Since COVID-19 strained the global supply chain in 2020, it has seen an impressive recovery. But as we approach 2025, there are still many issues for businesses to resolve as supply chains continue to be riddled with cracks.
Read also: Resilience in the face of adversity: how recent disruptions have strengthened supply chains
Many regions are disrupted by warand others are on the brink. Businesses also grapple with fluctuating customer demands and changing markets. For manufacturers sourcing raw materials, the problem is compounded by climate change-related volatility in agricultural yields and political instability in areas important to minerals and similar products.
If there’s any good news, it’s that organizations across all sectors are learning to cope with uncertainty. This is no longer a shock and they are now developing new tactics, tools and technologies to ride the waves.
Primarily, supply chains are going digital, adopting artificial intelligence (AI), machine learning (ML) and the Internet of Things IoT. Automating tedious manual processes reduces the risk of errors and saves employees time. Enhanced AI-based data analytics platforms collect and process massive data sets to provide reliable insights in real or near real-time.
According to PwC, the best technologies adopted for global supply chains are common data platforms based on cloud, IoT and advanced analytics. Using these technologies, companies can improve demand and risk forecasting, gain visibility across the entire supply chain, and optimize resource allocation. All of this contributes to cost savings and improved operational efficiency.
Supply chain risks are increasing in volume and impact
After a brief post-Covid recovery, supply chain disruptions are increasing again, with threats coming from multiple vectors. Extreme weather events are more frequent and climate change is affecting traditional shipping routes. Due to a prolonged drought, the Panama Canal Authority has limited daily traffic by approximately 40% compared to 2023. This represents 2.5% of all ocean freight and 14% of US ocean freight.
The war is disrupting important supply chains across the Black Sea and the Suez Canal, and could soon also affect the seas around China and Taiwan. As of January 2023, the volume of containers traveling on the Red Sea had fell by 75%. Meanwhile, cyberattacks and strikes, like those that took place in the United States in October 2024, remain a threat.
Overall, the chances of shipments being delayed, lost or damaged are greater than ever. Just going via the Cape of Good Hope instead of Suez adds up to 10 days to the trip. The deadlines are 28% more than before the pandemicpushing manufacturers to rethink their supply chains to build resilience.
Many are working to diversify their supply chains with “+1 supplier” methods. Almost all are being flexible, stress testing, planning for longer lead times, and ensuring they are agile enough to pivot supply chains quickly.
These new priorities are driving the adoption of supply chain data analytics platforms such as Qlikfor real-time monitoring, reliable predictions on potential disruptions and risk modeling to improve supply chain risk management. Along the same lines, PwC recommends transforming a linear supply chain into a single digital ecosystem, to gain full visibility and make decisions with all Tier 1 and Tier 2 suppliers based on robust data.
Costs are rising and increasingly volatile
Growing supply chain disruption is also driving up costs for manufacturers and importers. Passing by the Cape of Good Hope adds over a million dollars On average, fuel costs and container costs increase with each development of war, tropical storm and strike. They already represent more than double the historical averages. At the same time, climate change affects agricultural yields in unpredictable ways.
Usually, companies can simply pass price increases on to the consumer. But consumers are already paying more for fewer goods. After years of inflation and uncertainty, they are no longer willing to absorb further price shocks. CEOs strive to achieve profitable growth, which requires minimizing disruption and reducing costs.
Part of the problem is that prices are not only increasing, they are also volatile. It’s difficult for anyone to know which products might see a price increase and when, and which might go down, making it harder to take appropriate action.
Some verticals are offshoring and nearshoring to shorten supply chains. By the end of 2023, 97% of companies said they were reconfiguring their supply chains. In other verticals, reshoring is not a possibility. Instead, they can use Hedgify ensuring price protections on vital raw materials, thereby reducing financial uncertainty.
Price protections for raw material sourcing were once only available to multinational companies with access to proprietary commodity futures platforms, expensive supply chain insurance policies, and sophisticated know-how in scenario modeling. Hedgify is changing the landscape by providing easy access to simplified protection contracts, comfortable payment schedules and insightful commodity-specific analysis reports.
For all organizations, data analysis allows them to improve forecasting and minimize disruption, helping to reduce costs and improve operational efficiency. Automating manual processes is also important to reduce errors, which can be costly to correct, to streamline workflows, and to improve operational efficiency.
Sustainability, a growing concern
Manufacturers today have a new issue on their list of priorities: sustainability and ESG compliance. Environmental and social justice issues dominate many portfolios, highlighting the need to make the supply chain as green as possible, minimize the carbon footprint and maximize the circular economy. As awareness of the “long supply chain” evolves, consumers are also interested in Scope 3 emissions, which can account for 65 to 95 percent of an organization’s carbon footprint, according to PwC.
The supply chain must also be ethical, both to please consumers and to comply with new regulations. In 2022-2023 alone, at least eight countries have introduced laws on modern slavery and human rights in the supply chain. The SCDDA in Germany, the CS3D in the EU, and the Forced Labor and Children in Supply Chains Act in Canada are all in force or will soon come online. Shipments can be seized if they do not comply with regulations, with more than 4,000 seizures in the United States in 2023 for violating forced labor laws.
The regulatory burden for ethical sourcing will only increase. Organizations need transparency in the supply chain to have confidence that they are only working with companies that respect labor laws, prevent human rights abuses and follow sustainability best practices and social justice.
This requires much better end-to-end visibility of the supply chain. Businesses are adopting solutions like Z2Dataa holistic, data-driven supply chain risk management platform that tracks and evaluates the compliance profile of each third party. These technology tools analyze huge data sets to provide real-time insights that enable companies to optimize routes to minimize waste and emissions, and monitor ESG compliance throughout the supply chain .
Supply chain managers need all the help they can get
The global supply chain is not in a good place. Increasing risks, costs and ESG requirements increase the burden on manufacturers and any business that relies heavily on long supply chains. At the same time, volatility and uncertainty hamper decision-making. Supply chain managers need the full power of new technology tools to deal with unpredictability and help their organizations remain profitable and competitive.