Idea in Brief

The Problem

Disruptions and shortages during the Covid-19 pandemic exposed weaknesses in global supply chains, which already faced threats from trade wars.

The Cause

Many companies hadn’t rigorously identified and addressed hidden vulnerabilities.

The Solution

Thoroughly map your supply chain to uncover risks. To mitigate them, line up alternative supply sources in diverse locations or increase stocks of critical materials. Revisit your product strategies. And explore new manufacturing technologies that could increase flexibility and resilience.

When the Covid-19 pandemic subsides, the world is going to look markedly different. The supply shock that started in China in February and the demand shock that followed as the global economy shut down exposed vulnerabilities in the production strategies and supply chains of firms just about everywhere. Temporary trade restrictions and shortages of pharmaceuticals, critical medical supplies, and other products highlighted their weaknesses. Those developments, combined with the U.S.-China trade war, have triggered a rise in economic nationalism. As a consequence of all this, manufacturers worldwide are going to be under greater political and competitive pressures to increase their domestic production, grow employment in their home countries, reduce or even eliminate their dependence on sources that are perceived as risky, and rethink their use of lean manufacturing strategies that involve minimizing the amount of inventory held in their global supply chains.

A version of this article appeared in the September–October 2020 issue of Harvard Business Review.