OECD Supply Chain Resilience Review

1. Overview

The key to supply chain resilience is not found in the elimination of risk, but in the effective navigation of risk. This is best accomplished by working together, through public, private and international cooperation with trusted partners. Policy environments that enable agility, adaptability and alignment are an essential antidote to a fragile, frozen and fractured international trading system.

The OECD Supply Chain Resilience Review encourages the strategic use of policy tools related to trade facilitation, digitalisation, trade in services and emerging data and analytical capacities to ensure stronger, safer and more prosperous trade. This report synthesises recent work of the OECD Trade Committee. It draws on the OECD’s unique data, indicators and monitoring of supply chains to set out a sensible and balanced approach to navigating supply chain risks without undermining the upside benefits that come with expanding global trade. In so doing, it explores and assesses the resilience of global supply chains and presents findings that address the following questions:

• Are global supply chains overly vulnerable to external shocks?

• Can we identify critical trade dependencies?

• What are the opportunities and risks arising from digital transformation and from paths towards achieving environmental objectives?

• How can we keep supply chains resilient without disrupting the benefits of openness?

• What policies can support supply chain resilience?

The report is divided into two parts: Part I assesses the degree to which countries may be overly dependent on others and discusses the likely costs to economies if international trade began to fragment. It then focuses on the interlinkages between policies pursuing environmental objectives and the digital transformation on the one hand and the functioning of international supply chains on the other hand, highlighting mutual opportunities and vulnerabilities.

Part II makes the case that agile, adaptable, and aligned supply chains are the key to resilience. It explores the main areas where governments can play a role and sets out policy recommendations with these objectives in mind.

The country-by-country statistical annex for each OECD Member country uses an “at-a-glance” format to monitor their degree of interdependency with trading partners and the preparedness of their policy landscape for facilitating agile, adaptable and aligned supply chains.

1.1. Supply chains enable competitive production

Supply chains are integral to how firms produce and trade, and indispensable to a competitive production economy. Today, 60% of global trade consists of intermediate products – goods and services that businesses use as inputs to be able to produce the final products sold to consumers.

International trade boosts productivity. It allows firms to gain access to a larger and more sophisticated pool of capabilities and resources, while consumers benefit from lower prices and more diversified products. International supply chains also play an important role in increasing income in emerging and developing economies, significantly contributing to a reduction in global poverty (Figure 1.1).

 

1.2. Current trade flows are relatively well diversified, but there are some trends towards over-concentration

Recent events have sharpened awareness of the potential risks associated with reliance on international supply, and possible vulnerabilities to localised shocks. Potential disruptions are widespread and varied, ranging from climate shocks or interruptions affecting logistics and transport, to policy induced shocks such as economic coercion by a strategic trading partner. One way of understanding a country or sector’s vulnerability to such disruptions is to monitor import and export concentration across trading partners. This report uses granular trade data to assess trade dependencies and their evolution over time for the world and for OECD Members. It finds that while global exports and imports of products have become more concentrated towards specific countries since the mid-1990s, current average levels of concentration are not alarming. Around 70% of exported products are relatively well diversified and only approximately 30% of products record high levels of concentration. Global concentration of exports across supplying countries is higher than global concentration of imports across destination countries. This can be explained by the tendency of countries to specialise in the production of different products (or inputs and components), while consuming relatively similar baskets of products.

Still, on average, countries are increasingly sourcing products from fewer sources than is in principle globally possible. Comparing data from the early 2020s with the late 1990s, the report finds there are 50% more cases where countries import products from fewer than half of the suppliers than are globally possible, in markets where supply is already concentrated, a condition the report labels as 'significant' concentration. While such significant concentration may reflect economic and geographic factors, as well as countries’ preferences and policies (including those that lead to trade distortions), it is also a potential source of vulnerability to shocks. This trend is however almost entirely driven by non-OECD countries as OECD countries' level of such significant import concentration has remained stable over the observed period. In this regard, China’s contribution to countries’ significant import concentration has increased from 5% to 30% over the past 25 years while the combined contribution of the United States, Germany and Japan decreased from 30% to 15%.

To summarise, OECD data show that while some trade flows appear significantly concentrated, large, if not dominant, portions of global and national trade are relatively well diversified. Several countries—most notably within the OECD group—have used international markets to diversify and reduce dependency. That said, there is still untapped potential in diversifying further.

