How Supply Chain Resilience Is Affected By Geopolitical and Environmental Challenges

How Supply Chain Resilience Is Affected By Geopolitical and Environmental Challenges

The initial pandemic-induced supply chain disruption has eased, but emerging geopolitical tensions are prompting organizations to enhance their supply chain resilience, according to an article by Risk Management Magazine. Michael Zuraw of Onsemi notes that geopolitical uncertainties are challenging strategic sourcing and distribution, despite a stabilizing economy. 

Conflicts, such as the war in Ukraine and attacks by Yemen’s Houthi rebels, have disrupted major shipping routes, forcing ships to take longer, more expensive paths. Additionally, climate change impacts, like the Panama Canal’s drought-induced capacity reduction and infrastructure issues like the Baltimore bridge collapse, exacerbate these challenges.

A Deloitte survey highlighted in the article revealed that over 70% of chief procurement officers reported increased supply chain risks, with few able to predict these risks accurately. Dan Lever of Clyde & Co. stresses the importance of understanding international relations and conflicts in supply chain risk management.

Companies are adopting strategies such as onshoring, nearshoring, and vertical integration to bolster supply chain resilience. U.S. legislation like the JOBS Act and the CHIPS and Science Act has encouraged domestic manufacturing, reducing reliance on foreign suppliers.

The heightened focus on supply chain resilience has shifted supply chain management from procurement and logistics to strategic enterprise risk management, often led by high-ranking executives. This strategic approach integrates various functions and emphasizes transparency and ethical practices, aligning with regulatory requirements. Despite ongoing uncertainties, companies that adopt comprehensive risk management strategies are better positioned to navigate supply chain challenges.