Fasten Your Seatbelts: Turbulence Ahead for Global Supply Chains

This piece was originally published on March 5, 2020 by Stanford Graduate School of Business.

It's been 15 years since Thomas Friedman declared that “the world is flat,” given the many ways that technology and lower trade barriers had collapsed national boundaries and fostered a new wave of globalization in which everyone does business with everyone else.

But what happens to those well-oiled global supply chains when the president of the United States, the world's largest economy, imposes steep new tariffs on everything from Chinese steel to French wines? Or when a fast-spreading virus paralyzes business in China, with ripple effects on companies throughout the world?

These natural and manmade disruptions are the turbulent new realities of global supply chains, says Hau Lee, a professor of operations, information and technology at Stanford Graduate School of Business. For most large American manufacturers, globalized sourcing is here to stay, as they continue to take advantage of low-cost labor overseas. (The number of manufacturing jobs in the U.S. has fallen dramatically over the past 40 years, from over 19 million in 1980 to under 13 million today.)

“The world isn't as flat as it used to be. It's bumpy,” says Lee. “The question is how to create an agile and flexible response.”

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