How Companies Are Overhauling Supply Chains to Ease Bottlenecks | WSJ

The Covid pandemic has strained global supply chains, causing freight backlogs that have driven up costs. Now, some companies are looking for longer-term solutions to prepare for future supply-chain crises, even if those strategies come at a high cost. Photo Illustration: Jacob Reynolds

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[Basta]

There are tradeoffs between efficiency and robustness. Efficient systems are sometimes fragile. Robust systems have some redundancies. For goods and skills of strategic importance, having regional or onshore capacity is very needed. It's like insurance in case of war.

[rd]

Regionalization is intelligent. They can get back supply chain resilience at the cost of a small amount of supply chain efficiency. Big picture wise though there should always be product available AND if for some reason one region has a problem...product can be shifted from one region to help with shortages. That's if companies do things intelligently and not on the cheap, those companies will have a problem at some point as well.

[americanexpat]

I'll give you a supply chain/engineering analogy that might help to clarify the issue. As somebody that has worked in oil refineries, we build tankage into many areas of a plant for the express purpose to 'buffer' one processing unit from another when an upstream unit has manufacturing problems.

Operations wants these tanks, but they are expensive to build/maintain so there's always a desire not to install them. However, they become indispensable during major plant issues. That's essentially what happened globally. There was not enough 'surge' capacity in the global supply 'system' to effectively 'buffer' the issues. Hence, you have tremendous backlogs sloshing through the system. For example, a CNBC video on this subject made the comment that it was taking twice as long for a ship to make the trip from an Asian dock to an west coast dock.

None of this is surprising to me having watched many plant upsets over the years. You are always thankful for those storage tanks when the major upsets come along. If you don't have them, you get our current worldwide global supply chain.

This will take months to line itself out. That's because the current supply chain was created to minimize cost when there are few 'upsets' occurring. They were not designed to be robust in the face of disturbances.

[drewh]

I ordered a load of tiles from Guangzhou, China. It took 18 days ocean shipped to LA, California. Then from there they took 38 days by rails to NYC.

[alexanderphilip]

Mexico is going to be the next big thing on the western hemisphere, with a market as large as the US right next door and a favourable internal demography, Americans and Mexicans are set for the next two or three decades. Definetly an alternative to china if American politicians decide to run with it in the long run.

[IpSyCo]

Mexico is a perfect country for smaller businesses looking to nearshore manufacturing. Cheap labor; a larger young population, skilled in manufacturing, and above all they’re integrated into the USMCA free trade agreement with the US and Canada. Not to mention Mexico has the most free trade agreements in the world. So that gives even more up side potential for businesses that want to export elsewhere.

[EnriquePerezBarahona]

Regionalization is supply chain resilience by another name. Yes, some investment will be required but you loose a lot more if you're unable to fill orders in a timely manner, if they get fulfilled at because of geopolitical sensitivities.

[TAL]

What does this have to do with supply chain when companies stockpile goods. US simply don't have good reliable distribution network in US.

[stevenwashington]

Always on the lookout for 2020-21 Select Lamelo Ball Rookie Selection RC Rookie Cards. Whether they are Silver Prizm, Red Wave, Blue and Gold Shimmer, Green Cracked Ice or even base...I'm buying them all!!! This kid will be the next Jordan in 10 years - FACTS.

[siamimam]

Im from bangladesh and they are probably paying $2 to assemble the boot compared to USA where it might take $10-15

[domenicobartoccioni]

I believe that the cost of reshoring is overall far higher that bearing and enduring a few years of products shortage and cost increases due to pandemic.

[antonionader]

Amazing information about nearshoring, reshoring and regionalization

[worldcitizeng]

No mention of labor cost in each region

[alexander]

Wouldn’t it be cheaper to just increase inventory a bit rather than building entirely new factories in other countries?

[TheSolderingGuy]

Kudos for getting the map of India correct in the maps !

[prayagmehta]

As long as lean and JIT are metrics drive like say GM and not objective driven like say Toyota, there will be consecutive hiccups in the entire chain. Even though lean and QC and many good management techniques were thought of in the us first ( Deming, Juran and Taylor) they have been unable to deploy such techniques properly.

[zoeybella]

Reshoring might work for a few high value products, but the west certainly doesn't have the type of labour force needed to work at those mind numbing and repetitive factory jobs where cheap, mass production items are made. The US companies will probably move a lot more industry to Mexico and Europe will operate more in the Balkans.

[auro]

this is like how companies are hoarding supplies to raise inflation

[cheryldeboissiere]

Could WSJ cover Houthi problem as I just left a story out of New Zealand 🇳🇿, where they are experiencing 2 week shipping delays? Thank you very much beforehand...

[mmp]

It's high time to remove China from supply chain equations and look for other developing countries.