Supply Chain Resilience: From "Just in Time" to "Just in Case"
min readSupply chain disruption has moved from a background concern to a boardroom priority: Covid, its persistent aftershocks, the Ukraine conflict, the Red Sea Houthis, sanctions, tariffs and now the Iran conflict have confirmed CEOs’ long held perception, highlighted back in 2020 by The McKinsey Global Institute's August 2020 report, Risk, resilience, and rebalancing in global value chains, of the significant impact supply chain shocks can have on net present value.
However, no one could have foreseen the relentless sequence and complexity of shocks to the global supply chain we have experienced since. The current conflict involving Iran brings many of these risks into sharp focus. Heightened tensions in the Strait of Hormuz threaten a chokepoint through which roughly a fifth of the world's oil passes, the wider instability across the Gulf region threatens helium and aluminium supplies from neighbouring states, and has had ripple effects on energy prices, transport costs, and raw material availability including pistachios. All of these effects are impacting the cost of living and are being felt well beyond energy, including in the NHS where access to key materials is at risk leading to drug prices reportedly rising by 30%. It is clear that the old "just in time" model is no longer sufficient. The watchword now is "just in case."
So, what can organisations do?
Non-contractual strategies are a good starting point.
- Stockpiling can blunt price spikes — airlines that stockpiled jet fuel may be better placed during oil disruptions.
- Nearshoring shortens the supply chain and reduces geopolitical exposure, with some firms reportedly restructuring production accordingly.
- Friend-shoring relocates activities to suppliers in politically and economically aligned countries which reduces exposure to tariffs and political risk.
- Multi-sourcing provides continuity, and, in tandem with AI-demand forecasting platforms — shared even among competitors — can offer a continuously updated view of supply and demand.
Before selecting a strategy, assess your degree of dependence on each critical supplier. If you are sole-sourced and a gap would be catastrophic, that is your call to action.
Crucially, close supplier relationships matter. During a disruption, valued customers may receive prioritised orders, earlier warnings, and greater flexibility. A strategic step might be taking a seat on a supplier's advisory committee for direct operational visibility.
On the contractual side, the goal is to pass customer-level risk back-to-back through the supply chain. Key mechanisms include:
- exclusive supply obligations;
- forecasting provisions, consignment and safety stock requirements, and robust performance regimes;
- financial protections such as indemnities, set-off rights, and parent company guarantees;
- additional security and early warning mechanisms, such as audit rights and reporting obligations, allowing you to manage risks you cannot see; and
- carefully drafted force majeure clauses covering all possible disruptions which work in tandem with tested business continuity plans. However, risk should be shared equitably as your current supplier might also be your next best alternative on amended terms.
The overarching message is simple: robust contracts, close supplier relationships, and proactive operational strategies are the building blocks of supply chain resilience. Getting them right before the balloon goes up is not just good practice — it is a competitive advantage.
