Efforts to strengthen and diversify
supply chains since the Covid-19 pandemic struck have generally been hit or
miss rather than systematic, according to a new report from McKinsey & Co.
The report says addressing this vulnerability is still
a priority for businesses.
The US federal government has since conducted a supply
chain review to strengthen resilience and prevent disruptions and the Senate
approved a bill that would, among other things, create a supply-chain
crisis-response programme.
“Companies have learned the hard way that supply
chains are only as strong as their weakest link, and since large organisations
have an average of 5,000 suppliers, that’s a lot of links,” says the report.
“If one breaks, the costs can be enormous. Even before
the Covid-19 pandemic, such breaks were common: companies experienced a
production-line shutdown lasting a month or more every 3.7 years.
The report adds that the issues are more pressing in
the US because it satisfies a larger share of domestic demand for high-end
manufactured goods through imports than do most of its competitors. Even so,
efforts to strengthen and diversify supply chains have generally been hit or
miss rather than systematic. The pandemic revealed the limits of that approach.
“In the recent past, supply chains have been optimised
according to cost and efficiency; now, resilience and agility—for example,
identifying additional suppliers for critical parts, developing backup capacity
to reduce reliance on a single facility, and rethinking inventory
management—are bigger parts of the equation.”
By Just Style