Supply chains saw unprecedented attention in the last five years due to disruptions caused by the COVID-19 pandemic and several environmental and geopolitical events. But those days are beginning to fade.
While resilience and flexibility will remain top supply chain trends in 2025, evidence suggests that organizations have started to pull back from investing in technologies to introduce these characteristics as other enterprise issues take priority, according to industry experts.
In the new year, they said, one of the biggest challenges chief supply chain officers will face is making the case to get the investments they're seeking alongside competing priorities.
Investment slows
Supply chains remain vulnerable, but organizations appear to be "taking their foot off the gas" when it comes to investing in supply chain resilience, according to the recently published supply chain survey report from McKinsey & Company. The report is based on surveys conducted in May that asked supply chain leaders what they've done and what they plan to invest in for the year ahead.
Because of the pandemic, organizations realized they needed to make supply chains stronger and more flexible, according to Knut Alicke, a partner at McKinsey and co-author of the report. They subsequently set up short-term intervention measures such as control towers and war rooms that enable more visibility and collaboration, and then took more structural measures such as implementing end-to-end planning.
"They looked into their sourcing network, which is where a lot of the problems came from," Alicke said. "Like being too dependent on one supplier, one region, one country or one technology, so they started to split this and look to alternate sources."
In 2021 and 2022, supply chains became a boardroom concern, and there was a significant investment in building up resilience. However, while supply chain disruptions still occurred in 2023 and 2024, they were not as extreme, and interest in the issue diminished.
"Now [the chief supply chain officer] has lost the seat at the table as companies are now focusing more on cost cutting and inventory reduction," Alicke said. "Risk is still an important topic, but it's a little bit pushed out."
Investment in digital technologies such as AI and analytics to improve supply chain resilience will continue, but the investments will need to be justified to a greater degree, said Mike Dominy, an analyst at Gartner.
"There's a greater degree of scrutiny by CFOs on digital investments in general and digital supply chain investments, but I don't see any abandoning yet," Dominy said. "It's quite clear that using technology effectively helps organizations be more efficient and effective in supply chains."
Chief supply chain officers have always needed to manage costs, but in 2020, their budgets and latitude to spend increased to meet pandemic challenges, he explained.
[The CSCO] wasn't being pressed as much on costs because companies couldn't even get product in. But then inflation rose, costs went up, and CSCOs were getting asked again about costs and how to get them under control.
Mike DominyAnalyst, Gartner
"[The CSCO] wasn't being pressed as much on costs because companies couldn't even get product in," Dominy said. "But then inflation rose, costs went up, and CSCOs were getting asked again about costs and how to get them under control."
Keep the focus on agility
Supply chain has moved to the strategic center of organizations since 2020, but this has started to change, agreed Ashutosh Dekhne, a partner at EY Global Consulting Services.
Disruptions have become a continuing issue, so supply chain leaders must find ways to manage them, primarily by becoming more agile and flexible, he said. Doing so can help the supply chain be a growth engine rather than a cost center by bringing insights back to the commercial or financial sides of the organization.
"This could mean not just saying whether you can service a given potential customer need, but understanding the cost and the margin that you can get from serving that need," Dekhne said. "They need to be able to bring those strategic insights to the organization so that they can be seen as a core part of that team that drives the strategic agenda forward."
The diversification of suppliers, which helps to enable resilient and agile supply chains, will continue, he said. Part of this trend is about avoiding reliance on one supplier and adjusting inventory management as needed, by both using just-in-time inventory systems and maintaining inventory stocks.
"You now have to have a mix where you have a warehouse for resiliency and agility, but you also have a vendor-managed inventory program where you don't carry all that on your books," Dekhne said.
Supply chain visibility is another important trend, but it needs to go further than tracking and tracing goods, he said. To do this, organizations are implementing cloud-based digital technologies to create a unified data model across the entire supply chain, including manufacturing data, planning master data, supplier master data and customer data.
This added visibility can enable instantaneous root cause analysis of issues, Dekhne explained.
"For example, if on-shelf availability is not there, why?" he said. "Is it because we didn't produce X, or we produced X, but we shipped it to the wrong places because forecasting issues said we were short there?"
Better visibility is a trend that will continue because organizations have experienced significant losses from disruptions due to the lack of visibility into their extended suppliers, said Abe Eshkenazi, CEO of the Association for Supply Chain Management. Most of the disruption occurred in SMBs, which are not as well financed or resource rich as larger suppliers for traceability and transparency, leading to more investment in technology and digital transformation.
"Being resilient, adaptable and agile to the various disruptions requires predictive information in terms of what the possible outcomes are going to be," Eshkenazi said. "So we're seeing significant investment on AI, predictive analytics [and] machine learning."
Tech rewards come with risks
AI -- particularly generative AI -- advanced analytics and automation are technologies being implemented into supply chains, but analysts caution that these can carry risks as well as rewards.
For example, becoming more digitally enabled creates more cybersecurity risks and possible exposure to nefarious actors, according to Eshkenazi.
"They're not coming at the top tier. They're coming at your extended suppliers who may not have the same protocols or security requirements as the top tier," he said.
Organizations don't always have the skills and experience to take full advantage of the new technologies and will often accept the recommendations from AI systems uncritically, he added.
"[There's a lack of] experience or critical analysis of the information coming into the organization and what the systems are telling you," Eshkenazi said. "[We need] problem-solving and critical thinking for individuals, as opposed to overreliance on technology. We need to blend the investment in technology with a commensurate investment in the talent to take advantage of the technology investment."
AI is the "bright and shiny object" right now, but there's a lot of hype. The new year will be a time to sort out what's real and what's not, said Simon Ellis, an analyst at IDC.
"When you talk to the boots on the ground in companies, they're not clear what's happening or if anything's happening with AI," Ellis said. "There's an interesting disconnect between the supply chain planners and the hyperbole that exists around the broader environment."
One area of disconnect is defining the types of AI being used and the use cases, he said.
For example, traditional AI such as machine learning has been used in demand forecasting applications for at least 20 years. But, he said, using generative AI to create reports or provide customer support is still mostly aspirational or at the pilot stages for most organizations.
"Remember that five or six years ago, blockchain was going to change the world. Well, not exactly," Ellis said. "I'm not suggesting that GenAI is blockchain, but often, the more people extol the benefits and talk about massive change, the less likely it's actually going to happen. It's still early days for this stuff."
It could still take two to five years for generative AI to be used at scale in the supply chain, as organizations work out how to resolve concerns about data security, Alicke said. The technology is acknowledged as a valuable opportunity, but most organizations are wary about sharing data in an open cloud environment.
"Private cloud is an option now, and tools and ideas are popping up, like having GenAI copilots or being able to communicate with suppliers and customers," he said. "It's developing, and we'll see a lot of interesting applications in the next two to five years."
Ultimately, for supply chain in 2025, it's important that organizations hold on to what was learned in the last five years and keep it at the forefront of business strategy, Alicke said.
"Supply chain was in focus two or three years ago, and now it feels like it's losing this focus," he said. "Because of the cost cutting, you are basically reducing resilience or increase fragility, which means that in one or two years, everyone may see that the supply chain is fragile and they again need to do something to increase resilience."
Jim O'Donnell is a senior news writer for TechTarget Editorial who covers ERP and other enterprise applications.
