There are moments when supply chains suddenly become very interested in resilience.
This feels like one of them.
Across global markets, businesses are once again having to think about alternative sources, different routes and what happens when the supply chain they expected isn't the supply chain they get.
We've seen a particularly interesting example recently in global wheat markets.
Disruption to Black Sea shipments has led some Asian buyers to turn to alternative supplies from Australia and Argentina.
The wheat is available.
The problem?
It's more expensive.
And that got me thinking.
Because resilience has always had a slightly awkward problem.
When you don't need it, it can look expensive.
A second supplier might cost more.
Additional inventory costs money to hold.
Spare capacity can look inefficient.
An alternative route might be more expensive than the usual one.
Keeping options open generally comes with a cost.
And when everything is working perfectly, it's very easy to look at those costs and wonder:
Do we really need this?
Until something stops working.
I learned that lesson very clearly earlier in my career in the chemical industry.
Our manufacturing operation relied heavily on a small number of critical raw materials.
One in particular was consumed in huge quantities.
We weren't receiving a delivery every few weeks.
We were receiving bulk tankers two or three times a day, delivering directly into silos.
That should give you some idea of the volumes involved.
Without that material, there wasn't much manufacturing going on.
And then our main supplier declared force majeure.
Suddenly, we were on allocation.
The material hadn't become slightly more difficult to source.
There was a major shortage in the market.
And the normal supply arrangement we'd relied upon every day was no longer something we could rely upon.
So we started looking.
Everywhere.
Our normal method of supply was bulk tanker.
That's obviously what we wanted.
But there were only a limited number of suppliers capable of supplying the material in the format and volumes we required.
So the question started changing.
Could we get it in big bags?
Could we source packed material?
Could we find stock somewhere else in the market?
And eventually:
What can we actually get our hands on?
Some batches required more than ten tonnes of this material.
If you're buying that in 1,000 kg bags, you've already created a very different operation from a tanker discharging directly into a silo.
But what if the only material you can find is in 25 kg bags?
Ten tonnes.
Twenty-five kilograms at a time.
That's 400 bags.
For one batch.
Suddenly you've got pallets of material.
Storage to think about.
Handling.
Labour.
Operators having to get all of that material into the process.
And a whole range of practical, safety and quality considerations that need to be understood.
Was that how anybody would design the supply chain?
Of course not.
Was it efficient?
Absolutely not.
Was it potentially expensive?
Very.
But eventually the question becomes much simpler.
Do you want to keep running or not?
It's tempting to look back at a situation like that and say:
You should have had another supplier.
And there's some truth in that.
I've always believed in building resilience into supply chains where it makes sense.
I've rarely had to convince experienced supply chain leaders of the value of having options.
Sometimes I've seen people earlier in their careers gravitate towards one supplier because it's simpler.
And suppliers?
Well, suppliers quite often think they should be your only supplier.
Funny that.
There can be perfectly good reasons for consolidation.
More volume with one supplier might mean better pricing.
The relationship can become stronger.
There are fewer suppliers to manage.
Less administration.
Potentially greater leverage.
There are real efficiencies.
But there's another side to the calculation.
What happens if they can't supply you?
And this is where I think discussions about resilience can become too simplistic.
Just saying "dual source it" isn't much of a strategy.
Real supply chains don't always give you that option.
There might only be a handful of capable suppliers.
A second source might require qualification.
The capacity might not exist.
The alternative might be in another geography.
The specification might be difficult to replicate.
The material might be available, but not in the format you normally use.
Or the alternative might simply cost considerably more.
You can also take resilience too far.
Multiple suppliers for everything.
Huge amounts of inventory.
Spare capacity everywhere.
Alternative routes permanently available.
You could probably design an incredibly resilient supply chain.
You might also design one that nobody could afford to operate.
So perhaps the question isn't:
How do we make everything resilient?
Perhaps it's:
Where can we least afford not to be?
That chemical plant bought a lot of things.
But some materials mattered differently.
If one disappeared, we might have had an inconvenience.
If another disappeared, we might have needed to change the plan.
But there were a small number where losing supply could fundamentally affect our ability to manufacture.
They weren't just purchases.
They were dependencies.
And I think that's an important distinction.
What does your operation genuinely depend upon?
It might be a raw material.
A component that costs pennies.
One approved supplier.
A manufacturing site.
A piece of equipment.
A particular transport route.
A source of energy.
A regulatory approval.
Something that looks completely unremarkable on a purchasing report might be the thing that stops the whole system.
Do we know what those things are?
And if we do, what have we decided to do about them?
That's where resilience becomes much more interesting than simply holding more stock or having another supplier.
Sometimes resilience is inventory.
Sometimes it's another source.
Sometimes it's capacity.
Sometimes it's an alternative route.
But it can also be optionality.
Knowing where else you could buy.
Understanding what other formats could work.
Having suppliers you can talk to.
Knowing what would need to be qualified.
Understanding which compromises you're prepared to make.
Having already thought about the question:
What would we do if this disappeared tomorrow?
Because when our normal bulk supply disappeared, the alternative wasn't another identical supply chain waiting neatly beside it.
It got messy.
We were looking at different suppliers.
Different formats.
Different quantities.
Different ways of handling material.
Even 25 kg bags.
But messy options are still options.
And sometimes that's what resilience actually looks like.
Which brings me back to what we're seeing today.
When a normal source or route becomes disrupted, businesses don't suddenly stop needing the product.
They look elsewhere.
Different countries.
Different suppliers.
Different routes.
Different commercial arrangements.
And quite often the alternative costs more.
That doesn't necessarily mean the alternative is expensive.
It might mean we've finally discovered what the option was worth.
That's the uncomfortable thing about resilience.
Its cost is usually visible before its value is.
You can see the additional inventory on the balance sheet.
You can see the price difference from the second supplier.
You can see the unused capacity.
You can see the qualification cost.
What you can't always see is the disruption that hasn't happened yet.
And that's a difficult business case to make perfectly.
Because none of us knows exactly what will fail next.
Maybe we don't need to.
Perhaps the job isn't to predict every disruption.
Perhaps it's to understand where we're fragile.
What could stop us?
Where are we overly dependent?
What alternatives actually exist?
What would we be prepared to do if the normal route disappeared?
And crucially:
Where is resilience worth paying for?
Because I'm certainly not arguing that every company should hold months of inventory or maintain multiple suppliers for every product.
Sometimes that wouldn't make sense.
Sometimes it wouldn't even be possible.
But I do think we should understand our dependencies.
And I still remember what it looked like when one of ours suddenly became very real.
A plant consuming tonnes of material.
Tankers normally arriving two or three times every day.
Then force majeure.
Allocation.
A market scrambling for supply.
And us considering whatever material we could find.
Even 25 kg bags.
Hundreds of them.
At that point, nobody was trying to design the world's most efficient supply chain.
We were trying to keep manufacturing.
Because resilience can look expensive when everything is working.
Then something stops working.
And suddenly the calculation changes.
Resilience is expensive.
Until it isn't.
Theme
Resilience
Signal
The value of resilience is hardest to see when everything is working.
Reflection
Efficiency and resilience aren't opposites.
Every supply chain needs both.
The challenge is understanding where efficiency has quietly created dependency, and where that dependency could become a serious problem if one supplier, route, material or site suddenly disappeared.
Resilience doesn't necessarily mean duplicating everything.
It means understanding what your operation depends upon and deciding, deliberately, where having another option is worth the cost.
Because the cheapest option while everything is working may look very different when it isn't.
Question
What does your supply chain depend upon that you couldn't afford to lose tomorrow?
The Demand Signal
Lessons from the front line of supply chain.