Question

Given the supply chain disruptions caused by the Coronavirus (Covid 19) that commenced in China and rippled throughout the globe please research and address the following aspects:

• Were organizations inordinately focused on procuring inexpensive components and products from China at the expense of supply chain diversification? (Feel free to use specific companies or industries in your analysis.) Use specific organizational examples.
• What steps should an organization implement to better mitigate supply chain risk?

Answer 1

China under the leadership of Deng Xiao Ping implemented the policy of economic reforms and allowed the foreign companies to establish and operate manufacturing facilities in China. A huge labor force and relatively low income status of the country means the wage paid by foreign companies was very cheap and that reduced the input cost.
China also kept its currency artificially low which suppressed the wages in the economy and communist regime ensures that there won't be any dissent against the policy.

The scenario was favorable for the foreign companies and almost every big manufacturing company especially in automobile sector flocked to China to take advantage of low cost labor. However, the perfect scenario deceived those companies from taking into account the importance of supply chain diversification.
The COVID-19 pandemic which is originated from China disrupted the supply chain and then only those companies realize the need for diversification.

The compaies can still mitigate the risk but they will have to look at other countries which may not be that lucrative but still can offer some diversification. India, Indonesia also has sizeable labor force and Vietnam, Philipines are also cheaper in terms of labor cost. Further, these companies can also opt for former communist countries in East Europe which offer skilled labor.