While supply chain management has improved significantly over the last decade, global risks have also greatly increased — becoming more interconnected and complex and elevating resilience to the same level of importance as growth and profitability. As a result, companies must go beyond traditional risk identification and mitigation, with a particular focus on improving visibility across mid-tier suppliers beyond Tier 1. In this Viewpoint, we examine how companies can tackle these new challenges.
Supply chain management effectiveness has increased considerably over the last decade, driven by pressures on costs, increasing threats of raw materials shortages, and new opportunities provided by developing technologies like automation, blockchain, and the Internet of Things. However, an ongoing sequence of global disruptions — from the pandemic to wars in Europe and the Middle East and the resurgence of nationalism — makes it clear that the business environment has become significantly more volatile. According to the World Economic Forum’s “Global Risks Report 2025,” the top three risks now include state-based armed conflict, extreme weather events, and geoeconomic confrontations (e.g., tariffs, sanctions, regulatory barriers). Recent geopolitical tensions and weather-related events have only reinforced these concerns. While inflation risks are perceived to be lower than a year ago, they remain significant.
This means that supply chain resilience has moved beyond the procurement function to become a strategic corporate concern. Businesses need to up their game on how they identify, monitor, mitigate, and adapt to supply chain risks. This is particularly challenging for sectors that have multiple tiers, such as manufacturing, automotive, rail, aerospace and defense, chemicals, energy, and pharmaceuticals.
Most large companies already have a fairly sophisticated approach to managing Tier 1 suppliers and have improved visibility and control of raw materials, supported by legislation such as the EU’s 2024 European Critical Raw Materials Act. However, visibility into mid-tier supply chains (Tiers 2, 3, 4, and beyond) remains limited — despite their significant impact on overall supply chain resilience.
For example, in the aerospace sector, capacity constraints among mid-tier surface treatment providers have led to major supply chain disruptions. As performance requirements for technical products increase, mid-tier manufacturing processes and materials become more specialized, reducing the pool of viable alternative suppliers in the event of disruption. At the same time, supplier interdependence and connectivity are growing.
Obtaining intelligence, identifying risks, and exercising control over mid-tiers can be difficult. Simply imposing stringent mid-tier requirements during Tier 1 procurement can significantly add cost to bids. Imposing corporate controls and checks on mid-tier suppliers can muddy accountabilities, adversely affecting Tier 1 relationships and leading to legal complications if the legitimacy of Tier 1 contractual relationships is compromised. Most companies cannot afford to allocate the additional time and resources needed for extensive ongoing mid-tier supplier checks and controls.
Drawing on practical experience and real-world case examples, we explore how companies can enhance supply chain transparency — identifying potential weaknesses and risks at any tier and implementing measures to rapidly mitigate them.
Moving forward, companies need to think beyond Tier 1 supplier robustness and develop an operating model that builds a clear picture of resilience across the full supply chain at the right level of granularity. The most effective way to achieve this is by conducting a Tier 1+ investigation using a complementary approach to map risks per supplier and by value chain element (see Figure 1).
First, analyze risks going upstream along the value chain that are inherent in each element of the equipment or product. For example, if the product is a mobile phone, the analysis would unpack the supply risks inherent in the supply of the screen, frame, PCBA (printed circuit board), titanium raw materials, and so forth. The sort of risks identified could include lack of manufacturing capacity, market tensions, possible shortages, global constraints, and regulatory risks — risks that are mainly generic based on the nature of the element concerned, its markets, and its upstream value chain. This provides an informed high-level view of where key vulnerabilities may lie.
The second complementary step is to refine the analysis by looking at the specific suppliers involved in each value chain element for the company concerned. For example, for each supplier, the risks may be more, less, or different from those in the generic analysis, depending on aspects such as supplier location, recent history, ownership, reputation, competency, financial health, and market presence.
This two-step approach allows companies to quickly identify and map their most important risks and vulnerabilities without the need to assess hundreds of suppliers — while still providing sufficient detail and depth in key areas to guide meaningful action. In many respects, this is no different from conventional risk management practices except it is more targeted, detailed, and comprehensive, going well beyond what is normally conducted at a corporate level. As always, systematically categorizing different types of risk (e.g., geopolitical, climatic, capacity, financial) is essential, and proven tools and templates are valuable.
In addition to identifying the severity, likelihood, and time frames of potential impacts, it is important to consider the broader implications for both the company and its wider ecosystem. It makes sense to adopt an “80/20” approach (80% of outcomes result from 20% of the causes), ensuring focus remains on the most critical risks. The combined insights from value chain and supplier risk assessments can be readily organized using established templates to easily communicate the key findings.
