Global companies are rethinking where they source, manufacture and store goods. The emerging challenge is to build alternatives without losing the advantages of international trade.
Resilience changes the business calculation
For many years, procurement success was measured primarily by price, quality and delivery time. Disruptions have shown why that framework can be incomplete. A component that costs a few cents less may create substantial financial exposure if there is no practical substitute when its supplier stops operating. Companies are now being asked to look beyond the cost of each purchase and consider the consequences of interruptions across their entire network of factories, ports, warehouses and specialist service providers.
That does not mean every imported product is risky or every domestic supplier is secure. A local factory may depend on foreign components, energy or machinery. Two suppliers operating in different countries may source a critical material from the same upstream company. Similarly, a business can buy from multiple vendors but rely on one transport corridor or software provider. Resilience therefore depends on identifying genuine points of dependence rather than counting supplier names on a spreadsheet.
The OECD Supply Chain Resilience Review, published in June 2025, argues that navigating risks—not isolation—builds stronger supply chains. It reports that most trade remains diversified but that concentration is increasing in certain products and sourcing patterns. This creates a reason to improve visibility and flexibility, not a universal case for moving production back across national borders. For executives, the central task is to distinguish an efficient network from one that is efficient only while everything goes according to plan.
Further reading: OECD Supply Chain Resilience Review (2025)
The hidden costs of bringing production home
Calls for reshoring can sound attractive because shorter geographic distances appear easier to manage. Yet relocation involves capital spending, workforce availability, infrastructure, supplier qualification and sometimes higher production costs. New facilities may take years to reach stable output. A company that abruptly abandons established suppliers can lose technical knowledge and access to specialist manufacturing clusters. The result can be a more expensive network that remains vulnerable to a different set of disruptions.
OECD modelling in its 2025 review suggests that widespread supply-chain relocalisation could reduce global trade by more than 18% and global real GDP by more than 5%, without consistent gains in resilience across the economies examined. These are modelled scenarios, not forecasts of what will necessarily happen. Their significance is that relocating production carries economic trade-offs and does not automatically create a safer system. The balance will vary by product, sector, public policy and the severity of the risks involved.
This does not rule out strategic domestic capacity. Medicines, energy equipment, advanced manufacturing and essential public services can justify special consideration where interruption would have serious consequences. The question is whether a particular investment solves a demonstrated weakness. Building a second source, increasing component compatibility or creating an emergency stockpile may sometimes be more effective than replacing a whole international supply network. Good strategy starts with the failure mode, not with a political slogan.
Visibility must reach beyond direct suppliers
A manufacturer often knows its immediate suppliers very well while having little insight into the next two or three levels of production. A missing electronic component can originate in a specialist chemical input or one plant producing a critical material. When trouble appears, companies discover that two apparently independent suppliers depend on the same upstream source. Mapping such dependencies requires collaboration across procurement, operations, risk and supplier-management teams.
Visibility is also imperfect. Suppliers may consider their own sourcing commercially sensitive. Smaller firms may lack systems capable of reporting detailed production information. Data about an upstream facility can become outdated after an ownership change, natural disaster or contract shift. Rather than demanding complete visibility into every minor item, companies can focus deeper mapping on components whose failure would stop production, violate regulations or materially disrupt customers.
One practical approach is to classify dependencies by criticality and replacement difficulty. For a standard office supply, alternative vendors may be plentiful. For a specialised part qualified for a medical device or aircraft, switching can involve testing, legal approvals and substantial delay. Procurement teams can then prioritise second sources, inventory buffers or redesign work where the business case is strongest. That is more useful than treating every supplier as equally dangerous or assuming more data alone means greater resilience.
Further reading: OECD Supply Chain Resilience Review full report
Inventory is a financial decision
After disruption, adding inventory is an understandable response. Extra stock can keep production running while a shipment is delayed, but it also ties up working capital, uses warehouse space and risks obsolescence. A company may need to borrow to finance materials that sit unused for months. In industries with rapidly changing designs or limited shelf life, carrying more inventory can create losses rather than protection. The optimal amount depends on demand volatility, lead times, replacement options and the cost of a shutdown.
Finance and operations therefore need a shared calculation. Procurement may prefer a cheaper overseas supplier; operations may seek safety stock; treasury may want to release cash. These choices are connected. A slightly higher purchase price could be justified if it materially reduces the probability of an expensive production stoppage. Conversely, a large inventory buffer might be unnecessary if a reliable alternate supplier can deliver quickly. Resilience should be evaluated through total business cost, not through one departmental metric.
