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The Supply Chain Management amidst the Coronavirus: is it an opportunity to a refocusing on localities?

As national government and health care agencies worldwide work relentlessly to contain the spread of Covid-19, businesses are struggling to manage the adverse effects epidemic is causing on their supply chain. While China represents the manufacturing hub of the world the Covid-19, which had its epicenter in the Hubei province, led to a generalized plants’ shuttering and slowdown in freight and shipping, hence resulting in a shortage of components for western businesses. Electronics and automotive sectors are particularly hard hit. For instance, Apple reported that replacement iPhones for some devices will be in short supply for two to four weeks, while General Motors factories are facing production outages. These are only some notable examples of the risks from being dependent on a single supply market either directly or indirectly through Tier 1 or Tier 2 suppliers. “What should we do now?” is a common question coming from supply chain leaders today. Coronavirus outbreak provides the opportunity to European companies for a thoroughly strategic re-thinking of their SCM by reducing the risk of supply disruption and by prioritizing supply-chain-resilience measures. To this end, two different and complementary processes should be put in place. First, the monitoring of firms’ global suppliers for shifts that might increase the risk of supply disruption such as corporate restructuring, M&A, and economic and politic uncertainty. Big data and new technologies, such as artificial intelligence, have made extensive supplier monitoring affordable and readily accessible. Second, the mapping of supply chain to understand their global sites and subcontractors. Companies who invest in this type of efforts benefit when disruptions happen, because they are able to triangulate shortly their supply chain could be impacted in the days, weeks, months to come. But besides that, destabilizing events such as Covid-19 may pave the way for the development of a locally-oriented supply chain and hence, new opportunities for local businesses as companies search for alternatives to external supply. It could be not only an effective measure to reduce supply risks and ensure business continuity but also, by re-embedding manufacturing processes and supplying in their home-territory, a concrete step towards the “revitalization” of local economies of western countries.

 


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Nicola Lattanzi