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Solving the supply chain resiliency equation
This article was originally published by the World Economic Forum.
Two years of pandemic-induced disruptions have laid bare the risks inherent to low-cost globalized supply chains. Factory shutdowns and logistical bottlenecks oceans away have disrupted access to essential goods everywhere — and continue to do so.
It is clear that we urgently need to address the risks systemic to our global value chains and reshape them instead into more resilient, equitable, and cost-effective systems.
Diversifying risk
Building genuine resilience will require concerted efforts from governments around the world — their involvement is critical to making the foundational investments that will open a pathway toward creating balanced and shock-resistant supply chains.
Many have championed the reshoring of manufacturing as the centerpiece for securing critical supplies, but this is not a silver bullet. Resilient supply networks require diversifying risks across borders, while also leveraging the strengths of different geographic markets and increasing cooperation between the private and public sectors.
For example, replacing Asia’s mature manufacturing ecosystem is neither practical nor realistic. Asia will continue to be a key source of many goods and even as it seeks to move up the value chain, its manufacturing ecosystem will continue to serve the kind of production that requires low-cost scale and efficiency.
But if the goal is not to replace Asia as the world’s manufacturing hub, then what does a rebalanced value chain look like?
