Australian manufacturers should focus on identifying and strengthening the parts of their supply chains most capable of disrupting production and revenue, according to Proxima Australia.
The advice follows research from procurement and supply chain consultancy Proxima, which found that 53% of manufacturing CEOs globally said their businesses could not maintain day-to-day operations for up to three weeks following a major supply chain shock.
The research surveyed 515 CEOs across the UK, US, Australia, Singapore and Germany, including 367 from the manufacturing sector. It also found that 80% believed up to 20% of their revenue could be at risk if their three largest suppliers were disrupted for two weeks.
In an exclusive interview with Australian Manufacturing, Lara Mujico, Senior Vice President at Proxima Australia, said the findings indicated that manufacturers understood their exposure but had not necessarily built enough operational capacity to absorb a major disruption.
“If more than half of manufacturers cannot keep normal operations going for three weeks, the vulnerability is due to dependence on critical inputs, constrained inventory, limited alternatives and weak visibility beyond immediate suppliers,” Mujico said.
She said manufacturers should assess suppliers based on their potential impact on production and revenue, rather than procurement spend alone.
“A relatively low-spend supplier can still be business-critical if it provides a specialist component with no approved substitute,” Mujico said.
Rather than duplicating every supplier, she said manufacturers could use a combination of multi-sourcing, strategic inventory, pre-qualified backup suppliers, redesigned specifications or closer collaboration with existing suppliers.
Geopolitical and cyber risks
The research identified conflict and geopolitical tensions as the greatest financial supply chain challenge for 23% of manufacturing CEOs, while 43% said customs delays linked to protectionist policies had created periodic stock shortages.
Mujico said manufacturers needed to consider supply risk alongside cost when making sourcing decisions.
“Manufacturers can no longer assume that a low-cost source will remain low-risk simply because it has performed reliably in the past,” she said.
For Australian manufacturers, she said blanket reshoring may not always be practical because nearby alternatives can be limited.
“The more realistic approach is right-shoring – deciding which inputs need regional options, which need additional inventory, which need contractual protection and which can remain globally sourced,” Mujico said.
Cybersecurity was another concern, with 44% of manufacturing CEOs reporting a supply chain disruption caused by a cyber incident during the previous 24 months. However, only 35% said they had real-time visibility into the cyber risk exposure of critical suppliers.
“Cyber risk is now a supply continuity issue, not just an IT issue,” Mujico said.
She recommended that manufacturers identify critical suppliers and establish requirements covering cyber controls, incident notification and resilience testing, while prioritising the highest-risk supply paths.
AI and the cost of resilience
The research found that 52% of manufacturing CEOs said AI was delivering measurable value in supplier risk monitoring. However, data quality, skills and uncertainty around return on investment remained barriers to wider adoption.
Mujico said AI could help manufacturers combine supplier performance, trade, financial, cyber and logistics data to identify emerging risks and model potential disruptions.
“The organisations getting measurable value are concentrating on defined use cases, clean data, clear ownership and practical workflows,” she said.
Manufacturers also indicated a willingness to pay more for resilience. The surveyed manufacturing CEOs said they would accept an average 16% uplift in third-party supplier costs to guarantee supply chain resilience, with 69% accepting an uplift of at least 11%.
Mujico said any premium should be assessed against the potential cost of disruption, including lost sales, delayed production and recovery costs.
For manufacturers seeking to improve resilience, she recommended quantifying operational and financial exposure, developing targeted measures around critical risks, and making resilience an ongoing operating discipline.
“There is no single silver bullet,” Mujico said. “Manufacturers do not need to make every part of the supply chain more expensive. They need to make the critical parts more visible, more tested and harder to break.”
