Friend or Foe: Putting Supply Chain Resilience Under the Microscope

Introduction

For micro-, small and medium-sized enterprises (MSMEs), internationalisation is increasingly recognized as a key driver of growth and innovation. Moreover, internationalisation can bolster the resilience of MSMEs by decreasing the dependence on single markets and creating opportunities for learning and adaptation in dynamic global environments (Knight & Cavusgil, 2004), which enable MSMEs to defend themselves better against regional market fluctuations and crises (Verbeke, 2009). Internationalisation is often discussed in terms of export and foreign direct investment (FDI), but by learning from international operations incrementally, MSMEs can also build more resilient supply chains (Johanson & Vahlne, 2009).

Supply chain resilience

A supply chain is the interconnected journey that raw materials, components, and goods take before their assembly and sales to the customers (McKinsey, 2022). Supply chains also include the flow of services needed. Supply chain resilience is a highly topical issue, as it enhances MSMEs' ability to withstand external disruptions and sustain long-term competitiveness (Ambulkar et al., 2015). Modern supply chains have become increasingly complex and span across international borders, making them progressively more vulnerable and exposed to unexpected and often unpredictable disruptions (Millar, 2015). The shift toward leaner, demand-driven supply chains also contributes to increased vulnerability, as reduced inventory levels may not provide enough buffer against sudden shortages. In Finland, this is visible, for example, in the pharmacies where the continuous lack of many medicines has become the new normal (Helsinki Times, 2025).

Recently, we have witnessed major market and supply chain disruptions such as the Eyjafjallajökull volcano eruption, Brexit, the COVID-19 pandemic, the Suez Canal blockage, the outbreak of war in Ukraine, global inflation and energy crisis, strained trade relations between Western countries and China, and from a European perspective, the unpredictable decision-making of the Trump administration. Considering these disruptions, resilient supply chains are even more important today than some years back. Resilience, particularly in the context of supply chains, can be conceptualised in two main ways: the ability to recover quickly from disruptions and the mitigation of short- and long-term risks in the supply chain. This can also be connected to the concept of Quality at the Source (QATS) in lean manufacturing, that is, to assure long-term quality in every step in the whole value chain, including sourcing (Tewson, 2020).

Supply chains are subject to a range of risks, with geopolitical risk emerging as a fundamentally new category (Luo, 2025). Unlike traditional political risk, which typically involves localised issues within a single country, geopolitical risk spans multiple nations and is shaped by broader global tensions, including clashes between different political systems (e.g., democratic vs. authoritarian regimes). It also incorporates ideological and cultural divisions, involving conflicting values around governance, human rights, and societal norms. Ultimately, geopolitical risk may lead to, for example, geopolitical fragmentation and trade wars.

To mitigate geopolitical risks, the EU has since 2013 worked for a shift towards a trade and industrial policy that promotes Europe as a geographical region open to stable, rules-based international trade. Moreover, the approach has been to enhance domestic capacity and diversification to reduce the dependence on global supply chains prone to external vulnerabilities (European Commission, 2024).

Friend-shoring, near-shoring, and on-shoring

 As a means of “de-risking”, Luo (2025) discusses the concepts and policies of friend-shoring, near-shoring, and on-shoring, implying that SMEs relocate and diversify their supply chains to more aligned countries. Friend-shoring includes shifting sourcing to allied countries with shared values and stable politics, while near-shoring and on-shoring refer to bringing back sourcing to neighbouring countries or the home country. For example, we can notice a shift away from sourcing from China in favour of countries and regions such as India, Southeast Asia, and Eastern Europe (Luo, 2025).

Friend-shoring, near-shoring, and on-shoring strategies are not straightforward, they come with their own set of inherent challenges (Luo, 2025). One of the primary risks lies in the potential increased labour and production costs in home or allied countries. Rising operational complexities when establishing new supply chains are also associated with the strategies. Managing global supply chains is a trade-off between resilience and efficiency (Lücker et al., 2024). Additionally, with changing geopolitical situations, attention should be brought to the potential costs associated with re-entry, reconnection, and reattachment with suppliers of the country from which the MSMEs exit.

A turbulent geopolitical situation

During the first months in office, the Trump administration's economic and foreign policy has significantly increased geopolitical risk in global supply chains. The aggressive use of tariffs has marked a shift toward protectionism and “America first” (Baldwin, 2024). This rhetoric has taken EU politicians by surprise since the tariffs are imposed even on traditional U.S. allies (e.g., steel and aluminium tariffs on the EU, Canada, and Mexico), undermining long-standing trade relationships and reducing the predictability and stability of supply chains. The tariff policies have also contributed to a fragmentation of global trade norms, weakening institutions like the World Trade Organization (WTO). Less trusted or enforced rules of global trade add to increased geopolitical exposure and uncertainty.

The consequences of the turbulent global trade environment are that it is harder for MSMEs to predict future policy changes. Higher costs for raw materials, components, and finished goods pressure MSMEs to rethink their sourcing strategies. There is an increased risk of retaliation, as other countries will impose counter-tariffs on U.S. goods, disrupting traditional alliances and friendly trade relations, contributing to a broader shift toward “we first”. The ultimate question is whether this development should spur, for example, MSMEs in the EU to rethink their dependence on the global supplier network, especially in their strategic sourcing (e.g., important components in production). Companies have to rebuild their global supply chains, with geopolitical rather than efficiency motives as the driver. The question does not only concern managers in MSMEs, but it is also a question about policymaking in the EU. 

