Why Supply Chains Remain Vulnerable
Few Supply Chain Leaders Feel Prepared
Nine in ten companies have established risk management strategies in the years after COVID. Few of these firms, however, can confidently say that they feel fully prepared for the threats they face. In a 2023 Gartner survey, 62% of supply chain leaders reported that they were struggling to keep up with all the hazards their industry faces—despite the hard lessons learned from the pandemic's shortages. Additionally, 75% of executives expect major disruptions to their supply chains to increase over the next five years. According to a 2023 report from Deloitte, the top five priorities for procurement experts include driving operational efficiency; enhancing ESG/CSR; pursuing digital transformation; improving margins through cost reduction; and enhancing risk management. In spite of all the progress supply chain management teams have made in recent years, though, many organizations still feel unprepared for today's risk landscape.
75% of executives expect major disruptions to their supply chains to increase over the next five years.
Key Disruptions for Supply Chains in 2025: Geopolitical Tensions
While supply chain challenges have eased somewhat since the height of the COVID-19 pandemic, they're far from disappearing. A 2024 Deloitte study found that supply chain issues are on the rise again in Q4 across multiple areas—including transportation and logistics costs, raw material prices, and trade uncertainties. Procurement leaders are anticipating significant disruptions, including geopolitical instability (46%) and a lack of supplier resilience (42%), both of which will drive high inflation pressures (62%). Geopolitical friction spans much of the globe, as nations in Europe, Asia, and America grapple with hostilities. Tensions between Russia and NATO, competition between China and the United States, and conflicts in the Middle East all raise concerns over material access, operational efficiency, and revenue impacts. From the Red Sea shipping crisis—which saw a 66% decrease in traffic from April 2023 to April 2024—to gallium prices doubling after China's export restrictions, geopolitical conflicts are causing significant repercussions. Companies across sectors relying on global supply chains are struggling to mitigate these growing risks in an era of increasing volatility.
Sanctions: A Fast-Growing Consequence of Trade Policies
A less-talked about but rapidly growing branch of geopolitical upheaval, sanctions are also reverberating across international supply chains. In 2023 alone, the U.S. added 2,500 entities to the U.S. Specially Designated Nationals List, raising the total number of sanctioned entities and individuals to around 15,000. This number doesn't include non-U.S. sanctions lists such as the UK Sanctions List, Taiwan SHTC Entity List, and others. For industries such as automotive, which have as many as 18,000 suppliers in their production process, finding and extracting banned entities from their tier 1 and sub-tier suppliers presents a nearly impossible challenge. Automotive giant Volkswagen, for instance, saw Customs and Border Protection (CBP) detain a shipment of thousands of vehicles over suspected forced labor ties, highlighting the tangible impact of geopolitical conflict on global trade.
In 2023 alone, the U.S. added 2,500 entities to the SDN List, raising the total to approximately 15,000.
Lack of Supplier Resilience and the Rise of ESG Regulations
In the years since the pandemic's peak, supplier resilience has been tested on multiple levels. Geopolitical tensions have driven companies to pursue onshoring or nearshoring supply chain solutions, as evidenced by Mexico overtaking China as America's largest trade partner. New regulations are placing pressure on companies to have increasing insight into who they're doing business with. Compliance is no longer just about what's being supplied—it's also about who's supplying it. These regulations are focused on a range of areas, including due diligence, industry-specific disclosures, nature and biodiversity standards, social and human-rights concerns, and the advancement of the circular economy. Key regulations include: the U.S. Toxic Substances Control Act Section 8(a)(7) (PFAS reporting), California Climate Corporate Data Accountability Act (CCDAA), EU Corporate Sustainability Reporting Directive (CSRD), EU Corporate Sustainability Due Diligence Directive (CSDDD), and Australia's Climate-Related Financial Disclosure Law. A 2021 PwC survey found that over three-quarters of consumers agreed that they would discontinue their relationships with companies that treat the environment, employees, or the community poorly.
Bold SCRM Strategies, Big Shortfalls: Supplier Collaboration Limitations
To overcome challenges, businesses are increasingly turning to strategies including increasing supplier collaboration (61%), investing in digital transformation (42%), and enhancing demand management (37%). While these approaches are a step in the right direction, they ultimately fall short because they lack two crucial elements: scalability and sustainability. Supplier surveys continue to be the most common method of gathering critical supply chain information. However, surveys rely on static information—data fixed to the time it was completed. If a supplier is surveyed in March and placed on a banned entity list in June, companies may remain unaware until the next survey cycle, often up to a year later. This creates a serious visibility gap. Survey fatigue is also a growing concern: a 2024 Voice of the Supplier survey found that 61% of manufacturers felt their most important customer sends them too many information requests, and 60% noted their most important customer expects them to do too much administration. Suppliers may also misrepresent compliance status or omit important details, leaving companies investing in and acting on a version of the truth that may not fully reflect reality.
