Focused scrutiny pathfinder1/7/2024 ![]() However, that challenge might be worth taking in the post-COVID world. Given the incredibly high number of parts required – each with different lead times – a return to regional supply chains presents an incredibly complex challenge. Today, large electronic equipment manufacturers source about 40% of their parts from China including sub assembly. What continues to hold foreign attention, however, is the whole supply chain network of suppliers and sub-suppliers located in those Chinese hubs. Once the major attraction for companies towards Asia, the labor cost differential has shrunk over the past few years. That change had been kicked off several years ago because of increasing Chinese labor costs. To eliminate single-source dependencies, and to establish a flexible and adaptable supply chain, product integrators, sub-system suppliers and component suppliers will source, assemble and deliver from their own backyards. Logistics hubs will re-emerge at the regional level. Over the next years, we can expect to see a broad overhaul of our supply chain infrastructure and a new order based on three key dimensions: Today, we will tolerate higher prices for certain goods, if it means we get them faster and more in line with our aspirations.Īs a result, the change that had already begun, towards more flexibility and multi-level sourcing, will accelerate tremendously. The hidden costs of single-source dependencies and poor flexibility in adapting to real-time shocks have been laid bare. However, rapid political developments, a shift towards consumers buying niche products and, now, global pandemics have revealed the weakness that lies at the heart of this model of manufacturing. We want electronics made in China, so we can buy them cheap. Today’s globalized supply chain network has been optimized to identify minimum lead times at the lowest possible price. This rise in protectionism, coupled with concrete costs and new financial barriers, fueled broader challenges and concerns for logistics networks operating on the global level. As the Coronavirus wreaks economic turmoil around the world, modern supply chains face unprecedented stress and are drawing an increased level of scrutiny.įor months prior to the COVID-19 crisis, trade tensions had been mounting due to the escalating tariff war between Washington and Beijing, and a broader populist streak running through several other capital cities.
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