Next, synthesize the analysis into a risk mitigation roadmap. This typically includes mitigation actions organized by product/equipment element and supplier, along with clearly defined responsibilities for relevant functions or departments. At this stage, it is important to consider different types of risk mitigation levers. Figure 2 shows a typology of typical mitigation levers.
These mitigation levers relate to a range of actions: changes in the upstream supply chain, adjustments to the manufacturing footprint, and additional measures such as specification/process/technology changes, lobbying, collaboration, and training. Effective mitigation must be a cross-functional exercise, involving operations and manufacturing as well as procurement and commercial functions.
Finally, it is important to embed the approach into the operating model of the company, so it becomes part of normal ways of working. This is essential to ensure continued responsiveness as situations change, risks mature, and unexpected events occur. Key aspects include:
While this approach is relatively straightforward, several key success factors make it work effectively in practice, as explained below.
Effective supply chain resilience is about much more than supplier management and development. In many cases, the most effective solution to a key vulnerability may be to change the manufacturing model, footprint, or business model (e.g., through horizontal or vertical integration). Take the titanium value chain in the aerospace sector, for example: one of its most critical stages is producing titanium sponge from ore. Given the limited number of global sponge suppliers, key OEMs are exploring upstream moves within the recycling value chain to reduce dependence, aiming to partially replace it with recycled material.
Collaborations and partnerships with other companies (even competitors) can be crucial for driving change. This is particularly true at the raw materials level, where end users may constitute only a very small part of the suppliers’ business. The same principle applies to mid-tier suppliers: identifying and collaborating with other customers can help increase leverage and bargaining power. Examples include Schneider and GE, which jointly purchase grain-oriented steel, and Siemens Holdings, which purchases copper, aluminum, and classical steel on behalf of their multiple subsidiaries. In all cases, care must be taken to ensure that collaborative actions don’t inadvertently compromise existing contractual relationships further up the supply chain.
Resilience is about managing downside risks effectively, but the process of gaining new intelligence and deeper insight into the supply chain also creates a valuable opportunity to identify and crystalize other business opportunities. For example, the value chain element analysis described earlier provides critical input for revisiting and rebuilding a product’s full cost breakdown, which is an essential step for improving competitiveness. Similarly, supplier analysis invariably points to opportunities to improve performance weaknesses, which can be addressed either by working directly with the supplier or seeking better alternatives. From a sustainability perspective, supplier analysis also provides excellent intelligence for improving Scope 3 impact management — one of the most challenging aspects of the Greenhouse Gas Protocol.
Mitigation strategies are not boundless. In many cases, competitors will share the same or similar suppliers — particularly beyond Tier 1 — due to a limited pool. When there are limited suppliers, it is important not to be left behind. Establishing strategic partnerships early can prevent competitors from securing similar arrangements and serve as a key source of competitive advantage. There are examples across many supply chains where capacity limitations mean that early mid-tier partnerships are important, such as offshore installation services for wind energy providers or medium voltage transformers for central inverter manufacturers.
A key part of achieving resilience is being responsive to change, so it is vital that risk management processes also include the capacity and capability to sense and respond. Embedding the supply chain resilience process into the operating model is therefore essential. An important complement to the transparency assessment approach described in this Viewpoint is the establishment of ongoing risk monitoring and the proactive analysis of key risk indicators and early warning signs (e.g., changes in price dynamics, strikes, fires). Technologies such as AI are powerful tools for making such sensing and responding processes feasible and cost-effective. The case study on supply chain mapping illustrates how one company has successfully implemented a supply chain resilience strategy using the methods described.
Case study — Supply chain mapping for a major European energy company
Using the complementary two-step approach outlined in this Viewpoint, Arthur D. Little worked with a major European energy company to develop a supply chain risk mitigation strategy, including a target operating model to implement and embed the approach. The first stage involved analyzing inherent risks across key elements of the value chain, using bills of materials to focus on subsystems, subcomponents, intermediates, and raw materials. In the second stage, Tier 2+ suppliers were identified, profiled, and assessed. This enabled the development of a risk mitigation roadmap for each key equipment element, including risk mitigation actions by entity, and subsequent alignment with the company’s procurement strategy. As a result, the company was able to identify alternative suppliers, strengthen contractual and monitoring arrangements for material traceability, gain better intelligence on specific country-based risks, and enhance visibility of Tier 1 mitigation plans for critical Tier 2+ components.
In today’s complex world, improving supply chain resilience by using traditional approaches that rely heavily on Tier 1 partnership and collaboration is no longer enough. Companies now need to:
By Arnaud Bodji, Georg Glaser, Tom Teixeira
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