Recent disruptions across several industries have exposed the limits of supply chain resilience. Supply chain resilience is a company’s ability to withstand supply disruptions and recover quickly. A key part of that resilience is supply chain flexibility: having the ability to switch suppliers, production locations, or transportation routes when something goes wrong.

Airbus, for example, delivered 16% fewer aircraft in the first quarter of 2026 than in the same period a year earlier. Delays at Pratt & Whitney, one of two engine suppliers for its A320neo family, were the biggest obstacle.

Semiconductor equipment manufacturer KLA faced a different problem. Suppliers discontinued certain DRAM chips used in its equipment, causing chip prices to surge. KLA expected the additional costs to reduce its gross margin in 2026.

The automotive industry faced a similar disruption in October 2025. China blocked exports of products manufactured at the Chinese facilities of Nexperia, a semiconductor company headquartered in the Netherlands. The restrictions forced Honda to suspend production at a plant in Mexico.

All three companies had taken steps to prepare for supply disruptions.

Airbus had another engine supplier, CFM. The company held extensive discussions with CFM about additional deliveries, but CFM had already agreed to increase production and would not commit to producing beyond that agreed level in 2026. Airbus CEO Guillaume Faury explained that CFM also needed to support aircraft already in service, limiting its ability to supply additional engines. Airbus had no spare inventory of Pratt & Whitney engines to draw on, either.

KLA had identified potential alternative suppliers and maintained inventories of critical components. However, those alternatives had not necessarily completed the qualification process, and some critical parts came from just one supplier or a very small number of suppliers. When the chips were discontinued, KLA had to buy them at higher prices and increase its purchase commitments.

Automakers using Nexperia chips also typically maintained some inventory and had alternative suppliers. But Nexperia supplied such large volumes that replacing its output quickly was difficult. Many of the chips were soldered directly onto other components, making immediate substitution impractical. Testing a replacement chip could take several months. Even when another supplier was available, switching was far from straightforward.

Each company had contingency measures in place. When the disruption occurred, however, those measures could not be put to work immediately.

Why were companies with backup plans still so vulnerable?

And what does it take to prepare alternatives that can actually be used during a crisis?

Why Efficient Supply Chains Still Struggle During Disruptions

Long and complex supply chains are often considered especially vulnerable. When components pass through several countries before reaching their destination, there seem to be more opportunities for something to go wrong.

In practice, companies with few alternatives they can actually use during a disruption often struggle more than those with simply long supply chains.

Those alternatives might include component suppliers, manufacturing plants, replacement parts, transportation routes, or warehouses with available inventory. Their value depends on whether a company can switch to them when needed.

The three companies discussed earlier had identified backup suppliers, yet they could not switch immediately when problems arose. Even companies with highly efficient factories, suppliers, and logistics partners can face the same difficulty when tariffs change, a supplier runs into trouble, or a shipping route becomes unavailable. Every alternative requires preparation. Without that preparation, a backup option may exist on paper but remain unusable in practice.

Consider switching suppliers. Components from a new supplier need to undergo qualification, including testing and approval against quality and safety standards. If a company has identified an alternative supplier but has yet to complete qualification, that process will have to begin after the disruption occurs. During the Nexperia crisis, qualification could take several months, with some industry estimates approaching a year.

Moving production to another factory presents similar challenges. When tariffs rise unexpectedly or a plant shuts down, manufacturing the same product in another country or facility may seem like a practical solution. But production requires product-specific molds, tooling, and equipment. A factory without those capabilities cannot immediately take over production, even if it has available capacity.

Replacing components introduces another obstacle: the company’s internal systems.

Many manufacturing operations run according to system-generated plans. Each product has a bill of materials (BOM), which lists the components and quantities needed to manufacture it. Planning systems use that information to calculate material requirements, place orders, and issue production instructions.

If a replacement component is missing from the BOM, the system will not automatically order it or authorize its use in production. Even if the company obtains the part, the system may still show a material shortage, making production planning difficult. Adding the replacement requires engineering change approval. Once approved, the change must be reflected across every plant manufacturing the product, along with the relevant documentation, suppliers, and service organizations.