1.3. Some sectors and countries may be more exposed to shocks than others

The model in this report shows that economies with strong vertical links to major foreign economies tend to be more exposed to international supply chain shocks, with Canada, France, Germany, and the United Kingdom being the most exposed across all economies considered in the model. The United States, Brazil, and China are less exposed due to their greater reliance on domestic product and factor markets in most sectors, which allow for effective allocation of factors of production (Figure 1.2). China is the second-most important source of shocks for most economies (after their own domestic economies).

The impact of shocks occurring in domestic sectors tend to be larger compared to those occurring in foreign sectors. This is because, in most sectors, the reliance on foreign inputs and foreign markets for final products is smaller than the reliance on domestic inputs, product and factor markets. In addition, international markets offer broader adjustment and diversification options than domestic ones.

Sectors vary in their exposure to foreign markets. The strategic manufacturing sector (of critical importance for national and economic security, such as petroleum or electronics) has one of the highest levels of upstream and downstream foreign product exposure. In the OECD, 26% of inputs for strategic manufacturing industries are sourced from abroad, and 27% of their output depends on foreign final demand. These supply chains are highly complex, often requiring more production steps and border crossings.

1.4. Relocalising supply chains may result in GDP declines and more variable output for most countries

OECD modelling shows that some policies aiming to make value chains more domestic (relocalised) could be costly and may not necessarily offer more stability in the face of shocks (Figure 1.3). Compared to an interconnected regime, relocalisation (for details, see Chapter 3), could decrease global trade by more than 18% and global real GDP by more than 5%, with individual countries losing between 1.1 and 12.2% of GDP depending on the extent and nature of their GVC integration. In addition, the relocalised regime was no more resilient to shocks – in terms of the stability of GDP, production and consumption (i.e. deviations of these variables from the baseline levels in reaction to shocks)– than the interconnected regime. In fact, for more than half of the economies, the stability of GDP decreased in the localised regime. This illustrates that openness and the geographical diversification of input sources and output destinations in GVCs can offer important options for adjusting to disruptions and mitigating exposure to shocks from a greater number of sources.

 

1.5. Global supply chains are affected by the digital transformation and by policies pursuing environmental objectives

Supply chains evolve in a changing environment, and both digitalisation and the objective of transitioning to more environmentally sustainable supply chains, are important catalysts of this change. Various environmental requirements and the accelerated pace of digitalisation are adding to the pressures on supply chains, which are already facing substantial challenges from factors such as geopolitical uncertainty, economic fluctuations, and the concentration of critical raw materials (CRMs) in certain regions. However, these pressures also open the door to transformative change. By harnessing digitalisation, prioritising environmental sustainability, and by meaningfully addressing social risks, supply chains can become more resilient and play an active role in achieving policy objectives.

Exports of environmental products grew by 30% between 2012 and 2022 globally, with low-income countries more than doubling their exports of environmental goods1. However, supply chains for environmental goods are also exposed to supply chain vulnerabilities, particularly because the production of critical raw materials necessary for the shift to low carbon energy products is currently concentrated in a handful of extracting and processing locations. The five-fold increase of the use of export restrictions on industrial raw materials witnessed over the past 15 years illustrates the risks such levels of concentration can generate. The intertwined nature of global production in the form of GVCs has brought the sustainability of supply chains to the fore in recent years. Ensuring that production along the supply chain undertaken in a sustainable manner has been an increasing priority for many governments and publics within and outside the OECD. In this context, sustainability is broadly understood to include protection of the environment, adequate working conditions, and respect of human rights. In sectors like plastics, wood, textiles, motor vehicles and machinery, for instance, the majority of greenhouse gas (GHG) emissions occur upstream in the supply chain. In sectors like textiles and electronics, more than half of the value added is generated in countries characterised by very weak labour rights (measured by freedom of association).

A variety of government policies and multistakeholder, government-run, or industry-led initiatives have emerged over the past several decades to help address these concerns (e.g. supply chain sustainability laws, voluntary sustainability standards, environmental labelling and other information schemes). This has led to a complex and fast changing regulatory and policy landscape. Moreover, the benefits, costs and outcomes of different tools aimed at enhancing sustainability require further analysis, including how effects are distributed across the supply chain, particularly for developing countries and small and medium enterprises (SMEs).

The reach of such initiatives has been growing in recent years, with supply chain sustainability laws linked to labour issues estimated to cover close to half of global production in 2024 (Figure 1.4). A challenge may lie in designing frameworks that align sustainability and efficiency with resilience.