Digital Technology: Adoption Without a Roadmap
Many companies have jumped into digital solutions without a comprehensive roadmap. Most digital solutions on the market today are point solutions built to address very specific problems such as ESG scoring or monitoring supplier financial stability. The result is an increasingly complicated technology landscape fraught with data silos. According to BetterCloud, companies now use an average of 112 SaaS applications, with employees shifting between 35 job-critical applications more than 1,100 times a day. Disconnected data sets that cannot be effectively synthesized into a coherent, holistic view are preventing companies from seeing the bigger picture. Many employees turn to shadow IT solutions—unsanctioned software or manual workarounds like Google Sheets—to aggregate data from multiple systems. As much as 32% of SaaS solutions used by companies are not approved by IT. A 2024 academic study found that 94% of spreadsheets used in business decision-making contain errors, posing severe risks of financial losses and operational mistakes.
94% of spreadsheets used in business decision-making contain errors (2024 academic study).
Demand Management's Data Problem: Dirty Data and Verification Gaps
Demand management relies on precise, clean data to forecast and plan effectively. But when that data is flawed, outdated, or fragmented, even the most carefully crafted demand management strategies will fail. Gartner research indicates poor quality data costs companies at least $12.9 million a year, on average. A Z2 analysis of product BOMs found companies used over 500 different spelling variations for Texas Instruments' products in their systems, creating unnecessary complexity in tracking and managing suppliers. This type of disorganization can trigger shortages that lead to lost sales or surpluses that drive up holding costs. A Z2 analysis also revealed that of the 473,190 parts that became obsolete in 2023, around 142,000—or 30%—had no accompanying product change notification (PCN) issued from the manufacturer. Relying on unverified or incomplete data leaves companies vulnerable to sudden shortages or delays, forcing reactive responses based on incomplete or misleading information.
30% of the 473,190 parts that became obsolete in 2023 had no accompanying PCN from the manufacturer.
Top Risks Anticipated by Procurement Leaders
Source: Deloitte 2023 CPO Survey
Top Proactive Risk Mitigation Strategies Adopted
Source: Industry research
Four Best Practices for a Resilient Supply Chain
Sustainable strategies require scalable data, flexible frameworks, cross-team alignment, and always-on risk sensing.
Focus on Getting the Right Data
A proactive approach to data collection is essential. Companies should identify key data points that influence risk assessments and tailor their data-gathering strategies accordingly. Implementing automated systems that continuously update and verify supplier information can significantly reduce survey fatigue and enhance the overall quality of data collected. Companies should also leverage multiple data sources—including not only supplier databases but also industry reports and third-party data providers—to ensure a well-rounded view of potential risks. Companies must also focus on creating a highly accurate database that collects and normalizes data drawn from multiple sources. According to Gartner, known issues with LLMs including hallucinations, sycophancy, and sandbagging suggest that LLMs may be very good at making data look correct without being overly concerned about real-world accuracy—meaning organizations will need to invest more in data governance and literacy to provide additional human oversight where LLMs are deployed.
Build a Roadmap for Your Risk Strategy
Companies should identify the specific risks they want to monitor and determine the necessary internal and external data to build that framework. This comprehensive view will provide a clear understanding of their risk landscape. A key step is incorporating flexibility into these frameworks—companies need to develop dynamic risk models that allow for adaptation as new regulations and market changes occur. As priorities shift, their frameworks must be flexible enough to adjust without necessitating complete overhauls.
Foster Collaboration Across Teams
While operational efficiencies often focus on solving data silos, it's critical to resolve the human ones, too. Supply chain leaders who want to facilitate effective collaboration should establish regular channels for communication between teams that cover everything from procurement and compliance to sustainability. By fostering collaboration, companies can ensure that all stakeholders are aligned on risk priorities and data needs.
Enhance Risk Sensing Capabilities
Companies should utilize advanced analytics and AI tools to identify high-risk sub-tier suppliers and assess their impact on the supply chain. Risk assessments are one of the most effective proactive risk mitigation measures available, as they allow manufacturers to comprehensively visualize their threat landscape before costly disruptions even occur. Businesses that regularly update risk profiles based on new data ensure they're responding to evolving threats fast and effectively. Investing in technologies that provide real-time insights into supply chain risks allows organizations to respond to emerging issues and patterns among their suppliers. Firms that utilize continuous monitoring can identify vulnerabilities before they escalate into significant problems.
How to Leverage Technology the Right Way
Digital transformation is a core part of a modern, effective risk management strategy. AI and machine learning are transforming supply chain management by providing sophisticated tools for predictive analytics, demand forecasting, and risk detection. In a 2024 State of Manufacturing report by Fictiv, 87% of supply chain leaders surveyed agreed that AI is vital to their company's future success.
