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Building supply chain resilience: a review of challenges and strategies
For several decades, textbooks, articles and consultancy reports in supply chain management (SCM) have expounded the virtues of low inventory, just-in-time delivery, single-sourcing, centralization and tightly-coupled processes. Heeding their advice, many companies have effectively implemented this ‘lean’ approach and managed to achieve impressive cost savings and productivity gains. Over the same period, they have globalized their sourcing, production and distribution operations, creating complex webs of interdependency between factories, warehouses, freight terminals and shops around the world. This has enabled them to expand their market areas, off-shore their production to low labour cost countries and diversify their supply base, again all in keeping with what is generally considered to be good business practice. By doing so, however, companies have increased the vulnerability of their supply chains to many different types of disruption. They have often traded higher efficiency for greater risk exposure.
This paper begins by examining the nature of the risks to which supply chains are exposed and how these risks have been changing. It then shows how global supply chains have become more vulnerable over a period when the probability and seriousness of disruptions have been increasing. Later sections discuss changing managerial attitudes to supply chain risk and the various ways in which companies and governments can enhance the resilience of supply chains.
The paper is based on a review of academic, business and governmental literature mainly published over the past decade, though it also acknowledges the important contribution of earlier work to current thinking on the subject.
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