Faced with trade disruption and rising concentration risk, businesses are reconsidering their suppliers. The evidence suggests that bringing everything home is not a complete answer.
The problem with a single solution
When a supply chain breaks, the immediate response is often to look for a nearer supplier. Shorter routes can be attractive, particularly when a company has experienced long delivery times or sudden restrictions at a border. But geography alone does not determine resilience. A domestic supplier can rely on imported components, a local transport network can be disrupted and an apparently diversified supplier list can conceal dependence on the same upstream producer. The central management question is not simply where production takes place, but how quickly a business can identify, absorb and respond to disruption.
What the OECD found
The OECD's 2025 Supply Chain Resilience Review challenges the idea that sweeping relocalisation automatically makes an economy safer. Its modelling suggests that broad efforts to move supply chains home could reduce global trade by more than 18% and global real GDP by more than 5%, without consistent improvements in resilience [1]. These are modelled scenarios, not a prediction that such losses will occur. The report also finds that most global trade remains relatively diversified, although concentration in imports has been rising. That combination matters: companies need targeted responses to specific vulnerabilities, rather than a universal instruction to abandon international suppliers.
Know what is actually concentrated
A manufacturer might buy a component from three distributors and assume it has three independent sources. If all three obtain the component from one plant, the apparent choice offers limited protection. Mapping therefore needs to move beyond the direct supplier, especially for parts that would stop production or prove difficult to substitute. The practical objective is to identify critical dependencies, understand where alternative capacity exists and estimate the time required to change sourcing arrangements. Not every input deserves equal scrutiny. Commodity office supplies and a specialist semiconductor should not be governed as though their interruption would have the same consequence.
Diversification has a price
Adding suppliers, maintaining buffer stock or qualifying alternative materials can raise operating costs. An IMF working paper published in May 2025 describes a trade-off between the resilience benefits of import diversification and the efficiency costs it can introduce [2]. That does not make diversification a mistake. It means leaders should be explicit about the disruptions they are trying to withstand and how much protection they are purchasing. A second source that cannot scale during a regional crisis may have less value than it first appears. Conversely, a modest extra cost for a genuinely independent source may be justified for a business-critical input.
Make resilience operational
A useful resilience programme joins procurement data to financial and operational decisions. Teams can classify critical inputs by substitutability, lead time and revenue exposure; identify shared dependencies; test scenarios involving ports, power, cyber incidents or supplier insolvency; and agree who can authorise an emergency change. Finance should participate because contingency measures tie up cash, affect margins and may alter contractual obligations. Sales and customer-service teams need realistic recovery estimates, not optimistic assumptions produced after a disruption has already begun.
A more measured strategy
The strongest supply chain may be neither the cheapest in normal conditions nor the most local. It may be the one whose risks are visible and whose alternatives have been tested. The OECD describes resilience in terms of agility, adaptability and alignment [1]. For companies, that translates into reliable information, practical options and relationships that can withstand stress. A business cannot eliminate every disruption, but it can avoid discovering its most important dependency on the day that dependency fails.
References
[1] OECD, Supply Chain Resilience Review: Navigating Risks, June 2025
https://www.oecd.org/en/publications/2025/06/oecd-supply-chain-resilience-review_9930d256.html
[2] IMF, Supply Chain Diversification and Resilience, Working Paper, May 2025
https://www.imf.org/en/publications/wp/issues/2025/05/23/supply-chain-diversification-and-resilience-567065