The Internet of Things (IoT) is revolutionizing real-time visibility in the supply chain—by deploying IoT devices throughout supplier networks, companies gain unprecedented insights into the movement and condition of goods at every stage. Blockchain technology brings traceability, security, and transparency to the supply chain, ensuring records cannot be tampered with. Digital twins offer a powerful way to simulate supply chain disruptions and optimize decision-making.
87% of supply chain leaders agree AI is vital to their company's future success (Fictiv, 2024).
Supplier Risk Distribution (Sample Scorecard)
Source: Z2 Platform Analytics
Tier 1 Suppliers
Sub-Tier Suppliers
Parts Obsolescence Without PCN — 2023
Source: Z2 2023 Analysis of 473,190 obsolete parts
Building Resilience with Z2
An end-to-end platform built for the complexity of modern supply chain risk management.
How to Leverage Technology the Right Way
Digital transformation is a core part of a modern, effective risk management strategy. AI and machine learning are transforming supply chain management by providing sophisticated tools for predictive analytics, demand forecasting, and risk detection. In a 2024 State of Manufacturing report by Fictiv, 87% of supply chain leaders surveyed agreed that AI is vital to their company's future success. The Internet of Things (IoT) is revolutionizing real-time visibility in the supply chain—by deploying IoT devices throughout supplier networks, companies gain unprecedented insights into the movement and condition of goods at every stage. Blockchain technology brings traceability, security, and transparency to the supply chain, ensuring records cannot be tampered with. Digital twins offer a powerful way to simulate supply chain disruptions and optimize decision-making—by creating a virtual representation of the supply chain, companies can model potential disruptions and explore various response scenarios without impacting actual operations.
87% of supply chain leaders agree AI is vital to their company's future success (Fictiv, 2024).
Building a Resilient Strategy with Z2: Accurate and Automated Data Management
Z2 gives users access to a centralized, expansive database of over one billion electronic components, 300,000 suppliers, and 100,000 manufacturing sites worldwide, creating a reliable foundation for risk analysis. With built-in automated updates and data normalization, companies can bypass common data errors and inconsistencies, streamlining accurate risk analysis without the need for manual checks. Because Z2 provides extensive insights into components and suppliers down to the sub-tier level, organizations can focus their supplier surveys on only the information that's not already captured in the platform's database.
Z2 database: 1B+ electronic components, 300,000 suppliers, 100,000 manufacturing sites worldwide.
Building Flexible, Customizable Risk Frameworks with Z2
With Z2, companies gain the flexibility to develop tailored frameworks that can adapt to evolving market demands and sustainability goals. Users can create risk assessments that incorporate real-time supplier and product data, aligning these frameworks with key business objectives—from regulatory compliance and ESG goals to critical risk priorities like geopolitical and obsolescence concerns. Rather than having a static framework that risks becoming obsolete as market conditions change, Z2 supports sustainable practices by allowing leaders to refine their risk assessments as new regulations and risks arise. This adaptable model helps companies stay ahead of shifting regulatory demands such as updated environmental mandates, shifting global trade policies, or the latest industry standards on component quality and availability.
Real-Time Risk Detection, Predictive Analytics, and Continuous Monitoring
Waiting for annual updates or relying on dated databases can leave companies vulnerable to emerging risks. Z2 addresses this by providing real-time risk sensing and predictive analytics powered by AI and machine learning. Users gain insights into potential risks before they escalate—whether those threats are connected to environmental compliance, sanctions lists, or unexpected supply disruptions. The platform's proactive risk forecasting also helps companies detect and respond to vulnerabilities promptly, empowering them to shift from a reactive to a proactive risk management strategy. Z2's platform enables companies to receive automated alerts about compliance risks and sustainability issues. As new substances are added to compliance lists like REACH and emerging forced labor issues come to light that impact trade restrictions, Z2's rapid updates allow companies to maintain their compliance standing effortlessly.
Expert-Driven Support and Dynamic Data Integration
Z2's sustainability model is reinforced by its network of experts across supply chain, ESG, and regulatory compliance. This multifaceted expertise helps customers build data models and frameworks that can evolve with changing risks, providing a flexible solution that scales with the organization's growth. Additionally, Z2's integration capabilities mean that data can be seamlessly incorporated into other systems, allowing for cross-departmental collaboration. This close integration helps companies meet their goals without needing to constantly rebuild processes.
Why Z2?
As companies aim for sustainable, scalable, and resilient supply chains, the value of an end-to-end solution is all but indisputable. Z2's comprehensive platform empowers organizations to build proactive risk management strategies designed to thrive in changing market conditions. With Z2, companies adopt a technology-driven, customized approach to risk management that's agile, scalable, and future-ready—equipping them to adapt to market movements, regulatory demands, and sustainability goals. By integrating Z2, companies can confidently navigate today's complex supply chain landscape, creating a resilient, sustainable strategy built to keep them successful and competitive for years to come.
