From Taiwan to Tariffs: How Supply Chain Leaders Are Thinking About Risk

Speaker A: Justin. I'm Justin Gillipo and this is 0100, the unboring supply Chain Podcast. We recently surveyed leaders across industries about the biggest threats to their supply chain and how they're building resilience in an era of constant disruption. 85% say geopolitical chaos is damaging their operations. Cybersecurity ranks as a top three external shock Climate risks are reshaping where companies build facilities. And 55% say traditional low cost sourcing strateg are no longer tenable. But while most companies are stuck firefighting each new crisis, a small group of leaders is doing something fundamentally different. They're treating resilience not as insurance, but as offense, as a competitive advantage. So what separates these leaders from everyone else and how can the rest catch up? Today I'm joined by VP Research and Advisory Garen John and Chief Research Officer Kevin o' Meara to unpack the shock ready playbook and talk about what supply chain resilience leaders are doing differently. Kevin Garant, welcome.

Speaker B: Thank you, Justin, Great to be here.

Speaker C: It's a very pertinent topic, so I'm looking forward to this conversation.

Speaker B: Yeah, same for me. Great to be with you both.

Speaker A: Wonderful. Well, let's jump in. We're calling this report the shock ready playbook. But let's be real. After the last few years, does anyone actually feel shock ready anymore? Between evolving US China trade dynamics, persistent questions around Taiwan's future, tariffs that seem to shift every quarter, what's fundamentally different about how companies need to think about resilience today? Geraint, kick things off for us.

Speaker B: Yeah, you mentioned obviously some major disruptive events there. Uh, and I think the message that we hear certainly from those leaders we talk to here at 0100 is that they need to and are taking a fairly calm sort of multi event focused approach. They're having to navigate through, as you say, these kind of different shocks and they need to better respond, you know, in very specific ways. Whether it's tariffs, whether it's the Iran war, they've got to find a way through that, deploy the tactics and strategies that enable their supply chains to continue functioning, serving their customers and so on. So that's always going to be super important. But as you kind of alluded to in your introduction, I mean really the focus now is equally on how can we invest in the resilience of our, uh, extended networks so that our supply chains are, uh, stronger, more agile, more adaptable. So as you say, resilience is more than just an insurance policy. It's more than Just managing risk and mitigating risk. It's really about now proactively putting your company in a position of advantage so that you can navigate disruptions more effectively, hopefully than your competitors can. Now, we call this resilience on offense, and it's clearly a very different sort of mindset that we see those really small number of leaders kind of following now.

Speaker A: Yeah, that resilience on offense, I know, has been resonating a ton. Kevin, I know you're having daily discussions, particularly with everything going on geopolitically. How, how does that sit with what you're seeing and what you're hearing from folks today?

Speaker C: It is treated as an opportunity, I think, by smart companies because disruption is a disruption that hits a lot of folks and you're going to have some competitors who leave some doors open, you're going to have some customers who are receptive to, you know, your ideas about how to basically get through a tricky time. But the thing that's really most different, I think, to Garen's point, really, is this is the new normal. And it's not just disruption and volatility is the new normal. It's they come on top of each other. So you watch the news and what you have is the Iran war driving up oil prices, but at the same time you have geopolitical tensions in certain countries interfering with the flow of goods through particular places. Obviously straight of Hormuz is related, but things that happen in, you know, the Panama Canal are, uh, not necessarily rated, and yet they are multiple crises at once. In other words, if you're going to be able to use tactics to turn disruption into opportunity, you need a serious playbook of how to be ready and how to respond quickly. And it's not just about listening and having a good risk management or crisis management playbook. It's about how to anticipate and be in position to potentially take share if the opportunity presents itself.

Speaker A: Yeah, and that's super helpful, Kevin. You know, I think the way we've seen it over and over is that these risks are not just increasing in challenge, they're increasing in frequency and, and they're oftentimes layering on top of one another. You know, managing risk for supply chain leaders is not a new thing. And yet this report subtitled what Supply Chain Resilience Leaders are Doing Differently. So I'm curious, Garant, when you analyze the data, did a clear dividing line emerge between the winners and everyone else? What are those resilience leaders actually doing? What's new? What's separating them from Companies that are just reacting to each new crisis.

