How global supply chains actually work (and why they’re hard to change)
Introduction: why “supply chain” is the wrong mental model
The term “supply chain” is used constantly in public debate, often as shorthand for shortages, delays, or geopolitical risk. It appears in discussions about inflation, industrial policy, national security, and climate strategy. Yet it is rarely explained in a way that reflects how these systems actually function.
The problem begins with the phrase itself. A “chain” implies a linear sequence — something that can be shortened, rerouted, or replaced with relative ease. In reality, modern supply chains are not chains at all. They are complex coordination systems built over decades, shaped by incentives, contracts, and accumulated expertise.
Understanding how they work requires moving beyond logistics and toward structure.
What a supply chain really is
A supply chain is not a single route from producer to consumer. It is a network of firms, processes, and relationships that coordinate the flow of inputs, components, and finished goods across multiple stages of production.
At each stage, decisions are shaped by:
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Cost and reliability
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Contractual obligations
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Technical standards
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Information availability
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Time horizons
No single actor controls the entire system. Even large firms typically oversee only a portion of their upstream and downstream dependencies. Visibility is often limited, particularly several tiers removed from final assembly.
This is why disruptions are difficult to anticipate and slow to resolve. What appears to be a logistical problem is often a coordination problem, embedded in contractual and operational arrangements that cannot be altered quickly.
In this sense, supply chains function less like pipelines and more like ecosystems.
Why supply chains became global
Modern supply chains became global not by accident, but through a combination of structural forces that rewarded scale, specialisation, and reliability.
Trade liberalisation reduced barriers to cross-border exchange. Advances in transport and communications lowered coordination costs. Firms increasingly organised production around comparative advantage, locating each stage where it could be performed most efficiently and consistently.
Over time, reliability became as important as cost. Suppliers that delivered predictably were favoured over those that were merely proximate. Redundancy was minimised, inventory was reduced, and production schedules were tightly synchronised.
Globalisation, in this context, was not just about cheaper labour or distant sourcing. It was about building systems that could operate continuously with minimal friction.
Once established, these systems proved durable.
As firms optimised production for efficiency and reliability, access to stable financing and predictable interest rate environments also shaped long-term investment decisions, particularly for capital-intensive manufacturing.
Where vulnerability actually comes from
Supply chain vulnerability is often attributed to distance or global reach. In practice, the sources of fragility are more specific.
The most significant risks tend to arise from:
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High concentration of critical inputs
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Single points of failure
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Lack of substitutable suppliers
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Reduced inventory buffers
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Limited transparency across tiers
A supply chain can be global and resilient, or local and fragile. What matters is not geography alone, but how dependencies are structured and managed.
Just-in-time production, for example, increases efficiency but reduces tolerance for disruption. When combined with concentrated sourcing, it can amplify shocks. Conversely, diversified sourcing across regions can increase resilience even if distances are long.
Vulnerability is therefore a design outcome, not an inherent feature of globalisation.
Why “reshoring” is structurally difficult
Calls to reshore production often underestimate the complexity of existing supply networks. Relocating a single facility does not recreate the surrounding ecosystem of suppliers, skills, and logistics that make production viable.
Reshoring faces several structural constraints:
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High upfront capital costs
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Shortages of specialised labour
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Absence of local supplier networks
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Long lead times for capacity build-out
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Trade-offs between cost, speed, and scale
Even when policy incentives are strong, firms must weigh these constraints against operational risk. As a result, reshoring tends to be selective and gradual, focused on specific components rather than entire supply chains.
Change occurs, but rarely at the pace implied by political rhetoric.
How geopolitics changes supply chains (incrementally)
Geopolitical pressure does influence supply chains, but its effects are typically evolutionary rather than transformative.
Rather than abandoning existing networks, firms respond by:
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Diversifying suppliers
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Building redundancy
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Shifting marginal capacity
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Adjusting inventory strategies
These changes reduce exposure without dismantling systems that remain economically viable. Full withdrawal is rare, because the costs are high and the alternatives uncertain.
As a result, supply chains tend to adapt slowly, absorbing geopolitical risk through incremental adjustment rather than dramatic reconfiguration.
This gradualism is a feature, not a failure. It reflects the constraints under which global production systems operate.
In a more fragmented global order, firms increasingly respond to geopolitical pressure by managing exposure rather than pursuing outright withdrawal, reinforcing a broader pattern of caution in international decision-making.
What supply chains adapt to — and what they resist
Supply chains are designed to adapt to certain types of change and to resist others.
They adapt relatively well to:
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Gradual demand shifts
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Predictable regulatory change
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Incremental cost pressures
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Long-term risk trends
They struggle with:
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Sudden shocks
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Abrupt policy reversals
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Uncoordinated interventions
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Unclear or conflicting timelines
When expectations align with system capabilities, adjustment is possible. When expectations outpace structural reality, disruption follows.
Understanding these limits is essential for interpreting both policy ambitions and market responses.
Conclusion: supply chains are systems, not switches
Global supply chains are often discussed as if they can be redirected at will. In reality, they are the product of accumulated decisions, embedded relationships, and long time horizons.
They evolve, but they do not pivot quickly. Change is cumulative, constrained, and uneven.
Seeing supply chains as systems rather than switches helps explain why transformation is slow, why vulnerability persists despite awareness, and why resilience is often incremental rather than absolute.
This perspective does not resolve the challenges supply chains face. It does, however, clarify what is possible — and what is not — within the structures that already exist.
