Why it happens
This is why supply chain complexity so often outpaces a manufacturer’s sense of its own growth. Headcount, revenue and output tend to be tracked and expected to rise together, and they usually do rise in a roughly proportional way. The number of supplier relationships, the number of distinct components sourced, and the number of dependencies between them do not rise proportionally — they rise combinatorially, because every new supplier or component potentially interacts with every other one already in the chain, whether through shared logistics, overlapping lead times, or competing capacity at a shared sub-supplier. A firm can feel, correctly, that it has grown by 20% in headcount and output while its actual coordination burden has grown by considerably more, because the relevant quantity was never the count of suppliers but the connections between them.
Ronald Coase’s 1937 account of why firms exist at all is a useful companion here. Coase argued that coordinating activity has a real, measurable cost, and that this cost — not merely convenience — is why some coordination happens inside an organisation rather than through a series of open-market transactions. A manufacturer’s supply chain sits at exactly this boundary: every supplier relationship is a coordination cost the firm has chosen to bear internally rather than resolve anew on the open market each time, and as the number of these relationships grows, so does the aggregate cost of managing them — a cost that rarely appears as its own line item anywhere in the business’s reporting.
This absence of a dedicated line item is itself part of the mechanism. Because coordination cost is distributed across many people’s time — a planner’s attention here, a procurement manager’s follow-up call there — rather than concentrated in a single budget, it is structurally difficult for any single report to capture its total growth. A manufacturer can be accurately tracking direct material cost, logistics cost and headcount cost while remaining largely blind to the coordination cost sitting underneath all three, simply because no existing accounting category was built to hold it.
How this presents
The mismatch tends to become visible first in planning and scheduling functions, which are structurally the point where every supplier relationship’s uncertainty converges. A production planner managing five key suppliers can hold most of the relevant variables in their own judgement. The same planner managing twenty five cannot, not because they have become less capable, but because the number of interactions between those twenty five suppliers’ individual delays, substitutions and capacity constraints has grown past what any one person’s attention can track without a deliberate system built for exactly that purpose — precisely the kind of design response Galbraith’s research points to.
A second, quieter sign is the growing frequency of expediting — last-minute intervention to fix a shortage or delay that a well-coordinated system would have surfaced earlier. Expediting is rarely tracked as a metric in its own right, which means its rising frequency is often the clearest available signal that the underlying coordination burden has outgrown the informal systems managing it, well before that shows up in any formal report.
A third sign, specific to growing manufacturers, is the point at which a single supplier’s delay begins to have consequences beyond its own order — a late delivery from one supplier that pushes back a production run, which in turn shifts demand timing for a second, unrelated supplier’s components, which then arrive too early and sit as unplanned inventory. This kind of second-order consequence is a direct expression of the combinatorial growth in connections Galbraith’s framework describes, and its appearance is usually a reliable sign that supply chain complexity has moved past what informal coordination can absorb.
Where this shows up
The pattern described here is most recognisable in manufacturers, part of the wider Asset and Production-Based grouping. The same organisational questions appear, under different names, in other sectors.
Questions worth considering
- Has the number of supplier relationships grown in step with output, or faster?
- Where does planning currently rely on one or two people’s personal knowledge of how suppliers interact with each other?
- How often does expediting occur, and would anyone currently notice if that frequency were rising?
- Has a delay from one supplier recently caused a visible knock-on consequence for an entirely different, unrelated supplier — a sign that the connections between them, not just their individual reliability, have become the real constraint?
Your team is facing similar challenges?
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