In each case, companies had identified alternatives but had not completed the preparations needed to use them.

Why had those preparations been overlooked? The answer becomes clearer when we look at how global supply chains have been designed over the past two decades.

Manufacturers have generally concentrated component production in locations offering lower costs, extensive supplier networks, and strong technical capabilities. Final assembly and distribution have often been located closer to end markets. China became a major center for component manufacturing, while other Asian countries, including Vietnam, offered alternatives in terms of cost and production capacity. Regional assembly operations helped companies deliver finished products to customers more quickly.

Cost and efficiency were the main priorities.

Under those priorities, maintaining a qualified second supplier that rarely receives orders can look wasteful. The same applies to keeping spare equipment available so one factory can take over another factory’s production. These investments increase costs without necessarily improving day-to-day output, making them easy to postpone.

This model worked well for many years and remains useful today. Its efficiency, however, depended partly on relatively stable trade rules and transportation routes.

That assumption has repeatedly been challenged in recent years. Attacks on commercial vessels in the Red Sea have forced container ships to divert around southern Africa. New tariffs have changed sourcing economics. Export restrictions, as seen in the Nexperia case, have interrupted component supplies.

Supply chain efficiency alone is no longer enough.

Just-in-time (JIT) manufacturing helps reduce inventory by bringing in materials when they are needed. Companies increasingly need to complement that approach with just-in-case (JIC) planning, which prepares for disruptions before they occur.

Preparing for disruptions also calls for a change in how companies think about their supply chains.

Traditionally, the discussion has focused on moving production out of China, relocating manufacturing closer to customers, or increasing inventory. A more useful starting point is to ask: If something goes wrong, what can we actually move or change?

Can orders be redirected to another plant or region? Can production move to another factory? Can components be sourced elsewhere? Can inventory be transferred from another warehouse? Can a different shipping route be used? Can product specifications be adjusted to accommodate replacement components?

Companies also need to consider whether they can continue maintaining and supporting equipment already sold and installed at customer sites, commonly referred to as the installed base.

A resilient supply chain is built around alternatives that can be put to work when events unfold differently than expected. Those options need to be ready long before a disruption occurs.

Supply Chain Resilience Strategies Start With Component Sourcing

How can companies prepare those alternatives?

Component sourcing is a logical place to start. In all three examples from the introduction, the disruption began with suppliers responsible for providing essential components.

Adding another supplier, however, is only part of the preparation.

If a new supplier operates in the same country as the existing one, both may be affected by the same tariffs or trade restrictions. A company therefore needs to examine where its suppliers are located, alongside how many suppliers it has.

There are four main approaches to reconsidering component sourcing:

• Diversification: Expanding the supplier base across multiple companies and countries.
• Regionalization: Building a regional supply chain that covers component manufacturing through finished products.
• Friendshoring: Moving production to countries with closer political and diplomatic ties.
• Selective reshoring: Bringing production of critical components back to the home country.

1. Supply Chain Diversification

Supply chain diversification reduces reliance on individual suppliers or countries by expanding sourcing options.

Because many manufacturers have depended heavily on China for components, this approach is often called China Plus One, meaning the addition of at least one sourcing location outside China. In practice, companies may need several additional locations, making China Plus Several a more accurate description.

China remains difficult to replace for many components. Its manufacturing scale, extensive supplier base, ability to respond quickly to technical requirements, and tooling capabilities continue to give it significant advantages.

A practical diversification strategy aims to reduce excessive dependence on individual countries, suppliers, regions, or trade lanes while preserving purchasing leverage. Qualifying additional suppliers in Vietnam, India, Malaysia, Thailand, Mexico, Eastern Europe, or Türkiye can give companies more room to respond when disruptions occur.

But diversification can be misleading.

Suppose a manufacturer adds a supplier in Vietnam. If that supplier still depends on Chinese components, raw materials, equipment, or technical support, the company’s underlying dependence on China may remain largely unchanged. Two apparently independent suppliers may also purchase essential components from the same sub-tier supplier.

