More and more people are keenly aware of the disruption in global supply chains in recent months, as their daily lives are affected by supply shortage and longer lead times for receiving deliveries of a wide range of products, including new phones, game consoles, and cars. We are also told supply chain disruptions are not about to end but will exist for some time to come. It is therefore worth understanding what has thrown global supply chains into disarray, in what ways the COVID-19 pandemic has played a part, and what will become of global supply chains in the future. In short, the pandemic accentuated preexisting strains in global supply chains and the need to become more resilient to future disruptions.
Looking back, the late 20th century was the golden era of global supply chains. Multilateral reduction in trade barriers and relative geopolitical stability led to the proliferation of geographically dispersed modes of production in many industries, including apparel, automobiles, and electronic equipment. Large suppliers such as Foxconn in electronics and Pou Chen in shoemaking thrived as "behind the scene champions" to engage in low-cost manufacturing for brand owners such as Apple and Nike.4 Improvements in container shipping and intermodal freight transport lowered the cost of moving cargo, facilitating the cross-border shipment of physical goods. Containerization also lowered information costs by removing the information burden from all but the consolidator and the breakdown operator. Offshoring of call centers, software development, and business services also spread in the 1990s, enabled by the rise of the Internet and low-cost telecommunication.
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