Scenario analysis can make these trade-offs concrete. What happens if a major port closes for two weeks? If a single specialist supplier shuts down for a quarter? If a currency decline raises imported input costs at the same time demand weakens? An effective exercise estimates the operational response and the financial consequences, including lost revenue, customer penalties, expedited freight and cash-flow pressure. The purpose is not to forecast the next crisis precisely; it is to expose decisions that would otherwise be made too late.
Digital tools help, but data quality matters
Businesses increasingly use forecasting software, shipment visibility tools and analytics to identify delays before goods arrive. These systems can improve decision-making when they combine reliable supplier updates with transport and inventory information. Yet a dashboard cannot create production capacity where none exists. If the underlying data are incomplete or late, predictions may look precise while missing the most important risk. Digital investment should accompany relationship management and operational contingency planning.
The World Bank Logistics Performance Index provides a framework for thinking about trade logistics, including the reliability and timeliness of supply chains. It is valuable context, but national-level indicators should not be mistaken for guarantees about a specific supplier or shipment. Companies still need evidence from their own products and routes. That includes measuring whether estimated delivery times are realistic and whether recovery plans have been tested with the people expected to carry them out.
Supplier relationships become particularly important under stress. An established partner may share information early or help prioritise scarce capacity if agreements and communication channels are strong. A contract written only around penalties may be of limited use when an entire region is affected. Diversification and cooperation are not opposing ideas: a firm can maintain trusted strategic partners while building alternatives for the vulnerabilities that matter most.
Further reading: WTO Global Value Chain Development Report
Resilience as a leadership discipline
Boards should ask where an interruption would be most costly and what would enable recovery. The answers need not be highly technical. Which products rely on one source? How long could essential services continue without a specific supplier? Which alternative producers have actually passed qualification? How much extra working capital would a prolonged delay require? What dependencies sit with logistics providers, power systems and digital infrastructure? Such questions connect supply-chain planning to financial governance.
A workable resilience programme should use a limited set of measures: time to detect a disruption, expected recovery time, concentration exposure, inventory coverage for critical components and the cost of maintaining alternatives. Targets should reflect the business model. A hospital, a fashion retailer and an industrial equipment manufacturer will make different choices. Standardised reporting can help leadership compare changes over time, but it should not pretend that all products face equivalent risks.
The strongest networks of the coming decade may be neither completely local nor maximally global. They may be deliberately adaptable: international where specialisation brings value, diversified where concentration is dangerous, and prepared to change routes or suppliers when conditions shift. The real lesson from recent supply-chain disruptions is not that global trade has failed. It is that resilience has a cost, so businesses should spend deliberately on the protections that genuinely improve continuity.
Business leaders can turn this framework into a decision process by identifying the five or ten inputs whose absence would have the greatest effect on revenue, safety or contractual performance. Each needs a realistic recovery estimate rather than a generic risk label. For one component, the answer may be a qualified second manufacturer. For another, the answer may be maintaining spare parts, diversifying transportation routes or negotiating priority access to production capacity. The cost of these safeguards should be compared with the plausible cost of disruption, not with an unrealistic expectation of eliminating every risk.
Insurers and lenders may also influence how companies approach resilience. Insurance coverage can address some direct losses, but exclusions, deductibles and the difficulty of establishing claims can limit what is recoverable. Credit facilities can support working capital during a disruption, yet additional borrowing increases financial obligations. Companies should understand the interaction between contractual protections, cash reserves and operational alternatives. A resilient business is one that can continue serving customers when a predictable dependency fails, not merely one that holds an impressive-looking set of insurance policies.
The final challenge is maintaining discipline when conditions appear calm. Alternative suppliers cost money to qualify, stock buffers are tempting to reduce, and scenario exercises require staff time. The benefits are most visible only during a crisis, so short-term performance targets can slowly dismantle hard-won protections. Regular board review and transparent metrics can counter this tendency. If management knows exactly which risks it accepts and why, the company can preserve the advantages of international commerce without confusing low immediate cost with low long-term risk.
References
1. OECD Supply Chain Resilience Review (2025). https://doi.org/10.1787/94e3a8ea-en
2. OECD Supply Chain Resilience Review full report. https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/06/oecd-supply-chain-resilience-review_9930d256/94e3a8ea-en.pdf
3. WTO Global Value Chain Development Report. https://www.wto.org/english/res_e/publications_e/gvcd_report_2023_e.htm
4. World Bank Logistics Performance Index. https://lpi.worldbank.org/
5. OECD Trade and Globalisation. https://www.oecd.org/en/topics/trade.html