How to achieve resilient supply chains 

Due to recent turbulence, the call for policies safeguarding EU companies has been pinpointed in several reports and articles, both in general (e.g., Blom, 2025; European Commission, 2021; European Investment Bank, 2024) and with a specific focus on MSMEs (e.g., Miroshnichenko, 2025).  

A compilation of the articles and reports is presented in the table, giving practical tips on how to support and build resilient supply chains, with a specific focus on mitigating the consequences of detrimental, long-term dependence.

Table 1: Tips on building resilient supply chains 

Conclusion

In the end, the four key pillars supporting resilient supply chains are visibility, collaboration, flexibility, and speed (Millar, 2015). Visibility enhances openness and trust, for example, by using technology for planning, tracking, and monitoring. As supply chains are becoming increasingly complex, collaboration is essential to connect multiple actors in an ecosystem. Additionally, being agile and a “need-for-speed” are essential to be able to adapt to rapid changes in the economic environment. 

Adopting a “Europe first” strategy, instead of relying on global supply chains, will have both negative and positive impacts. From a consumer point of view, the prices of many products and services are likely to increase as, for example, MSMEs have to abandon sourcing from cheap labour countries in Asia. On the other hand, the costs of transportation will decrease, and as the transportation industry is one of the biggest polluters, near-shoring and especially on-shoring have a positive impact on the environment.

The objective of this project is to increase the resilience of Baltic Sea Region micro SMEs and the Baltic Sea Region, by stimulating increased trade and collaboration within the Baltic Sea Region. This will be done by providing micro SMEs with the knowledge, tools and network to execute effectful internationalisation strategies and build strong local value chains within the Baltic Sea Region.

References

Ambulkar, S., Blackhurst, J. & Grawe, S. (2015). Firm’s resilience to supply chain disruptions: Scale development and empirical examination. Journal of Operations Management, 33-34(1), 111-122. https://doi.org/10.1016/j.jom.2014.11.002. 

Baldwin, R. (2024). Trump, trade, and geopolitics: What It means for business. IMD Business School. https://www.imd.org/ibyimd/geopolitics/trump-trade-and-geopolitics-reflections-on-what-it-means-for-business.

Blom, M. (2025). How businesses are coping with ever-increasing geopolitical risks. World Economic Forum. https://www.weforum.org/stories/2025/01/how-businesses-coping-ever-increasing-geopolitical-risks.

European Commission (2024). Annual Report on European SMEs 2023/2024. GROW and Joint Research Centre. https://intellectual-property-helpdesk.ec.europa.eu/news-events/news/ec-publishes-20232024-annual-report-european-smes-2024-07-25_en.

European Commission (2021). Strategic Dependencies and Capacities. Commission staff working document. https://ec.europa.eu/info/strategy/strategic-dependencies

European Investment Bank (2024). Navigating supply chain disruptions. New insights into the resilience and transformation of EU firms. EIB Publications. https://www.eib.org/en/publications/20240179-navigating-supply-chain-disruptions.

Helsinki Times (2025). Finland faced ongoing medicine shortages in 2024. https://www.helsinkitimes.fi/finland/finland-news/domestic/25986-finland-faced-ongoing-medicine-shortages-in-2024.html?tmpl=component&print=1&layout=default&page=

Johanson, J., & Vahlne, J. E. (2009). The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411–1431. https://doi.org/10.1057/jibs.2009.24.

Knight, G. A., & Cavusgil, S. T. (2004). Innovation, organizational capabilities, and the born-global firm. Journal of International Business Studies, 35(2), 124–141. https://doi.org/10.1057/palgrave.jibs.8400071.

Luo, Y. (2025). A microscope on de-risking. Journal of International Management, 31(2), article 101231. https://doi.org/10.1016/j.intman.2025.101231.

Lücker, F., Timonina-Farkas, A. & Seifert, R. W. (2024). Balancing resilience and efficiency: A literature review on overcoming supply chain disruptions. Production and Operations Management, early view. https://doi.org/10.1177/10591478241302735.

McKinsey (2022). What is Supply Chain? McKinsey & Company. https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-supply-chain.

Millar, M. (2015). Global supply chain ecosystems: Strategies for competitive advantage in a complex, connected world. Kogan Page.

Miroshnichenko, E. (2025). SMEunited Board discusses impact on SME from geopolitical tensions and tariffs. SMEunited. https://www.smeunited.eu/news/smeunited-board-discusses-impact-on-sme-from-geopolitical-tensions-and-tariffs#:~:text=SMEunited%20acknowledges%20the%20growing%20complexity,materials%2C%20and%20complicating%20export%20opportunities. 

Tewson, G. (2020). Quality at Source. Medium. https://merchsprout.medium.com/quality-at-source-4100f3990253.  

Verbeke, A. (2009). International Business Strategy. Cambridge University Press.

Texten har granskats och godkänts av Novias redaktionsråd 10.6.2025.