The digital transition can make supply chains more efficient and transparent, playing a critical role in enhancing supply chain resilience. It can do so by enabling end-to-end supply chain visibility – helping businesses to better and more proactively manage emerging risks – and by enabling supply chain managers to monitor real-time information about markets, to more efficiently anticipate and react to shocks. However, while digital technologies bring numerous benefits, they also introduce new sources of pressures and vulnerability. These include greater vulnerability to cyberattacks, together with vulnerabilities that arise from the limited number of global suppliers of digital services. Balanced approaches to data governance can deliver important gains, especially for developed countries.

1.6. Supply chains can be resilient without undermining the benefits of open markets

Commonly proposed strategies for addressing the risk of foreign supply, such as dual sourcing, diversification of supply or reshoring, can increase the complexity of supply chains, affect growth and may not always improve resilience. There are risks everywhere – in the domestic economy as much as in foreign economies from which key inputs are sourced. Firms adopt resilience strategies for all types of risks and cannot focus only on risks related to foreign supply. Moreover, uncertainty is not just a vulnerability – it is also an opportunity. It is precisely the competitive advantage of global firms to benefit from market arbitrage, shifting production and exploiting opportunities in local markets they operate in.

To build resilient supply chains, firms generally rely on three basic building blocks: redundancy (maintaining safety stocks and back-up suppliers), flexibility (developing dynamic capabilities to quickly adapt and change the organisation of supply chains when a disruption occurs) and a culture of responsiveness (adequate training of staff and managers as well as decentralised decision-making to quickly solve issues as they arise). Efficient risk management strategies combine these three blocks. Resilience strategies are also tailored to the type of risks: for routine risks the cost of redundancy strategies is acceptable, while for major crises inventories and back-up capacity will never be enough and firms need to be flexible to absorb disruptions.

Top-performing firms tend to have supply chains possessing three qualities, described as “triple-A” (Lee, 2004[5]) because they are:

• agile – they can react quickly to any change in demand or supply

• adaptable – they can adjust over time to structural changes and evolving strategies

• aligned with the interests of all suppliers in the production network, as well as with a variety of stakeholders, including governments and non-government organisations (NGOs).

Agility and adaptability are part of the flexibility needed to build resilience. The alignment of interests facilitates co-ordinated and co-operative responses and is also important for environmental and social issues.

1.7. Policy approaches for agile, adaptable and aligned supply chains

While not every disruption or delay is a market failure requiring government intervention, governments do play a crucial role – as facilitators, integrators, and providers of infrastructure and emergency resources in co-operation with the private sector. Government intervention is also required for major risks or disruptions that exceed firms’ capabilities of routine risk management.

The following actions can have a high impact on the agility and adaptability of supply chains, as well in aligning interests among stakeholders.

• Promote trade facilitation policies. These aim to make trade and customs laws, regulations, documents, and procedures simpler and more efficient. They play a key role in streamlining and simplifying the technical and legal procedures at the border for products to be traded internationally. Such policies:

  • enhance agility in the face of more frequent, high-impact supply chain shocks and disruptions – they proved essential during the COVID-19 pandemic.

  • help firms adapt to sustainability regulatory requirements and prove compliance at the border

  • support alignment across stakeholders through enhanced consultations with traders and co-operation among border agencies

• Strengthen key supply chain service sectors. Services play a crucial role in supporting agile, adaptable and aligned global supply chains by enhancing efficiency, reducing costs, and ensuring seamless connectivity from manufacturers to consumers. Air, sea, road and rail transport help carry goods across countries, while logistics services help manage the complex flow of goods, optimising inventory management and allocation of capacity and resources. However, evidence from the OECD’s Services Trade Restrictiveness Index (STRI) shows substantial barriers to trade across these sectors. Key actions include:

  • Remove market access barriers for critical services sectors, notably transport, financial and telecommunications services.

  • Work towards greater regulatory interoperability across countries by strengthening common regulatory standards and expanding tools such as mutual recognition of qualifications and permits.

  • Foster international co-operation to create a more predictable, transparent, and efficient regulatory environment, thereby enhancing global trade in services, driving innovation, and promoting economic growth.

