The news has been full of descriptions of shortages caused by Just in Time (JIT) supply chains sourcing from China. While it is possible to use air freight to keep transport times within two weeks, most buyers would have to wait at least a month for sea freight. Countless events could disrupt supply and/or demand within a month, leading to significant shortages or overstock:
- Recession
- Epidemic
- Disruptive Competition
- Panic Buying
- Price War
- Tariff
- Sanction
- Blockade
- (Civil) War
- Work Strike
- Natural Disaster
The Weakest Link
Rather than dividing risk, spreading supply chains only multiplies exposure. If any part fails, the whole system is brought to a halt. Diversification is only a benefit if different sites duplicate capabilities:
Only the “Global Production” example can reliably implement JIT production, as nearly all of the supply chain is located close to the customer, ideally in one facility. Demand fluctuations could change outputs within the same day, or next day, while each supplier is only vulnerable to one region. Even if there is an issue in the region, sites from other regions could reduce the harm.
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