Checking the country where an invoice is issued is therefore insufficient. Companies need to understand where critical raw materials, technologies, equipment, and production capacity actually originate.

2. Supply Chain Regionalization

Many global manufacturers have traditionally produced components in Asia and performed only final assembly at regional facilities.

Regionalization goes further. For selected products, it establishes the capacity to manufacture components and complete finished products within the same region.

This can shorten lead times by reducing long-distance component movements. It also lowers exposure to transportation disruptions and can reduce the effects of tariffs and cross-border complications. With production closer to customers, companies can respond more quickly to changing requirements.

The trade-off is cost.

Regional operations may require duplicate equipment, inventory, quality management systems, and engineering personnel. When evaluated solely on component purchase prices or factory production costs, regionalization can appear uneconomical.

The calculation changes when the potential cost of a supply interruption is included. Lost revenue, expedited freight, delayed installations, service penalties, customer dissatisfaction, and management time spent resolving the disruption all have financial consequences.

Companies should therefore consider total value after accounting for disruption risk, rather than relying solely on the lowest landed cost calculated under normal operating conditions. Landed cost includes the expenses incurred to bring a product to its destination. This broader evaluation is particularly relevant for manufacturers seeking higher margins, dependable service revenue, and long-term customer relationships.

3. Friendshoring

Friendshoring involves relocating sensitive parts of a supply chain to countries that maintain closer political and diplomatic relationships with major sales markets.

It can resemble regionalization, but political considerations carry greater weight than geographical distance or cost.

This approach can be particularly useful in industries where customers place significant importance on country of origin, supply stability, and regulatory compliance.

There are two risks to consider.

First, political relationships can change. A country considered a reliable partner today may face different diplomatic or trade conditions in the future.

Second, companies must manage the actual origin of their components. Moving final assembly to a friendly country offers limited protection if critical electronic components, castings, magnets, or regulated parts still originate in high-risk locations.

4. Selective Reshoring

Reshoring brings production previously located overseas back to a company’s home country. Selective reshoring focuses that effort on critical components rather than attempting to relocate every manufacturing activity.

Bringing all production home can be expensive and time-consuming. If the domestic supplier network is inadequate, the move could even create additional vulnerabilities.

Selective reshoring is most useful for components whose unavailability could halt revenue-generating operations, harm customers, expose sensitive technology, or seriously disrupt field service.

It also requires more than a decision to produce domestically. Without skilled workers, qualified suppliers, suitable equipment, maintenance capabilities, and quality management systems, a company may simply end up with another expensive and vulnerable supply chain closer to home.

Expanding Supply Chain Options Through Product Design and Inventory

Securing a new supplier does not guarantee that its components can be used immediately. Replacement parts must be compatible with the company’s products, so sourcing flexibility also depends on how those products were designed.

Products that can accommodate components from different manufacturers, region-specific bills of materials, alternative materials, or modular parts without extensive redesign or recertification give companies considerably more sourcing options.

Products built around tightly integrated, highly specific components are harder to adapt. Procurement may identify an excellent alternative supplier and still find that engineering constraints prevent the component from being used.

Flexible product design requires preparation from the beginning. Engineers need to consider component interfaces, dimensional tolerances, preapproved alternatives, testing procedures, software compatibility, and the implications for after-sales service.

That preparation comes with costs. Engineering work increases, and companies may have more product configurations to manage. Weak configuration management can turn flexible product design into a burden, creating difficulties with documentation and quality control.

For long-lived industrial products, however, building flexibility into the initial design is generally much easier than redesigning equipment after a disruption has occurred.

Products designed around common components and modular assemblies also provide greater flexibility in manufacturing.

One approach is postponement.

Instead of manufacturing every finished-product configuration far from customers, a company produces common components or semi-finished goods first and performs final assembly closer to the customer market.

This allows the final product configuration to be determined later, reducing the risk of unsold finished-goods inventory and making it easier to respond to customer requirements.

The regional assembly operation, however, takes on more responsibility. To make postponement work, local facilities need technical personnel, tools, testing equipment, standard operating procedures, quality controls, and suitable production systems.

