Japan Disaster Shakes Up Supply-Chain Strategies
The recent natural disaster in Japan brought to light the fragile nature of the global supply chain. Professor Willy Shih discusses how companies should be thinking about their supply-chain strategy now.
Key concepts include:
- Concentrating the majority of suppliers for a particular product in one region can have serious consequences in the event of a natural disaster or political unrest.
- Diversifying your supply chain can insulate you against shortages and other unpredictable problems.
- Manufacturers may need to investigate whether customers will pay a premium for a product that is protected against shortage through a diversified supply chain.
“There are a lot of moving parts in this, and it will be interesting to see how it works out,” says Shih. “Companies need to understand the depth of their supply chains and critical dependencies. Then they can think through how ‘narrow’ is the optimum solution, and the cost/benefit tradeoffs of steps like incorporating more supplier or geographic diversity.”
See Japan Disaster Shakes Up Supply-Chain Strategies, by Dennis Fisher for Harvard Business School.
Tags: earthquake, Japan, SCM, supply chain, supply chain management, tsunami
