Supply Chain Risk: Product Portfolios and Within-Firm Resource Allocation
Publication Date
10-22-2026
Abstract
Existing work shows that firms manage supply chain risk by reconfiguring their suppliers. We show that they also respond on the output side by changing what they produce. Using plant-level product data from the U.S. Census Bureau, we instrument supply chain risk with an indicator for whether a natural disaster affects another county within 50 miles of one of the firm's supplier plants. Higher supply chain risk increases the number of distinct products manufactured at a plant. This expansion reflects substantial churn, as plants add and drop products at the same time. Plants reorient their product mix toward products that use more substitutable inputs and broader supplier bases and away from products that depend on specialized inputs and concentrated supplier bases. The new products extend beyond plants’ primary industries, account for enough sales to reduce product concentration, and persist. Within firms, product expansion is concentrated at core and capital-intensive plants. Introducing new products attenuates the profitability cost of supply chain risk. Together, the results identify the product portfolio as an important margin of operational hedging against supply chain risk.
Document Type
Article
Disciplines
Finance
Language
English
