The coronavirus outbreak in China should serve as a learning moment for global business, Yasunobu Kyogoku, founder of Innovation Global Capital, told Cheddar.
The San Francisco-based investment fund leader says companies should look to diversify their supply chains to reduce the impact of future outbreaks.
"The extent to which the China production base is so integrated into supply chains of American retailers is rather astonishing," he said. "We really don't know the full extent to which this coronavirus might hurt revenue or earnings of many retail companies."
Kyogoku has seen this type of thing before. As the former chief operating officer of Japanese retail giant Uniqlo, he saw how SARs sent shockwaves across the world economy in 2003.
Since then, China's contribution to global GDP has tripled from 5 percent to north of 15 percent, further raising the dependency on Chinese production.
Shifting manufacturing now likely won't help companies' coronavirus woes, as the outbreak is already leveling off in China. But it could inform better business practices in the future.
While supply chains are the complex result of trade agreements, global investment, local labor markets, and other factors, Kyogoku still applies old-school business truisms to the problem.
"Diversity of your supply chain, just like diversity of your revenue stream, is very important," he said. "Dependency on any one particular source of revenue or materials is often a risk for the business, so hedging those risks is very important."
There has already been some migration of supply chain sourcing into Vietnam and Cambodia, particularly in the shoe manufacturing industry, according to Kyogoku.
"There is always opportunity in crisis," he said
