Part 4/8:

While having a distributed supply network boosts resilience, it presents a classic trade-off between cost and risk. Economies of scale often favor large factories operating at high efficiency, which are typically located in cost-effective regions. However, these mega-factories may be more vulnerable to locational shocks. Smaller, regional facilities might be less efficient but offer better protection against disruption.

The COVID-19 pandemic, with its widespread impact, has prompted companies to question whether cost optimization should continue to be the primary focus or if risk management should take precedence. This evolving mindset forces businesses to reconsider traditional models, ensuring they can withstand unexpected shocks.