Your premises are intact, your supplier is not: mapping contingent interruption

The decision behind the headline

This review focuses on sole-source suppliers, geographic concentration and essential component availability.

Draw the component chain with a production location at each critical node. Ask the purchasing team what can genuinely be substituted, how long qualification takes and whether customer approval is necessary. A second source that needs months of testing does not solve next week’s delivery problem. Record inventory on hand and realistic replenishment time, then model when production would actually stop after the supplier event. This distinguishes immediate dependency from a problem buffered by existing stock. Recheck the component buffer after large orders.

A hypothetical scenario to test

A Swiss assembler cannot complete orders after a fire at its only component supplier. This is an invented example, not a reported claim or a promised payout. Reconstruct the sequence from the first sign of trouble to ordinary service resuming. Ask what would happen if the problem occurred during a holiday or at the busiest time of year. The stress test should expose assumptions about availability and timing before they are relied upon.

Take a fictional assembler with six weeks of components and a replacement supplier needing ten weeks to qualify. The gap is not ten weeks of lost production automatically: the six-week buffer changes the timing. Customer deadlines and partial output may change it further. Ask the insurer how a dependent interruption is measured and what evidence links your loss to the supplier’s covered damage. Include the supplier’s incident information and your own order history. Commercial unreliability or a supplier’s insolvency is not the same fact pattern as physical fire damage; ask separately about each instead of treating all inability to deliver as one extension.

Identify the contractual boundary

Two distributors do not provide independence if they source the same factory. Trace the critical component to its original producer and production location. Ask whether the proposed extension identifies direct suppliers only or addresses further tiers; never assume a commercial supplier list captures the entire dependency.

Compare the wording, then the price

Use an identical scenario with each insurer and request clarification of supplier extensions, named locations, insured perils and dependent-interruption sublimits. Ask for the relevant clause and a written explanation of anything left uncertain. An optional extension should appear in the schedule, not merely in a sales discussion.

Reduce the exposure before transfer

A useful first action is to qualify a second supplier and test substitution before an emergency. Assign an owner, a completion date and a simple test of whether the measure works. Written procedures matter only if staff can find and use them under pressure.

Evidence and the next review

Prepare supplier lists, contracts, component alternatives and purchase concentration. Date the records and keep an accessible copy away from the affected process. Deductible funding and the delay before a payment should sit in the continuity budget. Review the arrangement when your activity, technology, locations or counterparties change.