of your current supply chain it is possible to move forward with certainty in an uncertain world. From procurement to delivery, increasing the flexibility and efficiency of the system can save more lives now and prepare your business for the future. Covid-19 is not the first or the last time the world has been disrupted. The real question is, how will you prepare?
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