1. In recent decades, value chains have grown in length and complexity as companies expanded around the world in pursuit of profits. Since 2000, the value of intermediate goods traded globally has tripled to more than $10 trillion annually. Businesses that successfully implemented a lean, global model of manufacturing achieved improvements in inventory levels, on-time-in-full deliveries, and shorter lead times. However, these OM choices sometimes led to unintended consequences.. Intricate production networks were designed for efficiency, cost, and proximity to markets but not necessarily for risk. Now they are operating in a world where disruptions are regular occurrences. Companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years, and the most severe events take a major financial toll, reports the McKinsey Global Institute. This new research study, which we summarize in a two-blog series, explores the profound shocks facing value chains from financial crises, terrorism, extreme weather, and, yes, pandemics.

Some manufacturers will use technology and devise other strategies to come out on the other side of the pandemic more agile and innovative. McKinsey reminds us that the COVID pandemic is only the latest in a series of disruptions. In 2011, a major earthquake and tsunami in Japan shut down factories that produce auto components, halting assembly lines worldwide. It also knocked out production of silicon wafers, on which semiconductor companies rely.

Forty weather disasters in 2019 caused damages exceeding $1 billion each. And the number of ransomware attacks doubled from 2018 to 2019. Interconnected supply chains and global flows of data, finance, and people offer more surface area for risk to penetrate, and ripple effects can travel across these network structures rapidly. Companies tend to focus much of their attention on managing the types of shocks (like trade disputes, product recalls, data breaches, or logistics disruptions) they encounter most often. COVID is a reminder that outliers may be rarebut they are real possibilities that companies need to consider in their decision making.

1. Relate each of the major headings in Supp. 11 (Supply Chain Management Analytics) to the COVID pandemic. What changes might an operations manager make in response to this report?