Highlights This study investigates the effects of supply chain diversification amidst COVID-19. Both disruption shock and recovery periods are studied. Supply diversification enhances supply stream and profitability amidst COVID-19 crisis. Customer diversification enhances demand stream amidst COVID-19 crisis. The merits of customer diversification for profitability amidst COVID-19 appears in recovery period.
Abstract Resilience amidst a crisis is vital to survival in the turbulent contemporary business environment. Diversifying the supply chain has been proposed as an important means to build this capability. However, there is insufficient empirical evidence demonstrating the merits of supply chain diversification during a crisis. Sampling 1434 Chinese manufacturing firms amidst the COVID-19 crisis, our two-stage least squares (2SLS) regression analyses show that firms with a diversified supply base are associated with a larger supply stream (increased abnormal inventory) and increased profitability during the COVID-19 crisis, including both the disruption and recovery periods. In addition, firms with a diversified customer base are associated with a larger demand stream (reduced abnormal inventory) during the COVID-19 crisis (both disruption and recovery periods) but show increased profitability only during the recovery period. Our study contributes to the literature on supply chain risk, disruption, diversification, and inventory management. We also discuss the practical implications of supply chain structure design in building resilience.
The effects of supply chain diversification during the COVID-19 crisis: Evidence from Chinese manufacturers
2021-09-21
Article (Journal)
Electronic Resource
English