COVID-19 is leading many companies to make dramatic changes to the way they do business. While the work-from-home model has grabbed most of the headlines, companies are currently evaluating other (though equally important) measures that may stay with us for years to come. One big change: the way we set up supply chains. For years, globalization allowed businesses to develop razor-thin supply chains that drove higher margins. But many of those worldwide, lowest-cost, just-in-time supply chains have been stretched dangerously thin or even broken by the COVID-19 pandemic.
Businesses are reacting quickly. For example, a recent white paper published by global investment firm KKR estimates that many parts of the technology sector in China will consider diversifying 20%–40% of their production away from the country within five years, partly in response to the pandemic. Such a retreat from globalization—at least in the near future—seems inevitable. Some others have described this retreat as moving from “just in time” to “just in case.”
