Supply chain resilience: common sense or waste of money?

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You’ve probably noticed already, but there is something of an argument going on in the investment community about the supply chain lessons to be learnt from the Great East Japan Earthquake, as it is now being described.

The impact of the earthquake and ensuing tsunami on supply chains around the world has been widely reported and analysed.

Where the disagreement arises is over what is the correct lesson to be learnt from it.

One view is that companies need to look again at the resilience of global supply chains and reduce their reliance on single source suppliers.

The corollary to this is that making the changes that such a reassessment would indicate would result in new business investment fuelling further economic growth.

It almost makes it sound as though you have a duty to the global economy to invest in changing your supply chain.

And some commentators are predicting big changes in sourcing patterns over the next four or five years with some companies shifting up to a third of their production away from low-cost economies to somewhere closer to home.

The other side of the argument is that to change now would be an admission of failure. Making major changes to supply chains would simply swallow up money that could be invested more profitably elsewhere in the business.

My view is that it would be foolish to bet the business on a supply chain which has demonstrable weaknesses. But will that view win out?

I have no idea, but what I do know is that the attitude taken by the financial community will have a big impact on access to funding and the cost of money for specific projects.

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