A new study argues that manufacturers must re-think their global supply chains in the wake of COVID-19 by moving away from over-reliance on low cost production in single locations.
Researchers at the University of Birmingham said the impact of the Coronavirus demonstrates that manufacturers should switch from single large production sites in countries such as China to numerous smaller facilities around the world.
The study found that the most effective supply chains during the pandemic are those which balance cost control against risk, said report co-author Professor John Bryson:
“There is a real tension between optimisation of GPN [Global Production Networks] and risks which ripple out across the globe. COVID-19 is the first time that these ripples have impacted on every country and the majority of people living on this planet.
“It is unfortunate that companies, governments and geographers did not consider the outbreak of SARS in late 2002 as a testbed to develop new approaches to the management of risk. GPNs and offshoring come with many risks that have been ignored.
“Existing thinking on GPN design minimises costs and maximises economic ‘value’ rather than balancing profit against risk reduction - a high-risk approach that must change.”
A separate study published in May by the World Economic Forum found that almost half (48 per cent) of companies globally will overhaul their procurement and supply chain strategy in the case of a prolonged Coronavirus pandemic.