Advanced technologies are addressing growing global disruptions in the critical fight for resilience. Global pandemics, trade disputes, wars in the Middle East and Ukraine, and catastrophic weather disasters are all causing supply chain disruptions at a rate that few could have predicted.
Risks have increased since COVID-19 swept the world, requiring governments, business associations, non-governmental organisations, and corporate chief financial officers to completely reimagine supply networks. And there is no indication that the threats of today will abate.
Global supply chains are rushing to adjust to demands for greener, more resilient networks as they prepare for increased tariffs, higher transportation costs, and a changing regulatory environment.
Experts caution that while technologies such as distributed ledger technology (DLT) and artificial intelligence (AI) offer new tools, the fundamental issues and growing fragility of globalisation will continue to exist.
“Global supply chains are undoubtedly entering a new era, but the risks of today weren’t completely unknown in the past,” says Tinglong Dai, a professor of operations management and business analytics at Johns Hopkins University’s Carey Business School.
Although extreme weather has always been dangerous, Dai claims that its frequency and severity have never been higher. In a similar vein, dangers like the Houthis’ attacks on shipping in the Red Sea have escalated.
Dai said, “The true change is our realisation that the global supply chain model of the past three decades is unsustainable, especially given today’s shifting geopolitical realities.”
“The United States can no longer rely on a supply chain structure that centres on China. We are heading toward what I would call: supply chain iron curtain,” he added.
Increasing shipping charges
According to Zach Zacharia, associate professor of supply chain management and director of the Centre for Supply Chain Research at Lehigh University’s College of Business, “The world has changed very much, and the risks of global manufacturing and transportation have increased tremendously. The cost and time required to transport goods have changed as a result of the large shipping lines ceasing to operate through the Red Sea.”
Events have compelled businesses to examine shipping costs more carefully. Zacharia goes on to say that Russia’s invasion of Ukraine was a setback to globalisation. In the past, it made sense to manufacture a product at the lowest possible cost and then deliver it efficiently.
But once Ukraine was attacked and COVID struck, he said, “It became much more important to consider not just producing it cheaply but also transporting it back safely at a low cost.”
According to Jan Hoffmann, head of trade logistics at the United Nations Conference on Trade and Development (UNCTAD), “We do see more volatility in maritime supply chains.”
UNCTAD’s Review of Maritime Transport 2024, which was released last September, revealed that “important chokepoints like the Suez and Panama Canals are increasingly vulnerable to geopolitical tensions, conflicts, and climate change.”
Given that US President Donald Trump has indicated his aim to increase their use, tariffs may soon become problematic. While many view tariffs as a counterproductive strategy, they played a significant role in the recent US presidential campaign.
Zacharia warns that they don’t actually make sense because tariffs always lead to retaliatory levies. However, given the current geopolitical environment, they are certain to spread.
According to Rouben Indjikian, a professor at Webster University in Geneva and a former executive director of UNCTAD’s Global Commodities Forum, “a surge in trade conflicts, especially between the US and China, is altering traditional trade flows between these leading trade partners.” One recent instance is when China purchased soybeans from Brazil instead of the US, which is its usual source.
According to Evan Smith, co-founder and CEO of Altana AI, “Just-in-time fragility” is another effect of globalisation. For instance, Boeing used to have complete control over the value chain involved in producing its aeroplanes. It’s just doing the last assembly of its planes today.”
This implies that, as was the case with Boeing in July, the entire manufacturing line may have to stop if supplies of components like seats and engines from one or more upstream suppliers are disrupted for any reason.
Smith said, “This outsourced, efficiency-at-all-costs supply chain (favoured by so many companies) is efficient only under conditions of stability,” which is not the case today.
According to Dai, businesses and organisations must adopt a varied approach that incorporates friendshoring, nearshoring, and reshoring. “Restoring production to the United States is not the only goal.”
He contends that this won’t protect businesses against hazards on its own, especially those brought on by climate change.
“We must diversify by working with allies and neighbouring nations in addition to collaborating across US regions. A few people have already walked this path. Apple’s global supply chain has been successfully de-risked. They’ve taken proactive measures to lessen dependency on any one nation or area, adding a great deal of flexibility and resilience,” he noted.
A change in regulation at sea
Given the current global regulatory environment, supply chain management for firms may become more complicated—and costly. According to McKinsey’s 2024 Global Supply Chain Leader Survey, only 9% of respondents say their supply chains are currently in compliance with the EU’s Corporate Sustainability Due Diligence Directive. The directive imposes environmental and human rights due diligence requirements on large EU companies as well as large non-European Union (EU) companies operating in the EU. However, the directive is already in effect for some companies.
Although “the transition to greener ships and low-carbon fuels is still in its early stages,” UNCTAD acknowledges that “rapid decarbonisation is critical” with reference to global supply chains.
Smith notes a significant change in regulation. Governments now require businesses to understand their entire supply chains.
After being enacted into law at the end of 2021, the US Uyghur Forced Labour Prevention Act mandates that businesses take action to stop forced labour in their supply networks.
All businesses that utilise supply chains involving China’s Xinjiang Uyghur Autonomous Region must implement and document thorough due diligence measures to ensure compliance with US laws. They must also trace their supply chains for any potential exposure to forced labour, as stated by the US Customs and Border Protection agency.
“It’s not always simple. A major US clothing company may know who makes its clothes and where the fabrics in the production process come from, but not the cotton. The clothing company now has to make sure that the cotton that will be spun, woven into textiles, and fashioned into clothing that will be sold in US retail stores isn’t picked using forced labour,” Smith adds.
