AUBURN, Ala (EETV)- Glenn Richey, a Professor in Supply Chain Management at Auburn University’s Harbert College of Business takes a look at what the spread of the Coronavirus means for supply chains across the globe.
Richey says the timing of this outbreak is sure to cause problems in the relationship between U.S companies and their Chinese supply networks. Rickey is certain U.S business will feel the effects of this growing health crisis.
“The impacts are inevitable for any company sourcing either goods or services out of China, although they will vary from company to company. The underlying, inescapable factor is that these companies incorporate China into their supply chains for a reason, and that reason is typically cost. Chinese manufacturers succeed primarily because of their extraordinary efficiencies, which translates into lower costs. The value of their operations—be they product manufacturing, assembly or services—are high efficiency-based. Processes are very tightly cost-optimized, and margins are thin.”
Richey believes this outbreak will cause business leaders to look at new options that would reduce risks to their supply chain in the future. One option business leaders are considering is “near-sourcing” meaning they would begin to build distribution facilities in areas where they have a high demand for goods.
This however is just one of many ways this issues could play out as Richey goes on to say, “Bottom line is—nobody knows how this will all pan out. But one thing is certain—these changes will have lasting impacts on existing supply chain strategies. And that’s a good thing.”