Changes to product design and manufacturing processes require time.

When a disruption occurs unexpectedly, inventory remains one of the fastest ways to buy time. Additional stocks of critical components, long-lead-time parts, and service parts can help companies continue operating while they respond to supply problems.

Inventory extends the time available to respond, but it does not create another source of supply. If a company cannot switch to another supplier or component before its inventory runs out, the original disruption can halt production again.

The goal is to determine where inventory provides the greatest protection rather than simply increasing stock across the board.

Depending on the product and supply chain, the most effective buffer may be held as raw materials, components, semi-finished goods, finished products, or service parts.

Service parts deserve particular attention for manufacturers with a large installed base. A single inexpensive component can prevent an entire piece of customer equipment from operating. Keeping that part available may therefore be far more valuable than its purchase price suggests.

Building a Plant Network That Can Shift Production

Even with alternative suppliers, flexible product designs, and sufficient inventory, companies still need to decide where products can be manufactured.

A plant network becomes more resilient when another facility can take over production if one factory experiences a disruption.

Three approaches can help: plant standardization, flexible-production plants, and outsourcing. Each creates flexibility in a different way, and companies often combine them.

1. Plant Standardization

Plant standardization aligns the production processes and operating standards needed to transfer work between factories.

Manufacturers can retain differences between facilities while standardizing essential processes, data structures, quality gates, work instructions, tooling arrangements, and performance metrics. With enough consistency across these areas, a receiving factory can take over production without rebuilding the entire manufacturing process.

If one plant shuts down, another can absorb some of its production, improving the resilience of the manufacturing network.

Standardization also has drawbacks. Local plants may find common requirements restrictive, and imposing uniformity where it serves no practical purpose can eliminate advantages that individual facilities have developed. Companies should focus on the elements essential to production transfers, quality, and management while retaining useful local differences.

2. Flexible-Production Plants

Flexible-production plants are designed to manufacture several different products at a single location. This complements plant standardization, which makes it easier to transfer the same product between factories.

Creating that capability requires adaptable production equipment, modular tooling that can be changed quickly, skilled operators, programmable automation, digital work instructions, and reliable configuration management.

The approach is especially valuable when product varieties are numerous, demand is difficult to forecast, or customers require region-specific configurations.

The limitations are higher costs and operational complexity. Without clear processes and control standards, increased flexibility can also create confusion on the production floor.

3. Outsourcing

Outsourcing allows a company to use external manufacturers instead of owning every factory and piece of equipment itself.

It can help expand capacity, manufacture products in new regions, access specialized technology, or respond to sudden increases in demand.

Outsourcing is particularly useful when a disruption is expected to be temporary, demand remains uncertain, or a company wants to test a new manufacturing region before making a major investment.

It can provide access to additional production capacity relatively quickly, but it also reduces direct control. Companies need to manage quality data, manufacturing know-how, intellectual property, production priorities, and delivery schedules carefully.

Outsourcing is most effective when suitable partners have been identified and prepared before a crisis.

In practice, most manufacturers use a combination of these approaches.

The important next step is to give each plant a clear role.

One facility might focus on low-cost, high-volume production. Another may handle multiple product configurations. Others may specialize in launching new products, supplying service parts, or providing backup capacity when another plant goes offline.

Expecting a single factory to perform all these roles can create operational conflicts.

The way factories are evaluated must also change. A plant’s performance should reflect its contribution to the manufacturing network, alongside the cost of producing its current products.

Can it absorb production transferred from another facility? Can it qualify alternative components? Does it meet common quality standards? Are its work instructions compatible with those used elsewhere? Can it provide reliable production and quality data?

Factories can retain different capabilities and operating models while maintaining enough compatibility to transfer work between them.

The Equipment, Systems, and Data That Make Supply Chain Flexibility Work

Alternative suppliers and manufacturing locations become useful when equipment and business systems can support the transition.

Tooling shortages and unregistered replacement components can leave an otherwise workable contingency plan unusable. Companies need to address those practical obstacles before a disruption.

Equipment selection needs to account for changing circumstances.

