Supply chain fragility: The race to strengthen a broken global supply chain

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  Quantumrun Foresight
• August 10, 2022

Insight summary

Global supply chains are faltering under various challenges, leading to economic and product shortages. Strategies to fortify these systems include diversifying suppliers and moving production closer to home, reducing reliance on distant manufacturing hubs. This shift impacts global economic patterns, labor markets, and fosters new technological advancements.

Supply chain fragility context

Global supply chains are increasingly struggling to adapt to disorder in its many forms, including natural disasters, global health challenges, economic crises, armed conflicts, regulatory changes, and political instability. The COVID-19 pandemic, in particular, highlighted the havoc unexpected events can cause on global commerce. What can be done to build a more resilient global supply chain?

Global supply chains have become fragile because they are no longer as agile and resilient as they once were. Over the last four decades, stock market pressures to increase corporate profit margins have prompted businesses to hyper-focus on efficiency practices and over-optimize supply chains to minimize costs. This means companies have increasingly relied on fewer key manufacturing hubs rather than diversifying. Meanwhile, retailers kept expenses low by storing fewer products in warehouses and stores, assuming they would always be able to order inventory as needed. This practice is associated with the pervasive business strategy of just-in-time manufacturing, where companies produce items only as needed to save on costs. 

In addition, by the 2010s, global supply chains were also heavily reliant on China. The country became the world’s dominant manufacturing hub, fulfilling more than 40 percent of global demand for various consumables. However, production reached a standstill when COVID-19 first emerged. This event had a ripple effect worldwide as companies that relied on Chinese manufacturers suddenly could not get the materials and products they needed. With production stalled, there were not enough products in the right places to meet local demand. This led to panic buying globally and even more shortages. 

Disruptive impact

The pandemic caused supplier operations to stop in more than 160 countries, leading to production stalls and backlogs. This stoppage resulted in shortages of products and increased prices for consumers. COVID-19 disruptions were estimated to have resulted in a decrease of 5.4 to 9.7 percent in the global gross domestic product (GDP) in 2020, according to the World Bank. 

Global supply chains can be strengthened in several ways to be far less susceptible to market disruptions in their various forms. One strategy would be to increase the number of suppliers for critical items and ensure that their locations are diverse but relatively accessible. This is called a decoupling strategy, which would help companies insulate themselves from disruptions caused by factors like geopolitical tensions and natural disasters.

Additionally, companies could look to move the production of key items closer to home, either to neighboring countries or domestically (i.e., onshoring). Such investments would shorten respective supply chains and make them less reliant on overseas suppliers. For example, in October 2023, Intel started building two microchip factories in Arizona worth USD $20 billion.

Implications of supply chain fragility

Wider implications of supply chain fragility may include: 

• The development of more circular economy models, resulting in sustainable consumption and production habits.


• The creation of new laws to balance innovation with data privacy, enhancing consumer trust.


• Increased reliance on diverse suppliers from regions like South America and Africa, leading to economic growth and job creation in these areas.


• More businesses investing in domestic manufacturing, boosting construction and other related sectors in their home countries.


• A rise in the adoption of supply chain management software and automation, leading to more agile responses to market changes.


• A decline in corporate reliance on China, causing widespread unemployment and a shift towards modernized, transparent manufacturing practices in the country.


• Governments initiating legislation and funding to promote onshoring of manufacturing, especially in critical sectors impacting public health and security.


• Expansion of technological competencies in developing countries, driven by the diversification of supply chains and investments in local industries.


• A surge in global competition for supply chain dominance, influencing international trade policies and bilateral agreements.


• A shift in labor market demands, with increased need for skills in automation, logistics, and supply chain management across various industries.

Questions to consider

• How else can companies ensure they have resilient supply chains?


• What other possible technologies can help strengthen the global supply chain?