Do the economics of supply chain resilience make sense in a post-COVID world?
For decades, supply chains have grown in length and complexity as companies expanded globally in pursuit of better margins. Uninterrupted, post-war stability allowed this model to flourish, and even events such as the Japanese earthquake and the Asian tsunami that placed a strain on the ecosystem were short-lived and deemed a price worth paying for low-cost and increased efficiency. COVID-19 was a different animal altogether though, it was like nothing we’d seen since the second world war in terms of reach and lasting impact.
As we emerge from this intense period of disruption, many are questioning the wisdom of highly distributed, ‘just-in-time’ supply chains, but the economic realities of untangling them presents a number of challenges. The current stand-off between chip manufacturers and the auto industry over who should bear the cost of keeping excess inventory on hand is a perfect example of this: Is resilience worth paying for, and, if so, who should pick up the check?