Do emerging technologies have an impact?
How does a business or organisation reduce supply risk in this more unstable environment? Can new technology help, especially artificial intelligence?
Peter Liddell, Global Operations Centre of Excellence Lead and Global Sustainable Supply Chain Lead at KPMG Services in Singapore, says that more companies are using huge supply chain datasets and machine learning algorithms to use predictive analytics. This “allows for very fast decision-making and mitigation of supply risks before they arise,” he says.
“Global supply chain leaders across all industries and all jurisdictions are embracing AI as a top priority right now,” he adds.
According to KPMG’s 2024 CEO Outlook, which polled 1,325 CEOs globally, supply chain disruption was identified as the biggest risk to company expansion.
In contrast, supply chain risk only came in at number five in KPMG’s 2022 report. Significantly, according to Liddell, “64% of global CEOs surveyed said they would invest in AI regardless of the economic conditions.”
Many businesses are already utilising AI-based solutions to enhance supply chain “visibility,” which refers to the ability to monitor and track the movement of information and goods across the supply network. This is the most popular use case for AI, with 55% of supply chain executives polled for the McKinsey report stating they were utilising it for this reason.
Additionally, according to the survey, “the share of respondents who say that they have good visibility into deeper levels of the supply chain fell by seven percentage points, the second consecutive annual decline in this measure.”
This rate of AI usage supports the growing complexity of supply chains.
However, Shawn Fitzgerald, senior research director at a strategic consulting business, believes that creating “what-if” scenarios is where AI could be most helpful.
Fitzgerald observed that logistics can be significantly improved by “gaming out” scenarios in advance using AI-assisted predictive analytics. For example, a manager could consult the algorithm to determine whether shipping goods by water or air is safer and more efficient.
Governments are increasingly focused on sustainability, and supply chains should prepare for heightened pressure to ensure they contribute to solutions rather than exacerbate problems. Eventually, businesses may need to monitor each stage of the supply chain process closely.
“DLTs’ ability to make data public, keep track of every transaction, and name the people involved can make product tracking and traceability more accurate and reliable, especially when there is more uncertainty in geopolitics and worries about trading partners,” Liddell said.
“For supply chains to facilitate ESG Scope 3 reporting, visibility and traceability are two essential requirements,” he continues.
The international corporate value chain standard includes certain reporting standards, which may encourage the widespread use of blockchain and DLTs.
What are the roles of CFOs?
Liddell reports that some supply chain executives are creating plans for the next five to ten years using a greenfield-planning technique, which necessitates a fresh start.
“The supply chain planning function is also being planned for complete automation by a few firms, but this is likely to be far more difficult than many expect,” Liddell said.
Shawn Muma, director of supply chain innovation and emerging technologies at the Digital Supply Chain Institute, a research organisation of the Centre for Global Enterprise, said, “I think that organisations want to better understand their own risks, their suppliers’ risks, and their suppliers’ suppliers’ risks, and they ask for mitigation plans, but they haven’t significantly increased their own investments in risk mitigation.”
“This is still true even though new AI/ML tools are being made to help businesses make better decisions. For example, optimal machine learning (OML) can look at huge amounts of historical and current supply-and-demand data and make suggestions about things like the best levels of production and the best ways to ship goods,” Muma added.
According to Indjikian of Webster University, CEOs and CFOs are increasingly using digital enterprise resource planning (ERP) software. ERP enables businesses to integrate the supply chain into their overall production, distribution, and transportation strategy.
However, digitisation and ERP have their limits. According to Indjikian, “early warning systems can be improved by digitisation, but they are not easily able to overcome geopolitical risks, particularly climate events and their consequences.”
“It really comes down to diversification. A shipper will attempt to rely on multiple carriers, routes, ports, transportation methods, and suppliers of goods,” adds Hoffmann of UNCTAD.
Businesses should also avoid complex, multi-layered supply chains that make them dependent on their supplier, their supplier’s supplier, etc.
Overall, Smith of Altana AI contends that corporate boards and upper management need to respect supply chain management because it is no longer just a back-office, logistics-related job that involves ensuring that things arrive on schedule and in the most economical manner.
Fitzgerald affirms that businesses will need to prioritise supply chain management at the executive level. In addition to investing in continuous training and hiring and retaining the best talent, they must “make sure there is a career track for supply chain professionals to advance and partner with the business over time.”
The growing use of technologies like AI, DLT, and predictive analytics is reshaping supply chain management. These tools help businesses track supply chains, predict disruptions, and respond faster.
Artificial intelligence and machine learning allow companies to test different scenarios, improve routes, and reduce risks before problems occur. DLT creates secure and transparent records of transactions, helping ensure traceability and compliance with environmental and labour standards.
However, technology alone cannot solve deeper global issues. Heavy dependence on one country or region for manufacturing still poses risks. Many companies are shifting to nearshoring, friendshoring, or reshoring to build more diverse and resilient supply chains.
Climate change and geopolitical conflicts are also driving up transportation costs. Closures of key routes like the Suez and Panama Canals have disrupted global trade, pushing companies to rethink logistics and invest in greener transport options.
Governments are enforcing stricter rules on labour and sustainability. Laws such as the US Uyghur Forced Labour Prevention Act and the EU’s Corporate Sustainability Due Diligence Directive require greater transparency.
For CEOs and CFOs, supply chain resilience is now a key priority. Businesses that plan strategically, use digital tools, and adapt quickly will be better positioned to handle global uncertainty.