Nearly all businesses rely on some form of supply chain for sourcing, production, or distribution. The risks supply chain entities pose can include operational, financial, reputational, and compliance risks. The goal of this article is to give an update on the current and emerging challenges with supply chain risk management worldwide. Also, to give an overview of what actions and strategies companies have been taking to deal with these increasing risks to their business success.
This article builds upon the foundation of these prior Nimble Risk Management Consulting blog articles:
- Addressing the Increasing Needs of Third-Party Risk Management (TPRM)
- AI & Supply Chain Risk Management Overview
Frequency & Major Causes of Supply Chain Disruptions
With the growth of international businesses, the increased linkages of global economies, the worldwide increase in severe weather, the COVID-19 pandemic, and recent wars, supply chain disruptions have increased. More massive, cascading effects across organizations’ supply chains are now occurring and are predicted. Supply chain disruptions were significantly more common in 2024 compared to previous years. Overall, supply chain disruptions increased by 38% year-over-year in 2024. This marked a substantial rise from 2023, when disruptions grew by only 5%.
Major Supply Chain Disruption Types:
- Factory Fires: Remained the top disruption for the sixth consecutive year, with 2,299 alerts issued.
- Labor Disruptions: Jumped to the second spot with a 47% year-over-year increase.
- Geopolitical Events: The Red Sea Crisis in late 2023 and early 2024 significantly impacted global trade, disrupting an estimated $6 billion in weekly trade flows and increasing supply chain lead times by 35%.
- Extreme Weather: Saw a dramatic 119% increase, with flood-related alerts surging 214%, forest fires increasing 88%, and hurricanes/typhoons jumping 101%.
Climate-related events, such as Canadian wildfires and hurricanes in the U.S., caused substantial disruptions to supply chains across various industries. These disruptions exposed vulnerabilities in supply chain management and emphasized the need for improved resilience and adaptability in global supply networks. As a result, businesses began shifting towards regional supply chains, increased digitalization, and a greater focus on sustainability to mitigate future risks.
The top five industries most impacted by these disruptions were:
- Life Sciences (30% increase)
- Healthcare (35% increase)
- General Manufacturing (39% increase)
- High Tech (42% increase)
- Automotive (37% increase)
The industries below are particularly vulnerable due to their reliance on complex global supply chains, just-in-time inventory systems, and critical raw materials or components:
Automotive
Automotive production has been heavily affected by semiconductor shortages, geopolitical tensions, and just-in-time manufacturing dependencies.
Electronics and Technology
Consumer electronics and IT sectors face ongoing challenges due to semiconductor shortages and extended lead times for components.
Healthcare and Pharmaceuticals
Medical device production has struggled due to shortages of electronic components, compounded by rising demand for healthcare services during healthcare crises.
Food and Beverage
Supply chain disruptions have led to shortages of critical inputs, affecting food production and distribution. This industry remains above the national average for reported shortages.
Apparel and Footwear
The fashion industry has faced significant delays due to raw material shortages and shipping disruptions, with many companies reporting severe supply constraints.
Telecommunications
The telecom sector has been hit hard by delays in semiconductor-dependent products like routers and IoT devices.
