Why it matters
Supply chains determine whether a shortage stays contained or propagates. A network with several independent suppliers for each input absorbs the loss of one; a network that converges on a single facility transmits it to everything downstream. Which of the two exists is rarely visible from outside, and often not fully visible from inside either, since firms typically know their direct suppliers and not their suppliers’ suppliers.
They are also the physical constraint that economic aggregates omit. Output figures describe what was produced; they say nothing about whether the capacity to produce it depends on one strait, one mine or one manufacturer. Concentration of that kind does not appear in a growth statistic until it fails.
The efficiency-resilience trade-off is the structural point. Holding minimal inventory and sourcing from the single lowest-cost supplier is optimal under stable conditions and is precisely what removes the slack that absorbs a shock. Neither configuration is correct in general — they are bets on different environments, and the cost of the resilient one is paid continuously while the cost of the efficient one is paid rarely and all at once.
What to watch for
Disruption and cost increase are separate events. A supply chain can deliver on time at a much higher price, or fail to deliver at any price. The first shows up in inflation data, the second in output data, and commentary conflates them.
Reshoring changes the location of dependence, not necessarily its degree. Moving final assembly does not move the upstream inputs, and a domestically assembled product built from imported components has a shorter chain on paper and the same exposure in practice.
Lead times reveal what prices conceal. Prices adjust immediately; delivery times adjust when capacity is genuinely constrained. Surveys that track supplier delivery times often move before cost data does.
Concentration risk sits several tiers up. The critical dependency is usually not the direct supplier but a specialised producer two or three steps back, where a single firm may hold most of global capacity for one input.
Purchasing managers’ surveys published by S&P Global and national institutes cover delivery times and backlogs; the New York Fed publishes a Global Supply Chain Pressure Index that aggregates freight and survey measures into a single series.