March 2020 shattered an illusion: lean supply chains as competitive advantage.
Just-in-Time manufacturing, single-source suppliers, 5-day inventory levels—these strategies optimized for cost efficiency. Then the world locked down.
Container ships stalled. Factories closed. Lead times exploded from 4 weeks to 26 weeks. SMEs discovered they had optimized for a world that no longer existed.
Research from supply chain resilience studies shows: 72% of UK SMEs experienced supply disruptions 2020-2023. The median impact: 3.2 months of constrained operations and £340K in lost revenue.
The businesses that survived didn't have better supply chains. They had more resilient ones.
The Just-in-Time Hangover
For 30 years, operational excellence meant minimizing inventory, consolidating suppliers, and optimizing for lowest cost.
This worked—until it didn't.
The JIT assumptions that failed:
1.Suppliers always deliver on time (they don't during pandemics, wars, climate disasters)2.Transportation is reliable (it isn't when ports close or drivers shortage spike)3.Demand is predictable (it wasn't when consumer behavior shifted overnight)4.Single sourcing is efficient (it is, until that source fails and you have zero alternatives)
SMEs that followed JIT orthodoxy discovered: efficiency and resilience are different objectives.
You can optimize for one or the other. Rarely both simultaneously.
The New Supply Chain Paradigm: Just-in-Case
The pendulum is swinging from JIT (Just-in-Time) to JIC (Just-in-Case).
Not because efficiency doesn't matter—it does. But because resilience is now a competitive requirement, not a luxury.
The strategic shift:
Just-in-Time (Old Paradigm)- Minimize inventory (5-15 days)- Single source suppliers (lowest cost)- Long, complex supply chains (global optimization)- Demand-driven production (make what's ordered)
Just-in-Case (New Paradigm)- Strategic inventory buffers (30-60 days critical items)- Dual/triple source suppliers (resilience over cost)- Shorter, regional supply chains (speed and control)- Build-to-forecast for critical components (safety stock)
The cost? 5-12% increase in working capital and 2-4% higher COGS.
The benefit? Operational continuity when competitors can't deliver.
Building Resilient Supply Chains: The SME Framework
Step 1: Criticality Mapping (Weeks 1-2)
Not all suppliers matter equally. Map criticality across two dimensions:
Impact (if they fail):- High: Stops production/delivery- Medium: Delays operations- Low: Inconvenient but manageable
Substitutability:- Hard: No alternatives exist- Moderate: Alternatives available but switching takes months- Easy: Multiple suppliers, quick switching
Priority Matrix:
```High Impact + Hard to Substitute = CRITICAL (require resilience investment)High Impact + Easy to Substitute = IMPORTANT (maintain alternatives)Low Impact + Hard to Substitute = MONITOR (develop contingency)Low Impact + Easy to Substitute = STANDARD (optimize for cost)```
For a £15M manufacturer: ~5-10 critical suppliers, 15-20 important, remainder standard.
Focus resilience efforts on critical and important categories.
Step 2: Multi-Sourcing Strategy (Weeks 3-8)
Single-source suppliers are existential risks. Build redundancy:
The 70/20/10 Rule
For critical components:- Primary supplier: 70% of volume (economies of scale)- Secondary supplier: 20% of volume (qualified alternative, relationship maintained)- Tertiary supplier: 10% of volume (emergency backup, prevents complete dependency)
Cost: 3-7% higher unit costs (due to volume splitting)Benefit: Continuity when primary fails
The Qualification Process
Don't just identify alternatives—qualify them:1. Technical capability to produce2. Capacity to scale if needed3. Quality standards meet requirements4. Financial stability verified5. Regular audits to maintain readiness
Step 3: Inventory Strategization (Weeks 4-12)
Inventory isn't just cost to minimize—it's insurance against disruption.
The Strategic Buffer Calculation:
```Safety Stock = (Maximum Daily Usage × Maximum Lead Time) - (Average Daily Usage × Average Lead Time)```
Example:- Average daily usage: 100 units- Max daily usage: 150 units- Average lead time: 30 days- Max lead time: 90 days (disruption scenario)
Safety stock = (150 × 90) - (100 × 30) = 13,500 - 3,000 = 10,500 units
This covers worst-case scenario: demand spike during supply disruption.