Speaker B: Yeah. So we ran the survey among 100 supply chain leaders in February just before the Iran war kicked off. And there are certainly some things that we see leaders, and by leaders, I mean those that are a little bit more further ahead on the roadmap. We call it our, uh, capability matrix. So we asked people to kind of self assess themselves and then we divided them into kind of leaders and followers. So there are certainly some things that leaders do differently. Examples of that would be things like factoring risk considerations across all their supply chain functions fairly equally, designing their networks around long term geopolitical assumptions. So really kind of leaning into that and placing bets, leaning more heavily on their AI capabilities and developing those. And then in the case of cyber risk, which has obviously kind of come to the fore, as you said, it's a kind of a top three risk, really having kind of dedicated teams to address that. So there certainly are quite a number of differences. I think more broadly, as we've already said, leaders see resilience as a capability that needs to be part of business as usual, not just that kind of insurance policy or not just that kind of reaction to high risk events. And as Kevin rightly said, that can pay dividends in terms of opportunity if you've been making those investments in a kind of a structured way. So I think the mindset is different. The way of operating is a bit different. It really starts earlier in the process. It starts right back at the product design phase and goes right through to customer service and how the customer experiences delivery of your products during crises, during disruptive events.

Speaker A: Yeah. Unfortunately, we've had no shortage of opportunities to flex these muscles. Right. There's been a lot of recent geopolitical events that have pushed us. Kevin, I know you've facilitated some discussions with COOs and Chief Supply Chain Officers, folks within the Zero 100 community. How are you seeing that play out? How are you seeing that different mindset and way of operating start to bubble out through the broader industry?

Speaker C: I think it's about what Garen said. It's about having a longer horizon view of how to play the game. In other words, you don't want to respond to crises however quickly. What you want to be able to do is anticipate them and have some idea of how you'll handle it if that occurs. So for instance, the risk of China manufacturing China sourcing for the footwear and apparel industry has been evident for a long, long, long time. Some companies, and new balance comes to mind, have decided they wanted to basically hedge this by doing what was thought to be impossible. Coming up with a capability to manufacture shoes in the United States at a cost competitive price. They're not all the way there yet, but they've scaled up a US manufacturing capability that selling made in the USA shoe lines at an exact moment when that's actually a pretty darn hot market. So they put themselves in a really good spot. I think a similar thing, uh, Karen said it starts all the way back up in product design. If I think of somebody like for instance Samsung, who many, many years ago identified concerns around depending on Chinese electronics assembly, they started investing in Vietnam, but they were designing things differently in terms of the components and the manufacturing capabilities so that they could scale that Vietnamese capability. And it's been a very long time, as you know, Justin, I think you flagged me at the start and end dates of where we are in this process. But thinking long horizon about this is a key piece. And I would add also that thinking long horizon about the ability to negotiate some of these deals that are relevant, including tariffs deals, including market access deals. I think of Apple. I think the way Tim Cook has handled the tariff wars and China and the shift to India without getting himself in too much trouble with his friends in China, I think that's a uh, long horizon full stack approach which includes negotiating deals. Clearly something that is a possibility these days in the world of managed global trade. So it is all about long horizon thinking.

Speaker A: Absolutely. So we see that leaders are seeing this resilience as a capability that's gotta be incorporated. Right. This isn't just a, uh, insurance policy. This is, you know, really an opportunity to build resilience for the organization. Garen, what surprised you most in the research? You know, you've seen the data. We're talking to executives constantly. Was there something that made you go, wait, I didn't expect to see that out of the industry leaders.

Speaker B: I was maybe a little bit surprised at how strongly supply chain leaders railed against the current environment they have to work within. Clearly we hear some of that in our uh, private one to one conversations. But in the survey that we ran in February, we asked them m to agree or disagree with the statement geopolitical meddling and economic nationalism are damaging global trade, increasing supply chain costs and sapping profits. You mentioned in your intro that 85% of them agreed with this statement, 45% agreed with it strongly. So yes, in private conversations leaders are critical. But I think this finding really brings home the true nature of their discontent with what many political leaders not Just those in the US are doing that frankly just makes their lives, their jobs much more difficult.

Speaker A: Yeah. Kevin, I'm wondering from your perspective too. I mean, there is a sense where supply chain executives are having to play the showman. They're having to not only run their supply chain and build resiliency, they're also having to increasingly engage on a global stage and start to build up this muscle itself. How are you seeing executives and CEOs rise to the occasion as they're having to navigate this new normal?