Main Challenges with Managing Risks in Supply Chains
Integrating risk flow in supply chains presents several significant challenges for organizations in 2025. Based on the current trends and projections, the main challenges include:
- Complexity and Interdependency
The extreme interdependency of today’s global marketplace means supply chain issues can quickly cascade across industries. This complexity makes it difficult to fully map and understand risk flows, as disruptions in one area can have unforeseen consequences elsewhere in the supply chain. - Technology Dependencies and Cyber Threats
As supply chains become more digitized and reliant on IoT networks and connected devices, they face increased cybersecurity risks. More than 80% of a company’s cyber incidents result from compromised suppliers, highlighting the need for robust security measures across the entire supply chain. - Geopolitical and Economic Volatility
Global political unrest and economic uncertainty continue to pose significant challenges for supply chain risk management. Shifting geopolitical relations and trade policies can rapidly alter risk landscapes, requiring constant monitoring and adaptation. - Environmental and Regulatory Compliance
Growing complexity in environmental, social, and governance (ESG) regulations presents a major challenge. Organizations must not only comply with these evolving mandates but also ensure their entire supply chain adheres to sustainability standards, which can be difficult to track and enforce. - Lack of Resources and Tools
Many organizations struggle with a lack of resources, useful tools, data, or platforms to effectively capture, analyze, and integrate supply chain risk into existing management processes. This deficiency hampers their ability to implement comprehensive risk flow management strategies. - Stakeholder Alignment
Ensuring that senior management provides follow-up and leadership to promote the success of risk efforts among all stakeholders is a significant challenge. Additionally, there’s often a lack of understanding of supply chain risks and concerns among various stakeholders, making it difficult to align priorities and actions. - Balancing Resilience and Efficiency
Organizations face the challenge of maintaining efficient operations while building resilience against potential disruptions. This often involves difficult trade-offs, such as deciding between lean inventory practices and maintaining buffer stocks to mitigate risks.
Key Strategies Companies are Using to Mitigate Supply Chain Risk
Diversification and Regionalization
>Supplier diversification: 73% of companies reported progress on dual-sourcing strategies to spread risk and enhance supply chain agility.
>Regionalization: 60% of respondents acted to regionalize their supply chains, reducing dependence on single geographic regions.
Inventory Management
>Strategic inventory adjustments: Companies moved away from larger inventory buffers, with only 34% relying on this strategy compared to 59% previously.
>Balanced approach: 47% of companies planned to maintain current inventory levels with some changes in assortment or location, while 46% expected to reduce or eliminate risk buffers.
Risk Management and Resilience
>Enhanced capabilities: Over three-quarters of companies believed they had sufficient internal capabilities to manage supply chain risk.
>Cybersecurity measures: Businesses implemented robust cybersecurity measures and conducted regular security training to protect digital infrastructure.
>Flexible financing: Companies considered flexible lines of credit to manage inventory fluctuations and meet service level agreements.
Operational Improvements
>Real-time tracking: Implementation of real-time shipment tracking and exception management to proactively detect and address issues.
>Performance analysis: Companies analyzed lead times to compare carrier and supplier performance against industry benchmarks.
>Agile risk management: Development of comprehensive risk management plans encompassing prevention, preparedness, response, and recovery strategies.
Technology and Digitalization
>Improved visibility: The share of companies with comprehensive visibility of tier-one suppliers reached 60%, marking a second consecutive year of a 10 % increase.
>Advanced planning systems: Two-thirds of companies made progress in implementing advanced-planning and -scheduling (APS) systems for more accurate planning and rapid response to disruptions.
>Supply chain digitization: Businesses adopted scanning apps, supply chain management software, and AI-based solutions to automate processes and gain greater visibility.
Summary
The company strategies mentioned in this article reflect a shift toward more resilient, flexible, and technologically advanced supply chain management strategies that companies are using in response to the supply chain disruptions faced in 2024 as well as those predicted for the future. Some of the most important of the risk mediation strategies mentioned are:
- Improving visibility into supply chain workflows on an ongoing basis
- Doing advance risk management planning
- Doing agile risk management
By doing the three things listed above, supply chain risks can be discovered, scoped, managed, and mediated in a more efficient and agile fashion. Without ongoing visibility into what risks are in supply chains, agile risk management, and advanced planning, the risks associated with supply chains cannot be properly nor efficiently managed in a timely manner. This, in turn, leads to negative business outcomes.
This series of Nimble Risk Management Consulting blog articles about supply chain risk management will dig deeper into how to improve business outcomes by more efficiently managing supply chain risks on an ongoing basis with low targeted investments.
References
- How common were supply chain disruptions in 2024
- How common are supply chain disruptions? | Chain Store Age
- 37 Supply Chain Statistics, Trends, and Predictions for 2024
- Supply Chain Risk Management: Best Practices | AuditBoard
- Addressing the Increasing Needs of Third-Party Risk Management (TPRM)
- AI & Supply Chain Risk Management Overview
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