Supply chain experts say companies are investing more resources to build more resilient global supply chains in response to increasingly frequent health and trade policy changes as well as geopolitical shocks. They expect such shocks to occur with greater frequency.

The Trump administration threatened on May 1 to impose 25% tariffs on European vehicles, a move that followed the outbreak of war in Iran in February and an executive proclamation affecting aluminum and copper imports in April. People such as Dheera Anand, a partner at Bain & Company, point out that companies must now plan for similar shocks to occur regularly and strengthen supply chain defenses in new ways.

"This is not a one-time event. This is the world we live in. And I don't think it's going to calm down in the near term," Christopher McCarney, leader of supply chain and operations at KPMG U.S., said in an interview. "There's always going to be the next event, and now is the best time to modernize."

In fact, the "basic rules of risk management" have been fundamentally changed. Richard Chambers, a senior advisor at AuditBoard, an audit management software provider, previously told CFO Dive that the dramatic policy shifts in the U.S. last year were just the latest chapter in a "permanent crisis" phase since the COVID-19 pandemic.

Major supply chain changes on the horizon

Ongoing supply chain uncertainty has directly impacted corporate management practices. A survey released by KPMG on May 1 showed that a majority of respondents said their organizations now hold regular C-suite strategic meetings specifically to discuss supply chain dynamics; 73% of companies plan to undertake a comprehensive transformation of their supply chain operating models within the next 36 months. The survey noted that the top transformation priorities are risk management and resilience building.

McCarney said corporate priorities have shifted, with a growing need to build buffers into supply chains (which may push up costs) to guard against unforeseen supply chain shocks. "I think companies are willing to pay for resilience. So to speak," he said.

Organizations are also expanding the number and types of employees involved in supply chain risk management.

"Risk management is a shared responsibility across the entire company," Lisa M. Ellram, a supply chain expert at Miami University in Ohio, said in an interview. "People closer to the front lines, such as supply chain managers, may be the first to receive early warning signals, enabling the company to respond more quickly to supply chain disruptions." She said: "Companies are now more focused on anticipating risks, preparing for them, and anticipating them in advance."

Sumit Dutta, leader of supply chain and operations at Ernst & Young U.S., said he sees many CFOs working closely with chief supply chain officers because of the need to understand the financial impact of various events.

Cost is no longer the only priority

A supply chain is a complex network of suppliers, manufacturers, producers, distributors, and retailers that requires companies to meet customer demand through precise adjustments to raw material sourcing, manufacturing processes, logistics, and the return and refund of products or services.

Before the COVID-19 pandemic severely disrupted supply chains, companies built lean supply chains to cut costs, often using just-in-time inventory models.

But the pandemic highlighted the importance of resilience and the interdependence among supply chain links, and also raised the need for broader risk management of corporate supply chain practices. CFO Dive previously reported that a 2022 Protiviti study found that 45% of CFOs and vice presidents of finance began shifting from efficiency-based supply chain models to revenue assurance models.

Anand, who advises global companies on supply chain transformation, said the pandemic exposed a lack of sufficient flexibility in supply chains to absorb systemic shocks.

"You pull out one building block, and the whole system collapses because there isn't enough risk mitigation, resilience, or agility in the supply chain," she said. "I think the 'troika' of cost, cash, and service has now become a 'four-legged stool' of cost, cash, service, and resilience."

Just-in-time? Sometimes applicable

Experts say that despite the emphasis on resilience, just-in-time processes have not been completely abandoned by companies, but their flexibility is now under scrutiny. Companies now realize that certain parts of the supply chain need redundant design, such as multiple suppliers or larger inventories. This increases costs, but not doing so risks supply chain disruptions.

"I think companies now recognize that costs must be considered in tandem with the resilience of the supply chain against all these pressures," Dutta said. "Cost has not fallen out of view. But now there's an understanding that cost must be weighed alongside resilience, agility, and sustainability."

Jeannette Song, a professor at Duke University's Fuqua School of Business, also agreed in an interview: "Use just-in-time for certain items, but not for others. It's a hybrid approach. Do it in a disciplined way. It still reduces costs, but you only apply it to items with relatively stable supply."

Anand also described current practices as more nuanced. "There is no longer a one-size-fits-all approach to supply chain management," he said.