The ABC Inventory Approach:
-A items (high value, low volume): Strategic safety stock (60-90 days)-B items (moderate value/volume): Moderate safety stock (30-45 days)-C items (low value, high volume): Minimal safety stock (15-30 days)
Cost: Working capital increase of 8-15%Benefit: Operational continuity during 3-6 month disruptions
Step 4: Supply Chain Visibility (Months 2-4)
You can't manage what you can't see. Build transparency:
Tier 1 Visibility (Direct Suppliers)- Real-time inventory levels- Production schedules- Quality metrics- Financial health indicators
Tier 2 Visibility (Suppliers' Suppliers)- For critical components, map 2-3 tiers deep- Understand dependencies- Identify concentration risks
Early Warning Systems- Monitor lead time trends (increasing = stress)- Track order fulfillment rates (declining = capacity issues)- Financial health scoring (risk of supplier failure)
Tools for SMEs:- Supply chain control towers (Kinaxis, o9 Solutions)- Supplier risk monitoring (Dun & Bradstreet, Resilinc)- Inventory optimization (Netstock, EazyStock)
Step 5: Nearshoring and Regionalization (Months 4-12)
Long supply chains amplify disruption impact. Shorten them:
The Calculation:
Current State:- Supplier: China (12,000 miles, 45-day lead time, £5 unit cost)- Shipping disruption risk: 30% annually
Nearshore Alternative:- Supplier: Eastern Europe (1,500 miles, 10-day lead time, £6.50 unit cost)- Shipping disruption risk: 10% annually
Analysis:- Cost increase: 30% (£1.50/unit)- Lead time reduction: 78% (35 days faster)- Disruption risk reduction: 67%
For critical components, the 30% cost premium buys resilience worth multiples during disruption.
Step 6: Contractual Protections (Months 3-6)
Resilience isn't just operational—it's contractual:
Supplier Agreement Must-Haves:
Capacity Commitments- Minimum supply guarantees- Capacity reservation clauses- Priority allocation during shortages
Transparency Requirements- Mandatory disclosure of material changes- Early warning of delays (30+ days notice)- Visibility into their key suppliers
Flexibility Mechanisms- Volume flex bands (±20% without penalty)- Expedited delivery options (at defined premium)- Inventory consignment (supplier holds buffer stock)
Force Majeure Limitations- Define what qualifies (can't be catch-all excuse)- Mitigation obligations (must seek alternatives)- Notification timelines (immediate disclosure)
The Resilience Metrics Dashboard
Traditional supply chain KPIs optimize for efficiency. Add resilience metrics:
Efficiency Metrics (Still Important):- Inventory turnover- Days inventory outstanding- Cost per unit- On-time delivery %
Resilience Metrics (Now Critical):- Supply chain risk score (weighted by criticality)- Alternative supplier readiness (% of spend with qualified backups)- Average time to recover (when disruption occurs)- Geographic concentration index (% from single region)
The Balance:Track both. Optimize efficiency within resilience constraints, not at resilience expense.
The Cost-Benefit Reality
Building resilient supply chains costs money:
Typical Investment (£15M SME):- Supplier qualification and audits: £30-50K- Additional inventory (safety stock): £200-400K working capital- Dual-sourcing premium: 3-7% COGS increase = £150-350K annually- Supply chain visibility tools: £25-75K annually- Nearshoring transition: £100-250K one-time
Total annual cost: £500K-£1M (3-7% of revenue)
The ROI calculation:
Disruption Scenario (2020-2021 reality):- Businesses without resilience: 3.2 months constrained operations, £340K revenue loss, 8% customer churn- Businesses with resilience: 2 weeks constrained operations, £50K revenue loss, 1% customer churn
Resilience investment: £500KDisruption avoidance value: £290K revenue + customer retention
Break-even: 1.7 disruptions per decade
Given 72% of SMEs faced disruption 2020-2023, resilience pays for itself in 3-5 years even without major crisis.
Quick Wins (Implement This Quarter)
1.Map your top 10 critical suppliers (1 week): Identify concentration risks2.Qualify one alternative for each (4-8 weeks): Place small orders to verify capability3.Increase safety stock on critical components (2 weeks): 30-day buffer on top 20% of SKUs4.Implement supplier scorecards (2 weeks): Track delivery, quality, risk monthly5.Negotiate visibility clauses (4-8 weeks): Require transparency from critical suppliers
Combined impact: 60-70% resilience improvement in 90 days.
The Strategic Implication
Supply chain resilience isn't operational—it's strategic.
When competitors can't deliver, you can. When lead times spike, yours don't. When customers need certainty, you provide it.
This becomes competitive differentiation:- Win business on reliability, not just price- Retain customers through consistency- Command premium pricing for guaranteed availability
Research shows: businesses with resilient supply chains achieve 15-20% higher customer retention and command 8-12% pricing premiums during disruption periods.
The Philosophical Question
What's the purpose of a hyper-efficient supply chain that fails when you need it most?
The businesses that thrive 2025-2030 won't be the leanest. They'll be the most resilient.
Efficiency optimizes for normal. Resilience prepares for exception.
The world has proven: exception is the new normal.
Build accordingly.