Under stable conditions, manufacturers often select equipment based on how efficiently it can produce a particular product. When uncertainty increases, additional questions become important.

How quickly can the equipment switch between products? Can it perform different operations through software changes? Can fixtures and jigs be replaced easily? Can production recipes be transferred between plants? Are spare parts readily available? Is remote technical support possible? Can the equipment handle alternative materials or specifications?

Dedicated production lines can be highly efficient but may restrict a company’s response when circumstances change.

Flexible manufacturing cells, interchangeable tooling, backup sets of critical molds, and common control systems across factories may appear more expensive during normal operations. Their value becomes apparent when production needs to move.

Manufacturing systems also need to work across facilities.

Manufacturing execution systems (MES), quality management systems, and maintenance systems should support coordination across an entire plant network.

Companies need to trace which product was manufactured at which facility, using which components, from which supplier batch, on which equipment, and with which test results.

These records serve an operational purpose.

When a quality issue arises, detailed traceability helps identify affected products without unnecessarily recalling a much broader range of units. It also helps companies continue supporting equipment already sold when suppliers or components change.

Enterprise resource planning (ERP) and product lifecycle management (PLM) systems play an equally important role.

Much of supply chain flexibility depends on the quality of master data.

Approved alternative components must be registered in the system. Region-specific BOMs need to be managed correctly. Routing and process data must reflect what each factory can actually produce.

When an engineering change is approved, the updated information must reach every affected plant, document, supplier, and service organization.

Many manufacturers want flexible supply chains while continuing to operate business systems configured around a single production method or component specification. Those systems can become barriers to the flexibility companies are trying to build.

Logistics management systems also need to support supply chain coordination alongside shipment tracking.

Companies should be able to see suppliers, goods in transit, factory inventory, regional distribution centers, finished-goods warehouses, and service-parts inventory together.

They also need predefined rules for prioritizing scarce components and identifying alternative transportation routes.

Scenario analysis is another important capability.

What would happen if a regional factory shut down? How would a new tariff affect supply? Which shipments, facilities, or customers would be exposed if a major shipping route became unstable?

Companies need ways to assess these situations before making decisions.

For manufacturers importing components from overseas, some inventory is almost always moving across the ocean.

Inventory inside a factory warehouse is relatively easy to inspect. Components at sea can be harder to account for unless shipments are actively monitored. Teams may struggle to determine where those materials are and when they are expected to arrive.

When a supply disruption occurs, one of the first questions is how long existing inventory can sustain production.

That calculation becomes unreliable when arrival dates for components in transit are unknown.

If a shipping route is disrupted, companies also need to identify which shipments are affected before deciding whether alternative transportation arrangements are necessary.

The earlier a team learns that a shipment will be delayed, the more time it has to consider another supplier or route.

Solutions such as Tradlinx Ocean Visibility help companies monitor container shipments across multiple ocean carriers in one place and receive alerts about ETA changes or delays.

They can also help manage costs that may arise after cargo reaches its destination.

Demurrage charges can apply when a container remains at a terminal beyond its free time. Detention charges can apply when a container is not returned within the permitted free time after being picked up.

By tracking container dwell time at terminals and the time between gate-out and return in real time, visibility solutions can help identify shipments at risk of exceeding their free-time allowances.

This gives supply chain teams access to transportation information they need when coordinating inventory and responding to disruptions.

What Leadership Must Decide to Build Supply Chain Resilience

The preparations discussed so far share a common challenge: they can increase short-term costs and reduce certain measures of operating efficiency.

Qualifying an additional supplier costs money. Designing products to accept alternative components requires more engineering work. Preparing plants and equipment to transfer production also requires investment.

When judged only by current production costs and equipment utilization, these measures can appear unattractive.

That is why decisions about supply chain resilience cannot be left entirely to purchasing or manufacturing departments. Each department is usually measured against its own performance targets.

Senior leadership needs to establish the criteria that guide decisions across the business.

How much disruption risk is the company willing to accept? Which products and customers should receive the highest priority? Which investments are necessary even if they reduce short-term efficiency?

Performance measures must support those decisions.

