In today’s volatile global landscape, supply chains face an unrelenting barrage of disruptions. From missile attacks on commercial shipping routes in the Red Sea to flooding halting automotive production in Europe, businesses are constantly grappling with instability. The ongoing trade tensions also threaten the flow of critical materials, semiconductor products, and manufacturing equipment.
According to McKinsey’s latest Global Supply Chain Leader Survey, these disruptions are far from isolated incidents. In fact, a staggering 90% of respondents reported encountering supply chain challenges in 2024. More concerning, however, is the indication that companies may be letting their focus on resilience slip. The survey highlights significant gaps in organizations’ ability to identify and mitigate risks, with few new initiatives addressing these weaknesses.
One of the most striking gaps lies at the top level of companies. Only a quarter of surveyed supply chain executives reported that supply chain issues are regularly discussed at the board level, and many believe that boards lack a deep understanding of supply chain risks. This disconnect could leave companies dangerously exposed to the next disruption.
The Surge of Activity During the Pandemic
From 2020 onwards, McKinsey conducted annual surveys to track how organizations responded to unprecedented supply chain disruptions—particularly the COVID-19 pandemic. In this period, businesses swiftly adopted tactical measures such as building larger inventories and increasing buffer stocks. At the same time, companies took strategic actions to improve supply chain visibility, enhance planning capabilities, and explore regionalization and dual-sourcing options to ensure resilience.
Making Progress Despite Challenges
The silver lining in McKinsey’s latest research is that many companies are beginning to reap the benefits of these strategic changes. For instance, 73% of respondents reported progress on dual-sourcing strategies, while 60% are actively working on regionalizing their supply chains. Furthermore, companies are making strides in improving their supply chain intelligence, risk management, and planning. More than 75% of companies believe they have the internal capabilities to manage supply chain risk effectively.
Notably, two-thirds of respondents are investing in advanced-planning and scheduling (APS) systems, a vital aspect of modern supply chain digitization. These systems allow businesses to plan more accurately, respond swiftly to disruptions, and enhance resilience by evaluating multiple supply chain scenarios.
However, despite these advances, some pandemic-era measures, like higher inventory buffers, are being dialed back. The percentage of companies relying on large safety stocks has dropped significantly from 59% to 34%. The future of inventory strategies remains split, with 46% of respondents planning to reduce or eliminate risk buffers.
A Slowdown in Resilience Building
While significant progress has been made, signs indicate that the momentum for strengthening supply chain resilience may be fading. Investments in dual-sourcing, regionalization, and nearshoring strategies have plateaued in recent years. Additionally, investment in supply chain digitization is leveling off after a period of rapid growth between 2020 and 2023.
Perhaps most concerning is the slow adoption of APS systems. While two-thirds of companies are investing in these tools, only 10% have fully deployed them, and many are uncertain about their effectiveness. One-third of companies have not even quantified the business case for APS systems, and 15% report that these systems have failed to meet their objectives.
Gaps Persist Despite Efforts
The slow pace of progress is troubling, especially given that many organizations still face considerable gaps in their supply chain management systems. For instance, fewer companies report strong visibility into their deeper-tier suppliers, a critical weakness as major disruptions often originate at these levels. The share of companies with insight into lower-tier suppliers has fallen by 7% over the past year.
Moreover, companies are under increasing pressure to comply with new supply chain laws, such as the European Union’s Corporate Sustainability Due Diligence Directive, which mandates environmental and human rights standards across all supply chain inputs. Only 9% of companies say their supply chains currently meet these requirements.
A shortage of digital talent remains a major roadblock, with 90% of respondents admitting they lack the necessary skills to meet their digitalization goals. This talent gap, compounded by limited senior management knowledge of supply chain risks, is further exacerbating the situation. Although some progress has been made, only 30% of companies report that their boards fully understand supply chain risks, and even fewer (25%) discuss supply chain issues regularly at the executive level.
The Path Forward
As companies face new supply chain challenges, it’s crucial that they continue to strengthen resilience and address existing blind spots. McKinsey’s research provides key insights into how organizations can advance their efforts.
1. Embrace the 80/20 Rule for Data Quality
Data quality remains a significant bottleneck for many companies’ digitalization efforts. Despite these challenges, firms are still finding success with APS systems. By applying the 80/20 rule—where companies move forward with digital tools once most data is available, addressing gaps later—organizations can overcome this hurdle and continue to progress.
2. Focus on Talent Development
The ongoing digital talent shortage across industries requires a shift in how companies approach talent acquisition. In response, many businesses are turning to in-house training programs to develop the necessary skills for future supply chain transformation.
3. Accelerate AI Adoption
Artificial intelligence (AI) presents enormous opportunities for improving supply chain planning, operations, and risk management. AI-based systems can analyze vast amounts of data from suppliers, logistics providers, and other sources to automate and optimize supply chain functions. The rise of AI tools for demand planning is just the beginning, with much broader applications on the horizon.
4. Close the Boardroom Gap
Supply chain leaders must ensure that their issues are prioritized at the highest levels. This includes providing regular updates on supply chain risks, incorporating risk analysis into decision-making processes, and integrating supply chain issues into broader organizational strategies.
Conclusion
While significant strides have been made in supply chain resilience, the latest McKinsey Global Supply Chain Leader Survey underscores that vulnerabilities remain. Companies must ramp up their efforts to address talent shortages, enhance transparency, and leverage digital tools to stay ahead of future disruptions. Most importantly, organizations must ensure that supply chain risks are fully understood and actively discussed at the board level, empowering them to make the necessary investments to mitigate these risks effectively.
Is your organization paying enough attention to supply chain resilience? Here’s a simple gauge: Can you confidently answer “yes” to the following questions?
- Do you have a plan to build or acquire the digital talent your supply chain needs?
- Do you understand the risk status of your tier-two and tier-three suppliers?
- Do you have an effective early-warning system for supply chain risks?
- Is your supply planning using AI to evaluate risk scenarios?
- Does your board thoroughly understand supply chain risks?
If not, it may be time to refocus on your supply chain resilience strategy before the next disruption strikes.
Click to read more: https://www.mckinsey.com/capabilities/operations/our-insights/supply-chain-risk-survey
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