resilience

Building Supply Chain Resilience Starts at the Border

Building Supply Chain Resilience Starts at the Border

The net result of this unprecedented supply and demand shock to the economic system has led to many calls to build or rebuild supply chains with more “resilience.” Resilience is a word, however, a bit like motherhood and apple pie. After all, who doesn’t want a mother or pie? Who wouldn’t want resilience in the face of disruption? Resilience, perhaps like motherhood and apple pie, means slightly different things to different people. For some, it implies a new-found enthusiasm for relocating chains closer to home. If foreign markets are part of the problem, with uncertain responses to unfamiliar challenges likely to arise in the future, getting critical parts or entire chains to move home seems like a logical solution. For others, resilience means building up multiple supply chains, including an extreme version that calls for double chains for every item. The slightly less pronounced version looks to have multiple suppliers available for every item or every critical item in the chain. To minimize disruptive impact, these two chains or multiple suppliers should be located in entirely different countries or regions. Resilience can also mean holding increased inventory, to reduce the shock of chain disruptions. Over the past decade and beyond, firms have been following the “just in time” mantra and eliminating or reducing inventory. Parts, components and raw materials arrive at precise timings and get slotted directly into assembly. The reduction in inventory provided important cost savings for companies, as holding stock is expensive. Governments tend to be less certain about what, exactly, they mean when they ask for resilience in supply chains and are unclear about what sort of actions, if any, they ought to take to ensure it happens.