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Global supply chains have faced a decade of disruptions. The most significant have included the US-China trade war, the COVID-19 pandemic-era consumer goods boom and the Russia-Ukraine war. Supply chain disruptions have also included a variety of natural disasters, financial failures and operational difficulties.

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Supply chain activity has normalized in operational terms during 2023, but there are significant risks across the industrial policy, labor action and environmental policy implementation spheres heading into 2024.

Supply chains need to be more resilient, but questions remain over whether corporations and their investors are willing to make the investments necessary to fortify them.

Global supply chains largely normalized in 2023 after years of disruption, and the need for resilience is clear. The willingness of corporations to build that resiliency is not.

Falling operating margins and higher interest rates may be leading companies to cut their inventory balances and reverse recent supplier diversification increases.

There is no shortage of technology available to enable supply chain resilience, with generative AI as the latest example. Most companies need to see short-term returns on investment, and recent experiences with blockchain, for instance, are leaving some hesitant.

Organizational alignments are necessary to ensure continuing supply chain resilience. Tools for success include increased engagement with labor unions, geographic diversification with an eye to mitigating operational risk, closer tracking of environment profiles, reshoring and enhanced supplier engagement to manage tariff and geopolitical risk.

Paying for resilience in a high-cost environment

Shrinking corporate profit margins and higher relative capital expenditures signal that reinvesting in capital stock may take priority for companies over spending on supply chains.

Technology toolkit for enabling resilience

Deploying technology to enable supply chain resilience requires close attention to return on investment. While some large enterprises have the resources to gamble on emerging technologies, most players in the supply chain space will not spend for digital transformation without a near certainty of return on their investment in a reasonable period.

Delivering supply chain resilience through organizational agility

Building a robust supply chain is a long-term process, whether through adapting inventory policy and adopting new technologies or fundamentally retooling sourcing via supplier choice or international diversification.

Resilience still needed; spending not guaranteed

Supply chain resilience will be just as important in 2024 as it was in the past three years, yet corporate willingness and ability to invest in inventory management and multisourcing may be limited by falling profits and high financing costs.

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