Speaker C: I think it's unnatural. I mean, operations people, supply chain people are very practical minded engineering thinkers. They want to just know the constraints and then solve the problem. What increasingly I have to do is exactly what you said. I remember being in Davos early in the year with a number of different coos and I won't name anybody directly, but meeting with the trade representatives from various countries. India comes to mind. And actually this was at a regional level and needing to kind of retain the option to do business with the government of that in this particular case state by saying the right things at the right time and not necessarily doing what you would want to do in an ops context, which is let's break it it down, let's get the numbers and figure it out. Negotiation, maybe sourcing. People do this for a living. But I think the kind of performative diplomacy that you're talking about and I think drives them crazy to Garen's point about how much people don't like this, that's become something they have to do. And I would argue that it's not natural. They're not very good at it, to be candid. And I think the stronger ones are realizing we're going to have to actually do a little bit of this. I mentioned Tim Cook a minute ago and the conversations in Davos, which I again I won't cite by name, but more sophisticated, more senior folks in charge, typically of larger companies and have been around for a while are better, I would say on average at uh, just leaning into that process of playing the politics. It is a politics game at the end of the day. And I think people should rely a little bit more intensively on their own team's understanding of what the geopolitical implications are of potentially opening a new plant in this state or in this country. And what's the deal that I could strike for this. So it's unnatural, it's difficult, but it creates opportunity and turmoil, which is kind of what this theme is all about.

Speaker A: Absolutely. And as we're talking about the world stage. I mean we've already mentioned it once, but a big portion of the companies we surveyed, you know, technology firms, pharmaceutical companies, auto manufacturers, they're dealing with supply chain concentration in China. You know, this is a known issue. What did they tell you, Garen, about how they're thinking about this geographic risk and diversification? Have you seen the conversation evolve? Are companies still stuck in the same place that they were five years ago?

Speaker B: Well, I think on China it's definitely an evolution. Kevin mentioned Samsung. They were obviously an early move in terms of deciding to shift, in this case their own manufacturing operations out of China to Vietnam to India. So I think that is obviously a long term play. You don't kind of make those shifts, those changes overnight. So that definitely continues to evolve. The tariffs that we saw a year or more ago and what's happened since the uh, kind of talks between the US and China more recently, clearly those factors are going to come into play here in terms of what decisions companies make and how quickly they want to move. But I think you're right, there is definitely a lot more focus today on uh, geographic concentration risk. We're seeing it uh, at the moment in the Gulf in terms of oil, gas, key raw materials and commodities. And that's only going to kind of accentuate companies strategies moving forward in terms of wanting to diversify that risk, be reliant not just on kind of one major country, uh, whether it's China or others, but being able to spread that load and that risk a little bit. So I think the conversation is moving on. The strategies are kind of having to evolve. But uh, as Kevin rightly says, this is long term change we're talking about and leaders are not going to be blown off course just by individual disruptive events, no matter how impactful they are.

Speaker A: Absolutely. And as you're talking about them building this resiliency and kind of thinking about how to navigate the geopolitical stage, we have to talk about Taiwan for a second. Taiwan produces 90% of the world's advanced semiconductors. Kevin, how are you seeing the conversation about this Taiwanese concentration risk come up and what are leaders saying about it? How are they thinking through this?

Speaker C: It's a major exposure for semiconductors, but it's not only in the semiconductor side. There's a lot of manufacturing, shoe manufacturing, consumer goods manufacturing. So the dependence upon Taiwan has got a variety of flavors. The semicon question though, to your point Justin, is it's actually outside of just the worry of supply chain folks, this is much more of a national government sweating the exposure. I think that there's a steady move. Why do you think intel, for instance, has spiked massively in the last couple of years? Yes, a U.S. government investment, whatever you think of that, but clearly there's been a rise. You saw Micron Technologies is actually just joined the trillion dollar club the other day. There's a lot of investment in moving that dependence away from Taiwan. But it's. Anybody involved with semiconductors knows, even if there's no complexity from a uh, permitting and financing and political perspective, just turning on a fab takes years. So this is extremely slow process. And there are dependencies that Taiwan has got an edge on for all kinds of chemicals and gases and materials that are esoteric. Like the whole thing with helium getting constrained on its way out of the Strait of Hormuz is the kind of thing where there's multiple layers of anxiety. We're moving away from the dependence upon Taiwan and it's going to take a little while. But I think the comfort factor is, you know, we worry about this on a no guarant. The data showed it about a move by China to take Taiwan one way or the other, but it doesn't actually feel like it's that imminent. Too many people have too much money to make, including the Chinese themselves.

Speaker A: Yeah.

