MBA Boot Camp: Global Supply Chain & Resilience (6.5)

Concepts & Vocabulary

• Offshoring: Relocating a business process (like manufacturing) from one country to another to take advantage of lower costs.

• Nearshoring: Moving operations to a nearby country (e.g., a US company moving a factory from China to Mexico) to reduce shipping times and risks.

• Tariff: A tax imposed by a government on imported goods.

Core Lesson: The Fragile World

For the last 30 years, the global operational strategy was singular: Chase the lowest cost. Companies offshored manufacturing to Asia and used Just-In-Time (JIT) inventory to keep warehouses empty.

Then, the COVID-19 pandemic happened, followed by geopolitical tensions and blocked canals. The world realized that while JIT was extremely efficient, it was incredibly fragile. If one factory in Taiwan shut down, the entire global auto industry couldn't build cars because they lacked microchips.

Today, the major theme in MBA operations is Resilience vs. Efficiency. Companies are willing to pay slightly more to manufacture closer to home (Nearshoring) or keep extra inventory on hand (Just-In-Case) to ensure they can survive global shocks.

The MBA Marketing Insight: You cannot market a product you do not have. If you spend $1 Million on a holiday marketing campaign, and your product is stuck on a cargo ship outside of Los Angeles, that marketing money is completely wasted. Marketers must be in constant communication with supply chain leaders.