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Our Supply Chain Disputes team explores how supply chain consolidation and onshoring can boost resilience but also increase dispute risks. Clear contracts and strong planning are essential to manage challenges like delays, quality issues, and supplier dependency.


Supply and value chains have been undergoing significant changes, with a notable trend towards deglobalisation and decentralisation from regional hubs. Historically, businesses relied on complex, global supply chains to source materials, components, and finished goods from diverse locations. The disruption caused initially by the pandemic and now exacerbated by rising geopolitical tensions and shifts in trade policy have driven businesses to rethink this approach.

The narrowing or “onshoring” of supply chains involves a shift towards sourcing materials and goods from fewer, more reliable suppliers. These suppliers are often closer to home. By consolidating their supply chains, companies aim to reduce risks associated with trade conflicts, transport disruptions and other external factors that can compromise operations.

One of the driving forces behind this consolidation is the desire for greater resilience. Businesses are focusing on building more agile supply chains. These supply chains are designed toquickly adapt to changing circumstances. This could include a sudden imposition of tariffs, a spike in demand, or a disruption in transportation. Nearshoring and reshoring are becoming increasingly popular strategies. Companies are bringing manufacturing closer to their primary markets. This helps reduce lead times and enhances control over production processes.

Consolidation in supply chains, while offering benefits like cost reductions and increased efficiency, can also increase the risk of disputes in several ways:

  • Dependence on fewer suppliers: This creates more vulnerability if issues like delays, quality control problems, or financial instability of a supplier arises. Any failure or disruption from a key supplier can have a cascading effect on the entire supply chain, leading to disputes over performance, compensation, or unmet expectations.
  • Loss of flexibility: With fewer suppliers, businesses have fewer options to pivot or find alternative sources if a problem arises. This lack of flexibility can lead to conflicts if one party feels the other is not fulfilling its contractual obligations or is unable to meet agreed-upon timelines. Suppliers, under pressure to meet demands, may also become more prone to disputes over pricing or delivery conditions.
  • Power imbalance: Consolidating supply chains often gives more power to dominant suppliers, which can lead to imbalances in negotiations. The larger or more centralised company may exert unfair pressure on smaller suppliers. This in turn can create tension and potential disputes over terms, pricing, and contract conditions. Smaller suppliers might resist these terms or feel forced into unfavourable agreements, leading to disputes. Suppliers in the food, agriculture and beverage industry should be aware of their rights regarding unfair trading practises under the Agricultural and Food Supply Chain Act 2023.
  • Quality control issues: As supply chains narrow, the complexity of managing consistent quality across fewer suppliers increases. A single defective batch or quality issue could trigger disputes about compensation, returns, or reputational damage.
  • Logistical challenges: Consolidating supply chains can also lead to logistical bottlenecks. A disruption at a central node, like a single warehouse, transport route, or port can have far-reaching consequences. Disputes may arise regarding responsibility for delays, additional costs incurred from rerouting or even missed deadlines. This is especially likely if the terms of delivery are not clearly defined or flexible enough to accommodate unforeseen circumstances.

Next steps

In summary, the trend towards the consolidation and narrowing supply chains seems here to stay over the short to medium term at least. While this can streamline operations and foster greater resilience, it also introduces heightened risks. There is increased dependency on fewer players, which can lead to heightened vulnerability. Potential quality issues may arise, and there is often less flexibility in managing unforeseen disruptions. The severing or restructuring of existing long-standing relationships within supply chains can also lead to disputes. Businesses should take care to ensure that they have clear and fit for purpose contracts in place, establish strong relationships, and build appropriate contingency plans to mitigate these risks.

For more information or expert advice on all related matters, contact a member of our Supply Chain Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.



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