Speaker C: Just completely throw this thing down. I frankly trust. This is going to sound crazy. I'm out on a limb here, but I trust Xi Jinping and the CCCP to not shoot themselves in the foot on this thing. And I think so do most supply chain leaders because they don't have much choice. It takes a while to ramp up this capability. So we're on a path and we're just crossing our fingers we're going to make it across the bridge.

Speaker A: Absolutely. And you see a lot of this thinking, this kind of strategic, you know, going back to that long term view in China's latest five year plan and how they're thinking about not just being the manufacturer of the world, but really building up some of these advanced capabilities. You know, speaking of semiconductors. Right. Everyone's betting on AI and automation to build resilience. But, but a lot of that technology comes from the very regions that companies are trying to de. Risk from. Garen, um, I'm curious. From your perspective, are we solving one problem while creating another? What happens if these geopolitical tensions cut off access to the technology that we really need to build resilient supply chains?

Speaker B: Yeah. And as Kevin's rightly just said, I mean Taiwan is clearly a major uh, risk for companies in the west in developed nations. That's why we see the diversification or the gradual diversification of those kind of fabs away from Taiwan to, in TSMC's case, Arizona and indeed elsewhere. And also we see quite a lot of concern about what Chinese action, whether it's an invasion or a blockade against Taiwan, would mean for global supply chains. But I actually think if we look at this in the round, China's actually suffered more from this issue than most in recent years because of the American and European restrictions on the supply of things like software, advanced chips and tooling. And we've seen actually the Chinese government have to really kind of lean in and encourage domestic companies to invest heavily in building their own capabilities, their own AI, their own advanced chip making and other areas to really kind of attempt to create some measure of self sufficiency. And I noticed uh, interestingly just at the beginning of this week, Huawei has come out and said that uh, it's now five years away from making 1.4 nanometer chips, kind of the latest iteration of the technology. Now TSMC expects to start producing those at uh, scale I think in 2028. So Huawei is going to be maybe three years behind but that gap is narrowing. So I think we can probably learn a bit from what we see them doing in China if we kind of turn this around and think of it more broadly.

Speaker A: Absolutely. And you know, before we wrap up this session, I really want to make that resilience on offense framework actionable. So Garant, based on the research, based on what we see out of this report, what are the three to four concrete plays that resilience leaders are running that everyone else should be adopting?

Speaker B: So I think it's really a mixture of kind of strategies and kind of capabilities. So on the strategy side, things like dual or multi region sourcing with pre qualified alternate options or sources. So I think what we've seen in Russia and Ukraine and now in the Middle east, it's really focus attention on that regional dimension rather than just having backup entities or suppliers. But it's also about making sure that you're actively qualifying them, onboarding them, even giving them some business volume before a disruptive event happens so that they're ready to serve you to scale and so on when they're required. That's a major uh, investment and priority for companies whether they're kind of leaders or followers. Another area that we see quite strongly is really around regionalizing the supply network, so having parallel networks, whether it's near shoring to Mexico or to so called friendly nations rather than high risk geographic hotspots. And also kind of optimizing not just for kind of lowest cost from that kind of single geography, whether it's China or perhaps other countries in Asia, but really looking more broadly. So those are around the strategies and then on the capabilities I think we see a big need for using digital and AI. So things like having much better multi tier visibility into uh, different tiers of your supply chain, mapping that, monitoring risk, monitoring events, using control towers to be able to detect potential problems earlier and not just with your tier one suppliers, but you know, two or even three levels deeper. And then the other area we're beginning to see now is much more scenario based stress testing. So that certainly was something that we heard a number of member companies doing around tariffs last year. They've been doing it around the Middle east situation more recently. And really it's about regularly simulating specific disruption scenarios. And we know by the way that some companies are doing that around the China, Taiwan situation now and have been doing that for a while. So I think pre building those kind of scenarios, pre building sort of playbooks with specific trigger points, specific decision protocols so that you can really kind of respond very quickly when there's a crisis rather than having to take this more reactive firefighting approach that frankly it's still quite common. So as I say, really about different strategies, different capabilities, but investing in a very targeted way to ensure that hopefully you put yourself and your supply chain networks in the best possible position even though your whole industry may be affected by a particular event.

Speaker A: M. Absolutely. Well Kevin Garant, thanks for the conversation. Special thanks to Alicia Alien for production. For more insights from 0100, find us on LinkedIn@0100.com or on our members app. If you enjoyed the episode, leave us a rating or review wherever you get your podcasts. I'm Justin Gillipo and this is 0100.

Speaker C: Um,