Chapter 13, Problem 6SQ

“Don’t ship air” and “don’t ship water” are the bases of some important supply chain strategies. What do these statements really mean? What are the related strategies? How do these strategies help?

Global Supply Chains today are subject to more risk factors than localized supply chains of the past. Underestimating risks in global supply chains and not having suitable mitigation strategies in place can result in painful outcomes. It is thus critical for global supply chains to be aware of the relevant risk factors so that they build in suitable mitigation strategies. Discuss, giving examples where necessary, five risk factors facing global Supply Chain.

Global supply chains are exposed to similar risks as those faced by domestic supply chains and additional risks that are more global. The table provides a non-exhaustive list of the various types of risks faced by multinational companies. Natural disasters, geopolitical events, epidemics, or terrorist attacks can shut down production lines because of a lack of parts inventory. This is exactly what happened to some semiconductors during the recent COVID-19 impact on the global economy.   In the case of semiconductors, they are located in Asia, creating a risk of geographic concentration. Semiconductor components are lightweight, modular, and high-value-added products. This combination lends itself to a heavily traded global value chain. But high barriers to entry also make the industry entrenched. While the United States designs many advanced chips, production is highly concentrated in South Korea and Taiwan. However, the United States, mainland China, and other regions also manufacture…