Having long supply chains with many subcontractors involved can make it difficult for a company to overview its production. There are plenty of things that can go wrong on different levels that a company does not have direct control over.
But now, researchers from the University of Oxford and Harvard University, among others, claim that extended supply chains can be very positive for companies.
"The more steps in the process, the greater the opportunities for innovation. Industries with long supply chains do better", says Doyne Farmer, professor of mathematics at the University of Oxford and one of the researchers behind the study, in a press release.
The principle also applies to countries, according to the researchers. Up to half of China's economic growth in recent years is due to the deep supply chains that have been built up in the country. And if the supply chains become global, the benefits will be even more significant, which suggests that increased free trade can increase growth for all countries.
"We show that supply chains are accumulating the benefits of technological advances so that long chains provide lower prices and faster GDP growth," said James McNerney, a researcher at Harvard University and another of the researchers behind the study.