Supply chain disruption
Topic: Production Function, Returns and Costs · NCERT: Class 8, Ch 7 "Factors of Production"
Meaning
A supply chain is the network of people, organisations, resources, activities and technology involved in producing and selling a good. A supply chain disruption is a break in this network: inputs cannot arrive, or arrive late and at higher cost. When an input is essential, as in q = K × L, output is zero if that input is missing. So a firm that depends on far-off sources can be forced to stop production. Even when production continues, costlier inputs and freight shift the firm's cost curves up.
Example
During the COVID-19 lockdowns, many Indian firms had to halt production because inputs from distant places could not reach them. In the 2021 semiconductor shortage, car makers worldwide cut output. India responded with the India Semiconductor Mission (2021).
Don't confuse with
- Just-in-time vs just-in-case: these are ways of preparing for disruption. Just-in-time keeps low stocks, which is cheaper but more exposed to disruption. Just-in-case keeps buffer stocks, which costs more but gives greater resilience.