‘Just in time’ is bad risk management, or just plain greed, in an interconnected and China-dependent world

COVID-19 is a smart coronavirus because it can spread quickly among humans. The speed of that spread has been helped by the interconnectedness of humanity through international air travel.

The speed and dramatic impact on the global supply chain and responses by financial markets, governments and central banks have also been due to the world’s increased interconnectedness, both physically and virtually.

That same interconnectedness also means that the whole world can learn of COVOD-19’s spread and score as they happen, provided there is a free and honest flow of information.

The supply chain effects have been complicated by China’s ascension as a major global player in manufacturing, a global dependence on single sources of ingredients and components and so-called efficient inventory management, i.e. ‘just in time’. The latter is proving to be a short-sighted cost saving that works very well in good times but fails in bad times. Poor risk management or greed, depending on your viewpoint.

China is now the world’s biggest manufacturer of steel, active pharmaceutical ingredients, medical supplies and motor vehicles, as well as industrial and consumer electronics. People can live comfortably if they delay the purchase of that new phone, car or TV for a few weeks but most pharmaceutical and medical supplies wholesalers and suppliers have only a limited supply of these essentials.

The hopes are that China’s manufacturing will resume soon and supply chains will move again. Now though, we are seeing forced isolations in other countries that could result in the same supply chain blockages that China is trying to clear up; forced isolations and supply chain blockages that will have drastic implications for the earnings and spending of the average business and household in countries that do not have the draconian ability to impose the same sort of control over and co-ordination of businesses and people as China.

For the rest of us, the threat remains for further restrictions on the supply to health professionals and individuals of vital items of medical and sanitary products – all because of someone’s poor risk management, or greed.


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