Patterns suggest principles to inform practice

On April 19, the Wall Street Journal published a substantive, concise piece on the semiconductor supply chain. Please read: Why the Chip Shortage is so Hard to Overcome.

Several generalizable Supply Chain Resilience principles are articulated (but not headlined) in the WSJ piece. I bet I could find a WSJ piece from the second-quarter of 2020 reporting on the canned soup supply chain with similar language and examples. We have experienced similar patterns with sterile saline bags to pork chops to viral vector vaccines to diesel fuel to cargo containers to nitrile gloves…

In the WSJ story several principles are glossed. Three are prominent:

  • Demand Variation: Significant shifts in volume and/or velocity of demand — especially in a short period of time — will disrupt flows, usually with amplified network effects.
  • Concentration Risk: Flow channels (aka nodes, links, edges, bottlenecks, hourglass structures) both empower and constrain flow capacity.
  • Differentiated Financial Margins can decisively influence the distance and interdependencies of flow (lower margins almost always result in more fragile networks).

There are exceptions, but they tend to prove the rule.

Unfortunately, these (and other) shared patterns and related principles are not obvious to many — perhaps most (even most readers of the WSJ). There is a persistent tendency to focus on supply chain “species”, rather than shared ecosystems of demand and supply. This is an understandable, but insufficient angle on reality. It is an approach that often reduces interventions to versions of whack-a-mole. Species abide in ecosystems. Fitness requires attention to specific and system-level characteristics.