• Facilitate the digitalisation of supply chain operations. The role of digitalisation in managing supply chains is extensive and transformative. Digital transformation hinges on access to hardware, but tariffs and non-tariff measures on information and communication technology (ICT) goods can hinder the adoption of digital technologies, and the increasingly tight regulatory environment can undermine the ability of firms to adapt to unforeseen shocks. Concerns about privacy protection, cybersecurity, national security, regulatory reach, competition and industrial policy have all led to growing data regulation.

  • Lower tariffs on ICT goods to enable firms to digitise processes and be more agile in their response to supply chain shocks.

  • Streamline regulations governing digital trade and enable data flows and transfers. Cross-border data flows are the lifeblood of today’s international trade and supply chain transactions.

  • Enhance international regulatory co-operation over digital trade.

• Support international co-operation, and co-ordination with the private sector and other stakeholders. International co-operation is fundamental for addressing the systemic nature of supply chain vulnerabilities and the cross-border nature of regulatory challenges. At the same time, as firms operate supply chains and have direct control over sourcing strategies, inventory management and distribution networks, co-ordination between governments and the private sector is key for building resilient supply chains.

  • Develop and use multi-government trade agreements and supply chain partnerships to collectively set rules, co-ordinate and harmonise regulations for trade facilitation measures, pro-competitive rules for services supporting supply chains and the digital trade integration described above.

  • Use public-private partnerships as a structured mechanism to align the efforts of firms and governments.

  • Create “industrial commons” and preparedness conferences involving stakeholders from the government and private sector to establish integrated forms of emergency preparedness.

• Design policies that balance sustainability, efficiency and resilience. To promote agile, adaptable and aligned supply chains, policy design can account for the interplay between resilience and other objectives, including sustainability and efficiency. Aligning these goals in ways that promote long-term economic stability and sustainable development —while maintaining the capacity to withstand disruptions — may present challenges. Achieving synergies across these dimensions is possible, though not without inherent trade-offs. Key actions may include:

  • Capture synergies between resilience, efficiency and sustainability. For example, investing in renewable energy infrastructure enhances energy security while reducing carbon footprints; adopting energy-efficient technologies—such as smart grids or decentralised renewable energy systems—enhances the reliability of energy supplies and environmental outcomes.

  • Address trade-offs when balancing objectives. Firms designing resilient supply chains must weigh the costs of redundancy against efficiency and environmental considerations, such as waste. Flexibility in production processes, improved supply chain visibility through digital tools, and co-operative relationships with suppliers allow firms to adapt quickly to disruptions without over-reliance on resource-intensive measures. Using renewable energy in operations and transport can offset the environmental impacts of redundancy, aligning sustainability with resilience.

  • Aim for the least possible distortionary policy design and implementation of laws aimed at promoting sustainability and encourage stakeholder participation in their development and implementation. Enact facilitation measures to minimise the costs of implementing sustainable practices, especially for SMEs, and consider support to trading partners. Minimise certification costs for compliance with sustainability standards, including through clear guidance on how compliance is verified.

References

[3] Arriola, C. et al. (2020), “Efficiency and risks in global value chains in the context of COVID-19”, OECD Economics Department Working Papers, No. 1637, OECD Publishing, Paris, https://doi.org/10.1787/3e4b7ecf-en.

[2] Arriola, C., P. Kowalski and F. van Tongeren (2024), “Shocks in a highly interlinked global economy”, OECD Trade Policy Papers, No. 283, OECD Publishing, Paris, https://doi.org/10.1787/4a2f0127-en.

[4] Jaax, A. and E. van Lieshout (2025), “Mapping efforts to protect worker rights in supply chains”, OECD Trade Policy Papers, No. 291, OECD Publishing, Paris, https://doi.org/10.1787/f4eacea7-en.

[5] Lee, H. (2004), “The Triple-A Supply Chain”, Harvard Business Review, pp. 102-112, https://hbr.org/2004/10/the-triple-a-supply-chain.

[6] Moïsé, E. and E. Tresa (2025), “Non-Tariff Measures Affecting Environmental Goods Trade”, OECD Trade Policy Papers, No. 294, OECD Publishing, Paris, https://doi.org/10.1787/ca790510-en.

[1] World Bank (2025), World Development Indicators,, World Bank, Washington D.C., https://databank.worldbank.org/source/world-development-indicators (accessed on (accessed on 2025)).

Note

← 1.  Environmental goods analysis is based on the Combined List of Environmental Goods as updated in (Moïsé and Tresa, forthcoming_[75]).