Supply chains being replaced by 'webs'

One of the key drivers, and enablers of globalization the past generations has been "just in time," or JIT, manufacturing, a key element of total quality control and other quality methodologies.

At the most basic level, JIT entails keeping the minimum amount of components available at the manufacturing site, relying on process optimization to keep the supply chain "lean and mean."

But over the decades, the principles of JIT have spread across all aspects of the global economy, as companies sought to implement continuous improvement across their operations and business partnerships.

Over time, certain patterns emerged, with increasingly few key suppliers for critical components.

In the short term, cost reduction drove these decisions. But the system it produced was efficient, not resilient. Its benefits assumed a world without disruptions, whether natural disasters or geopolitical unrest.

Now, in 2022, it is very clear that our global economy requires not just efficiency but resiliency to cope with these disruptions. Whether COVID-19, China threatening Taiwan (the major producer of advanced microchips), or a freighter blocking the Suez Canal several months ago, a strategic supply chain will consider resiliency a cost of doing business, like insurance.

It has long been understood that JIT and other quality methodologies are a tactical methodology, not a panacea for running a business with an eye toward long term viability, as opposed to short term success.

Implicit in these changes is an acknowledgment of the limitations of mindlessly offshoring critical components and a partial return to emphasizing manufacturing critical advanced components locally.

This is not the end of globalization by any means, but the evolution of a wiser, more sophisticated global business ecosystem, which accounts for and does not ignore the inevitable disruptions that can overwhelm a system constructed by short-term thinking over the long term.