The Value of Diversified Manufacturing Operations in Preventing Supply Chain Disruption Caused by Localized Events

The devastating Corona Virus has severely impacted China, claiming the lives of hundreds of people. Perpetual news of more and more cases of Corona Virus infection is becoming commonplace with an aggregate totaling into the thousands.

For the most part, China is primarily known for its dominant role in international trade and manufacturing. One would be hard-pressed to discuss topics concerning the global supply chain without mentioning China. After all, much of global manufacturing occurs in China – from components to finished goods.

Therefore, if there is anything that can be learned from this disaster, it is the value of Supply Chain Diversification.

The term diversification instantly conjures up associations concerning stocks and investment portfolios, which does not apply to this topic. What we mean by Supply Chain Diversification is the incorporation of strategically placed manufacturing and component sourcing operations through different regions of the globe.

Though much different than an investment portfolio, the derived value is fundamentally the same – conscious effort to reduce risk. A diversified investment portfolio contains many different investment products as opposed to only one. This practice is a hedge against the risk of the stock failing to appreciate, or worse, becomes completely worthless. Like the familiar adage states, ‘Don’t put all of your eggs into one basket.’

With our example, SL Power’s ability to manufacture in Mexico and Vietnam has reduced the risk of any regional event (like the Corona Virus) disrupting our supply chain. This ensures that there is no supply disruption to our customers, which is another example of the extra foresight and care we invest in our operations.

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