Consider a company where plant managers are evaluated primarily on utilization, purchasing teams on acquisition prices, and engineering teams on product costs and launch schedules.

A plant manager has little incentive to maintain spare equipment if it lowers utilization, even when that capacity could support another factory during a shutdown. Purchasing teams may hesitate to qualify a more expensive second supplier because it would raise average purchase prices. Engineering teams face similar pressure when designing for alternative components adds cost or delays product launches.

Each department can perform well against its own targets while the company as a whole continues to postpone investments in flexibility.

Leadership therefore needs KPIs and incentives that recognize improvements in supply chain resilience across the business, alongside departmental cost performance.

Bringing departments together is another leadership responsibility. Supply chain risks are rarely visible to a single department.

Purchasing teams can identify hidden dependencies on sub-tier suppliers. They may discover that suppliers in different countries ultimately rely on the same source.

Engineering teams can make alternative components usable through product design and qualification.

Manufacturing teams understand which plants can produce particular products and whether they are prepared to absorb transferred production.

Logistics teams monitor goods in transit and prepare alternative transportation routes.

Finance teams can calculate the costs of supply disruptions and determine whether investments such as regionalization are justified.

Product management teams understand risks associated with product lifecycles and equipment already installed at customer sites.

Service teams know what happens to customers when essential replacement parts are unavailable.

Leadership needs to bring these perspectives together because no department sees the entire supply chain on its own.

Effective leaders can guide this discussion with straightforward questions. They look beyond “What is the lowest-cost supply chain?” and ask:

“What alternatives do we have if something goes wrong?”

“What would prevent us from using those alternatives?”

The second question is particularly important. As the opening examples showed, even a well-identified alternative may be unusable if an unresolved obstacle prevents the company from switching to it.

Asking that question can uncover problems that routine performance reviews overlook.

A backup factory may lack the required tooling. A replacement manufacturing process may not be qualified. An alternative component may be missing from the system.

A plant may rely on undocumented production knowledge that another facility cannot reproduce. A critical subcomponent may come from a single supplier, or the necessary testing equipment may be unavailable. Supplier information may be incomplete, and decision-making authority during a crisis may never have been assigned.

These gaps need to be identified before the company depends on its contingency plans.

Companies can start with their most important product families and critical components. Reviewing every product simultaneously is rarely practical.

Leadership should examine four questions for each priority product or component.

The assessment should lead to decisions rather than ending with a risk heat map.

A heat map can show where exposure is concentrated. It does not determine what action a company should take.

For each important product or component, leaders need to select an appropriate response.

That might mean qualifying a second supplier, regionalizing production, or reshoring critical components. It could involve redesigning a product, increasing targeted inventory buffers, standardizing plants, expanding flexible manufacturing capacity, or preparing outsourcing partners.

Maintaining the current arrangement and accepting the associated risk can also be a deliberate decision.

What matters is that the company has assessed its options and chosen a course of action consciously. Together, those decisions create alternatives the business can actually use when disruptions occur.

Why Supply Chain Flexibility Is a Competitive Advantage

Even extensive preparation cannot eliminate every supply chain risk.

The goal of supply chain resilience is to identify potential disruptions early and have workable responses ready. This gives companies an opportunity to act before supply problems lead to customer losses.

Airbus, KLA, and Honda all had some form of contingency planning. Yet their operations were affected because their alternatives could not be activated quickly enough. Supply chain flexibility becomes meaningful when companies have done the work needed to make those alternatives usable.

The difference is especially clear during a crisis.

Companies with ready alternatives can shift sourcing, production, or transportation to other locations and continue supplying customers.

During the same Nexperia disruption, Volkswagen secured chips from alternative suppliers and avoided a production shutdown at its German plants.

Companies without usable alternatives, meanwhile, may have to stop production or delay deliveries while they look for solutions.

With geopolitical uncertainty creating the potential for further disruptions, supply chain flexibility has become an important source of competitive strength.

Companies with flexible supply chains will still face disruptions, but they will have more ways to respond.

Those that fail to prepare may repeatedly discover that their supply chains were optimized for a world in which everything went according to plan.

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