The hidden cost of supply chain resilience
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For decades, businesses assumed that shipping lanes would stay open, trade agreements would endure, and major international relationships would remain stable.
- Those assumptions look less certain than they have in decades, with big economic consequences.
Why it matters: The economy increasingly rewards resilience over efficiency — a shift that increases costs, complicates investment decisions and may weigh on long-term growth.
- It helps explain why what seemed to be a one-off inflationary burst amid the pandemic re-opening half a decade ago has instead become a sustained era of elevated inflation.
- Just as the era of globalization from the 1990s to 2020 created an ongoing downward tug on prices for goods — decades of structural disinflation — this era has become one where supply chain stresses create structural inflation.
What's new: Businesses can no longer assume the rules, trade pacts and geopolitical stability that underpin the economy will still be intact in the near term.
- Companies are responding to a more volatile world by carrying more inventory, lining up backup suppliers and building more flexibility into their supply chains — choices that would have looked unnecessarily expensive a decade ago.
- It's a sharper break from the lean, "just-in-time" model that helped make global commerce faster, cheaper and more efficient.
What they're saying: "In a volatile world, optionality is key. Redundancy is key," Shawn Nelson, CEO of couch manufacturer LoveSac, told investors earlier this summer.
- The furniture company is starting to manufacture some of its couches in the U.S., but is also keeping overseas production — giving it multiple places to turn when tariffs, freight disruptions or other shocks hit.
Mentions of sourcing alternatives on S&P 500 company earnings calls surged as shortages and shipping disruptions exposed the risks of relying too heavily on a single supplier or region during the pandemic.
- They retreated as those strains eased, but never returned to pre-pandemic levels, and jumped again in 2025 as tariffs and geopolitical uncertainty put supply chain resilience back in focus.
- "In the first half of the year, we added new sources for over 50 constrained parts, and we plan to add another 50 in the second half of 2026, increasing the number of multi-sourced components by 15% this year alone," Honeywell Aerospace CEO Jim Currier said last month.
- The aerospace manufacturer's chief financial officer later added that the company is spending four times as much on multi-sourcing compared to the prior year and bringing production in-house.
Of note: Kratos Defense & Security Solutions CEO Eric DeMarco said last month that the defense manufacturer is making sure it has vetted alternatives for every supplier, including "their backup and the backup to the backup."
What it means for prices
The leaner, pre-2020 supply chains were built upon powerful financial and economic logic.
- Maintaining relationships with multiple backup suppliers, constant rerouting of supplies, building bigger inventory buffers — it all comes at a cost, which ultimately shows up in prices.
By the numbers: The era of peak globalization led to cheaper stuff for Americans. From February 1997 to February 2020, for example, the Consumer Price Index for durable goods fell 19%, or about 0.9% per year compounded.
- That amounted to a persistent downward pull on overall inflation, uninterrupted for 23 years.
- In the 6.5 years since then, by contrast, durable prices have risen 17.5%, or about 2.5% a year.
Zoom out: Getting away from super-lean supply chains may prove to have benefits. Some in the Trump administration have spoken of the advantages.
- "We treated efficiency as a substitute for resilience, and consumption as a measure of prosperity," Treasury Secretary Scott Bessent said in a May speech. "In the name of efficiency, we began to celebrate 'just in time' while neglecting 'just in case.'"
The bottom line: Corporations are reacting rationally to a more volatile world, and resilience is important — but not free. The costs are being borne every time Americans go to a store.
