The New Disruption Playbook – Part 6 –

The closer you get to the goal line, the more things get compressed

Play 6. Capacity is the hidden risk in shifting supply chains

Every quarterback knows there is always a risk they will get caught in a goal line stand, where everything compresses, and it becomes difficult to move forward. Similarly, as companies respond to tariffs by rethinking their sourcing strategies – whether through nearshoring, onshoring, or supplier substitution – one critical factor often gets overlooked: capacity.

Shifting supply from one supplier to another isn’t just a commercial decision, it’s a physical one too. It requires a deep understanding of the supply base’s ability to absorb new demand. This includes visibility into installed capacity (equipment, tooling, jigs, fixtures), as well as operational flexibility (number of shifts, shift patterns, tool changeover efficiency, and takt times).

Nearshore or onshore suppliers may not have capacity installed or planned for sudden demand shifts. Without clear communication and planning, companies risk creating bottlenecks or triggering delays that undermine the very resilience they’re trying to build.
To avoid this, companies must align with suppliers on detailed daily capacity expectations and flexibility requirements. Transparency into how capacity is managed, and how it can be scaled, is essential. These insights must be embedded into demand-driven supply chain planning processes.

History offers us two cautionary tales. Boeing’s 737 MAX program suffered from a fragmented and overstretched supply chain. While the root cause of the crisis was technical, the company’s inability to scale and synchronize its global supplier network contributed to production delays and reputational damage. Similarly, the Boeing 787 Dreamliner program faced major setbacks due to over-reliance on a globally dispersed supply base that lacked cohesive capacity planning.

This example underscores the importance of not just redesigning supply chains but ensuring they are capacity ready.

What can procurement do?

Procurement plays a pivotal role in managing capacity risk during supply shifts. Here’s how:

• Map Capacity Early: Work with supply chain functions and suppliers to understand installed and latent capacity, including tooling, labor, and shift flexibility.
• Align on Daily Rates: Establish clear expectations for daily production rates and flexibility thresholds.  Procurement’s role is to ensure these capacities are contractually secured and commercially enforced.
• Integrate with Planning: Feed capacity insights into demand planning and S&OP processes to ensure realistic supply commitments.
• Collaborate with Engineering and Operations: Ensure that any product or process changes are feasible within supplier capacity constraints.
• Monitor and Reassess: Build capacity reviews into regular supplier performance management routines, in support of supply planning functions.
• Use Digital Tools: Leverage supply chain visibility platforms to track capacity utilization and flag constraints in real time – procurement can act on strategies prescribed for our function.

Capacity planning flow: Shifting supply in response to tariffs

The flow steps are as follows:

1. Assess supplier capacity:

Read the field: understand the strengths and weaknesses of your team.

2. Align on daily capacity and flexibility:

Set the play: establish clear roles and expectations.

3. Integrate capacity into demand planning:

Plan the drive: integrate insights into your overall game plan.

4. Collaborate with engineering and operations:

Team huddle: ensure all players are aligned and ready.

5. Monitor and reassess capacity:

Watch the clock: continuously monitor performance and adjust as needed.

6. Use digital tools for visibility:

Use the playbook: leverage digital tools for real-time visibility and faster decision-making.

In the final part of this tariff series, Play 7, we discuss how tariffs can influence logistics, freight planning and decision making.

The New Disruption Playbook Series:

Play 1 on Diversification
Play 2 on Collaboration
Play 3 on Contracts
Play 4 on Innovation
Play 5 on Sourcing
Play 6 on Capacity
Play 7 on Freight Procurement