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Logistics Guide: Preparing for the Greatest Supply Chain Risks of 2025

It’s that time of year again, when we can use our past learnings, insight from what’s happening around the globe, and our forecasting skills to determine what we can expect in the year to come. With unprecedented visibility into our operations, supply chains, and logistics networks, we can identify opportunities and challenges like never before. But this clarity also reveals gaps, exposing areas where resilience and efficiency fall short. Addressing these demands nothing less than sharp critical thinking and innovative problem-solving. As we prepare for the year ahead, let’s explore the key supply chain risks of 2025 and discuss how we can proactively address them to stay ahead of the curve.

Risks of 2025

Given the challenges of the past five years, it’s no surprise that disruptions continue to rule the day. Many of the risks we contended with last year will persist and new ones will keep creeping up, forcing us to innovate and expand. In 2024, the main trends we noticed were the proliferation of sanctions and bans on different suppliers and the impact of Artificial Intelligence (AI) on data consistency. This year, we believe the three risks that will rise to the top are:

1: Supply chain restrictions due to tariffs continue to pose significant challenges for businesses. The European Union (EU) recently imposed tariffs on battery electric vehicles (BEVs) imported from China, with tariffs ranging from 7.8% to 35.3%, in addition to the standard 10% car import fee. This has escalated tensions between the EU and China, and led to increased operational costs for companies, forcing them to either absorb the expenses – reducing profit margins – or pass them on to consumers, potentially diminishing demand.

The impact of these tariffs extends beyond the EU-China dynamic. In the U.S., for example, companies have experienced increased costs due to tariffs, with a study noting an additional burden of $51 billion per year, primarily affecting businesses and consumers. These financial strains can disrupt established supply chains, leading to supply uncertainty, and the threat of retaliation. 

2:  Reputational risk is a newer issue, but a significant one. The polarization of public opinion worldwide has become so vast it is starting to affect the supply chain at large. How? Let’s break it down: When Company A engages in unethical or controversial practices, the public often scrutinizes not only Company A but also the businesses that work with them. This creates a ripple effect, where companies associated with Company A face backlash simply due to their connection, even if they had no control over the situation. These businesses are then forced to decide whether to continue their partnership with Company A, risking reputational damage, or seek alternative suppliers, which could disrupt their operations.

The rise of social media has brought increased scrutiny to areas of the supply chain that once operated largely unnoticed, amplifying the influence of public judgment. Reputational risk is particularly challenging to manage because it often arises without warning, leaving businesses scrambling to respond to something they are generally not equipped to handle. The most frustrating aspect is that reputational risk is nearly impossible to address proactively, making it a persistent and unpredictable threat that forces businesses to function out of a reactionary mindset. 

3: Value risk is an ongoing concern. It involves assessing the potential financial loss a company could face due to disruptions or issues with a supplier that significantly impact the value of the final product. The recent surge in bankruptcy filings—up 33.5% in the 12 months leading to September 30, 2024—has had a noticeable impact on the healthcare, automotive, and retail industries. This financial instability among suppliers can lead to production delays, increased costs, and compromised product quality, directly diminishing the value delivered to end customers. 

It’s easy to get caught up in the doom and gloom of the challenges we have to face, but as supply chain professionals it’s up to us to use our problem-solving skills to prepare. With insight into what to expect and the understanding that there’s plenty we also don’t know, we can plan different strategies as we forge ahead.

Preparing For The Supply Chain Risks of 2025

Before we even touch on specific ways to address the risks mentioned above, we need to go over the obvious: education and training. The supply chain space has changed dramatically in just the last five years, and education needs to be modernized to catch up. The new crop of supply chain professionals need to be armed with knowledge that will serve them in this ever-changing industry. This involves understanding complex technology systems—how they operate today, how AI can enhance their capabilities, and how to effectively train and leverage AI to deliver lasting value. It also requires a commitment to continuous professional development and training, ensuring supply chain professionals are fully prepared to tackle any challenges that arise.

Preparing for supply chain risks: ask the right questions

#1 Supply Chain Restrictions

Does your company have a way to react to restrictions? For many, this will involve seeking alternative suppliers, diversifying markets, or investing in local production to mitigate the adverse effects of trade restrictions. These changes come with their own set of financial challenges, which means these companies must also invest in sound strategic planning to ensure their solution doesn’t unwittingly end up being their demise.

Is there a mechanism in place to track restrictions to ensure you’re compliant? Keeping track of ever-changing regulations demands an overwhelming amount of manual workload, but the combination of human expertise and AI can help. Generative AI can be used for the data-intensive aspect of sourcing real-time regulatory updates, while human experts can use that information to handle complex judgment calls and provide strategic insights on how to proceed.

#2 Reputational Risk:

Have you defined the company’s risk tolerance for reputational damage?  Learn what customers, shareholders, and employees expect from the organization and management, so you can work to satisfy these conditions. Ultimately, you want to ensure all members of the company, from floor workers to CEO, understand the importance of reputational risk and what’s at stake so it is taken seriously.

Are you prepared to handle reputational risk? Incorporating reputational risk into your company’s strategy and planning process ensures you have a plan if an issue arises. Moreover, while reputational risk is a critical consideration, the speed of your company’s response is equally important. Consumers pay close attention to how quickly businesses take action, favoring those that make immediate changes over those that delay until the last possible moment. 

#3 Value Risk:

Value risk has a blanket effect on all other risks companies may face. There are many questions to consider:

  • What is the maximum financial loss we can absorb from a single supplier disruption without jeopardizing our operations?
  • How reliant are we on single-source suppliers for critical components or materials?
  • What is the potential reputational cost of failing to deliver on customer expectations?
  • How do geopolitical factors or trade policies impact the value of our products?
  • How quickly can we identify and respond to supply chain disruptions?
  • What percentage of our resources are allocated to proactive risk management?

In short, companies must meticulously align their supply chain strategies with the value curve, to ensure that every decision made and every action taken is a step toward enhancing the overall functioning of the supply chain.

Supply Chain Risks of 2025: Conclusion

The supply chain risks of 2025 demand foresight, planning, and proactive leadership. Supply chain leaders must adopt resilience-building strategies to address ongoing restrictions; invest in ethical practices to safeguard against reputational risk; and take planning to a new level to address value risk. This is the year supply chain leaders can make their mark with strategic planning that goes beyond risk mitigation. For many, that starts with selecting and implementing the right technology to lead the way. 
That’s where we come in. We’re Cornerstone Edge, your supply chain partner dedicated to turning risks into opportunities. Let us help make 2025 a year of growth and innovation for your business. Simply reach out.

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