Manufacturers are reassessing which suppliers could bring production to a halt as geopolitical instability, cyber incidents and sourcing constraints make supply chain disruption an increasingly persistent operating risk.
New international research suggests many manufacturers could struggle to maintain normal operations through an extended supply chain shock, reinforcing the need to understand which components, materials and suppliers present the greatest operational dependencies.
The Global Supply Chain Resilience Outlook from procurement and supply chain consultancy Proxima surveyed 515 CEOs across Australia, the UK, the US, Singapore and Germany, including 367 manufacturing executives.
Among manufacturing respondents, 53 per cent said their businesses could not maintain day-to-day operations for up to three weeks following a major supply chain shock.
Another 80 per cent said disruption to their three largest suppliers for two weeks could put up to 20 per cent of revenue at risk.
The findings highlight a central resilience challenge: not every supplier presents the same risk, and the suppliers with the largest contracts are not necessarily the ones most capable of stopping production.
Critical suppliers are not always the biggest
Procurement decisions commonly consider spending, price and supplier performance, but financial value alone does not indicate how critical an input is to production.
A relatively inexpensive component can stop an entire manufacturing line if no approved substitute is available.
Specialised materials, proprietary components and products requiring lengthy qualification processes can create particularly significant dependencies.
Manufacturers therefore need visibility into what would happen if individual suppliers became unavailable, how much inventory is available and how quickly an alternative source could take over.
This allows businesses to concentrate resilience measures on the inputs where disruption would have the greatest operational impact.
Resilience requires targeted protection
Adding another supplier is one way to reduce dependence on a single source, but maintaining multiple suppliers across every procurement category can increase cost and complexity.
Other options include holding strategic inventory of critical components, pre-qualifying backup suppliers, improving visibility further upstream or redesigning products so alternative
materials can be used.
The appropriate response depends on the input.
A commodity available from multiple suppliers presents a different risk from a specialised component manufactured by only a handful of businesses.
For Australian manufacturers, long international supply lines can add another consideration. Replacing overseas suppliers with domestic alternatives may not always be possible where local production capacity or specialist capabilities are limited.
Instead, businesses can identify which critical inputs justify alternative domestic or regional sources and which can continue to be sourced globally with appropriate inventory or contingency measures.
Geopolitical disruption complicates sourcing
Global sourcing gives manufacturers access to specialised capabilities and competitive pricing, but it can also expose production to events well beyond the factory.
In the Proxima survey, 23 per cent of manufacturing CEOs identified conflict and geopolitical tensions as their greatest financial supply chain challenge.
Another 43 per cent reported periodic stock shortages caused by customs delays associated with protectionist policies.
This means sourcing decisions increasingly extend beyond supplier price and performance.
Businesses may also need to consider where critical products originate, which transport routes they rely on, border requirements, replenishment times and how quickly another source could be activated.
Scenario planning can help manufacturers assess what happens if a supplier, country, transport corridor or other critical link suddenly becomes unavailable.
The objective is not to predict the next disruption, but to understand the options available when one occurs.
Cyber incidents add another vulnerability
Not every supply chain interruption begins with a physical shortage.
Cyber incidents affecting suppliers, logistics providers and other third parties can interrupt ordering, production scheduling and the movement of finished goods.
The research found 44 per cent of manufacturing CEOs had experienced supply chain disruption caused by a cyber incident during the previous 24 months.
Yet only 35 per cent reported real-time visibility into the cyber risk exposure of critical suppliers.
The gap illustrates how operational resilience increasingly depends on third parties that manufacturers may not directly control.
Technology can help businesses monitor these risks. Around 52 per cent of manufacturing respondents said artificial intelligence was already delivering measurable value in supplier risk monitoring.
However, technology cannot compensate for incomplete supplier information or limited visibility beyond direct suppliers.
Manufacturers still need to understand their dependencies before systems can effectively monitor them.
Resilience competes for capital
Building protection into supply chains carries a cost.
Additional inventory requires working capital and warehouse capacity. Maintaining alternative suppliers can reduce purchasing volumes with individual vendors, while sourcing from different regions may increase procurement or freight costs.
But operating without contingency measures creates a different financial exposure.
A critical shortage can result in idle production capacity, lost sales, expedited freight and additional recovery costs.
The business case for resilience therefore depends on comparing the cost of protection with the potential operational impact of disruption.
This is why targeted resilience matters. Businesses do not need the same level of redundancy, inventory or monitoring for every supplier.
Start with what could stop production
Manufacturers cannot eliminate geopolitical instability, cyber incidents, transport disruption or supplier failure.
They can, however, determine where those events would cause the greatest damage.
That means identifying components without readily available substitutes, suppliers concentrated in vulnerable locations, materials with long replenishment times and third parties whose failure could interrupt production.
From there, businesses can decide which risks justify additional inventory, alternative suppliers, redesigned specifications or closer monitoring.
As disruption becomes a more persistent feature of global supply chains, resilience does not necessarily mean preparing equally for every possible event.
It starts with a simpler question: which links could stop production if they broke?
Yvette is a Content Producer at Akolade, producing stories for Supply Chain Channel, an Australian learning ecosystem created to address the need for information, networking, case studies, and empowerment for everyone in the supply chain sector.
