German researchers expect diversification of supply chains as reaction to pandemic

German economists believe that the Corona pandemic may lead to a higher diversification of supply chains for German companies, particular for critical goods like medical supplies. The researchers see German companies well-positioned with the vast majority of goods being imported from a two-digit number of countries. The need for diverse supply chains of course not only applies to Germany, but nearly all over the world (read this interesting post by Alex Roberts, Counsel at Linklaters). 

Diversification in numbers alone cannot be the full answer here, however. In the wake of a global pandemic that affects almost all countries, just having a supply chain from many countries will not be enough. Ideally, a supply chain involves various countries with diverse "risk profiles" that would be affected in different ways or at different times by a pandemic or other risks. Having short distances to cover for your supply chain proves to be critical during these times, similar to having different means of transportation by land, air and sea. When borders close, air transport (ironically enough during these times) can be the lifeline. It certainly should not be the only one, however, for those who remember the last time the skies were clear over Europe due to a certain volcanic eruption in Iceland. 

The key is really understanding your supply chain and the potential risks and their effects. In our current age, data will have a major role to play in this. The Corona crisis can provide lessons for the future also in this context. One lesson may be that even having a supply chain from the EU can prove to be "not close enough to home", to ensure consistent supply of critical products, in particular if the global demand for such products also surges in a time of crisis. We may therefore see a (global) trend to re-nationalize production across industries.