The good news is that today’s supply chains are more extended and integrated than at any time in history. The not so good news is that today’s supply chains are more extended and integrated than at any time in history. While this global network allows manufacturers to leverage more resources, advance quality, boost innovation and lower costs – this same connectivity makes companies increasingly vulnerable.
After the global economy took a hit in 2008, many manufacturers adopted lean manufacturing strategies such as Just-in-Time (JIT) and other inventory reduction practices. With support from dependable suppliers, maintaining lower levels of raw materials, parts, and products on-site has become an effective cost-saving practice. But, as we are discovering, it is not without risk.
As a world-leading supplier of raw materials (some estimates are as high as 70%), China is a critical linchpin in the global supply chain. Directly or indirectly, nearly all manufacturers, retailers, and consumers are dependent on materials from China – whether they know it or not.
With the recent coronavirus outbreak, China has slashed production considerably. Consequently, many of its Asian customers have slowed production and even closed factories. And while regional automotive companies have been hit especially hard, this setback is by no means limited to any one industry. When supplies from China are scaled back the ramifications are felt globally.