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To reduce dependence on one country, start by identifying the technology components that could stop production or disrupt critical services, then map where they—and their upstream inputs, transport and inventory—actually come from. Rank the exposure by business impact and recovery time, qualify alternative suppliers or production locations before a disruption, and combine those options with targeted inventory and contingency planning. The right mix depends on the component; moving all production home is not a reliable shortcut to resilience.
What supply-chain diversification means in practice
Diversifying is not simply choosing a different country to replace the current one. It means reducing the chance that a single disruption can cut off a critical input, and ensuring the organization has workable recovery options. Those options may include another supplier, another production location, inventory to cover a disruption, or—in selected cases—domestic capacity.
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Look beyond the names on purchase orders. Two suppliers that appear independent may rely on the same upstream source, production stage, transport route or country. A map limited to direct suppliers can therefore make concentration look lower than it is.
The OECD’s 2025 review found that, globally, 50% more products were sourced from a limited range of suppliers in the early 2020s than in the late 1990s. That is a broad trend, not a measure of any individual company’s exposure. It is a reason to examine actual dependencies rather than assume a supplier list is diverse.
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How to implement a more resilient sourcing strategy
1. Identify the inputs that matter most
Begin with components and services whose loss would halt production, prevent delivery or threaten a critical service. Concentration is a warning signal, but it does not by itself determine priority: a concentrated input may have easy substitutes, while a less concentrated one may still be difficult to replace quickly. Define the consequence of losing each item before deciding how much effort to spend on it.
2. Map the real dependency chain
For each priority input, record the supplier and the location of the relevant production stage—not just the supplier’s headquarters. Include upstream materials and components, warehousing and inventory, transport routes, and any known dependencies shared by nominally separate suppliers. Ask suppliers for timely information about their own sources and production arrangements, and note where visibility is incomplete.
3. Rank exposure by impact and recovery time
Assess what happens if supply stops, how long operations can continue, how long a replacement would take to qualify and deliver, and whether a viable alternative exists. Consider technical substitutability alongside revenue or operational impact. A source with a long recovery time and no qualified substitute deserves more attention than one that can be switched promptly.
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Evaluate candidate suppliers and locations for technical fit, regulatory requirements, capacity, lead time and the ability to provide dependable information. Test whether the alternative can supply the required product—not merely a similar one—and establish what qualification or production changes would be needed. Keep communication open with suppliers and customers so that changes in capacity or constraints are more visible.
5. Select a component-specific mix of mitigations
Compare options using the same criteria for each component: concentration by country and supplier, impact of interruption, recovery time, substitutability, qualification effort, total landed and inventory cost, transport exposure, workforce and infrastructure, and regulatory, geopolitical and cyber risks. Standard products with simpler technology may be easier to source from several places than highly customized, technology-intensive products with strong scale economies.
| Option | What it can address | Trade-off or limit |
|---|---|---|
| Additional supplier or production location | Creates another route to supply when the incumbent source is disrupted. | May require qualification work, added cost or investment; apparent supplier diversity does not help if sources share an upstream dependency. |
| Near-shoring | Can shorten some transport routes and reduce exposure to long-distance delays. | Geographic proximity alone does not remove shared upstream dependencies or geopolitical risk. |
| Targeted inventory | Can provide time to manage a disruption while supply is restored or alternatives are activated. | Has carrying costs and cannot replace every specialized input. |
| Domestic capacity | May be justified for selected critical needs where security, lead time or strategic requirements warrant it. | Can be costly, and a national border by itself does not guarantee resilience. |
Choose among these options according to the component’s risk and the time needed to recover. A second source can be more practical than relocating an entire industry; inventory may bridge a short interruption, while a difficult-to-substitute input may warrant a longer-term capacity decision.
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6. Exercise a disruption scenario
Test what the organization would do if a supplier, country or transport route became unavailable. Trace who would make decisions, how quickly inventory would run out, whether an alternate source could meet specifications, and what information would be needed from suppliers. Record operational gaps, assign owners and deadlines, and update the contingency plan. The UK National Semiconductor Strategy includes crisis and contingency planning across government and industry as part of its resilience approach.
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Review dependencies, supplier concentration, capacity and alternative-source assumptions as conditions change. A previously viable alternate may no longer have capacity or may depend on a newly identified common source. Set a review cadence appropriate to the importance and volatility of each input, and update the plan when sourcing or production arrangements change.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why semiconductor supply chains need special treatment
Semiconductors illustrate why diversification cannot always be achieved by transferring production to one replacement country. The value chain is fragmented across specialized economies, and no country currently performs every stage or produces every semiconductor type used by downstream industries. Building capacity requires substantial investment as well as skilled workers, ultraclean water, reliable energy and transport infrastructure.
The concentration can be acute for a particular segment: the OECD’s 2025 executive summary says that more than 90% of leading-edge logic chips are produced by TSMC in Chinese Taipei. This figure concerns leading-edge logic chips, not all semiconductors. In the OECD’s comparison using underlying 2018 data, semiconductors represented 8% of value added in final demand for ICT and electronics, compared with 2% for primary energy; the underlying data year is 2018, not 2025.
For a chip-dependent product, identify the chip type and production stage at risk, then assess realistic alternatives, qualification time and supporting infrastructure. A second supplier or location may reduce a specific exposure, but the evidence does not support assuming that any one country can quickly reproduce the entire semiconductor ecosystem.
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Why broad reshoring is not a complete resilience plan
Domestic production can be appropriate for selected critical requirements, but moving production within national borders does not automatically eliminate concentration, upstream dependencies or infrastructure risks. The OECD’s 2025 modelling found that relocalisation scenarios could reduce global trade by more than 18% and global real GDP by more than 5%. Resilience did not improve consistently across those scenarios, and GDP volatility increased in more than half of the economies modelled. These are modelled economy-wide outcomes, not forecasts for a particular company or proof that every domestic investment will fail.
Use reshoring as one possible measure in a broader portfolio, and compare it with supplier diversification, targeted inventory and selective near-shoring on the same component-level criteria. The OECD’s overall analysis emphasizes that the costs and feasibility of diversification vary by product, so a single location policy is unlikely to fit every input.
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