In today’s interconnected global economy, supply chains are under increasing pressure to withstand a multitude of disruptions. From geopolitical tensions to climate change, businesses are realizing that traditional supply chain strategies are no longer sufficient. The question is no longer whether disruptions will happen, but how futureproof organizations are amidst disruptions.

This shift has brought ‘resilience’ to the centre of supply chain strategies. What does resilience mean in this context and how can companies build resilience into their value chain to stay future ready?

The Growing Threat of Natural Disasters

Climate change is emerging as one of the disruptors to global supply chains. The National Institute of Standards and Technology estimates that disruptions can lead to lost sales of up to 10% of annual sales, while the Supply-Chain Digest suggests that supply chain disruptions can increase costs by as much as 15%. The University of Tennessee's Global Supply Chain Institute found that 75 % of companies experiencing supply chain disruptions risk bankruptcy, with the Insurance Information Institute estimating the average cost to businesses at $1.7 billion per natural disaster. The volatility in the supply chain of one industry has a spiraling effect on the adjacent and dependent industries indicated by price fluctuations, bankruptcies due to prolonged downtime, increasing borrowed capital.

From extreme weather events to changing regulatory frameworks, companies can no longer afford to treat natural disasters as a future problem, it is already reshaping supply chain and the value chain of an organization, from point of purchase to point of sale.

Building climate resilience requires a dual approach: adapting to immediate environmental threats and preparing for long-term shifts in geological and built-environment landscape and climate behavior. This means rethinking supply chain network centrality, making a choice between eigenvector centrality and high hub centrality, wherein, former centrality is established to moderate the relationship between impact of natural disaster and the organization’s performance, while the latter worsens the relationship. Rethinking sourcing strategies such as managing critical supply chain connections, investing in sustainable logistics, and designing supply chains that are operationally prepared for natural disasters. Organizations that take the lead in resilience are better positioned to manage the tailwind forces of natural disaster—and identify growth opportunities amidst myriad influencing factors in an economy.

Vulnerabilities and the Impact of Supply Chain Disruptions

In 2020, McKinsey’s article “Could Climate Become the Weak Link in Your Supply Chain?” drew attention to the inherent vulnerabilities in our increasingly interconnected systems. While these systems have driven efficiency, they’ve also made supply chains more fragile. A single flood, wildfire, or heatwave can trigger cascading effects across geographies and sectors.

The COVID-19 pandemic was a critical stress test. From microchip shortages to global shipping delays and labour constraints, businesses experienced first-hand how quickly operations can be disrupted. McKinsey highlighted how companies with concentrated supplier networks or minimal buffer capacity were left scrambling.

As a result, organizations are now reassessing just-in-time inventory models and considering more robust, supply chain networks. The challenge lies in balancing operational efficiency with the ability to absorb shocks requiring supply chains that are not only lean, but also agile.

Future-Proofing the Supply Chain: From Risk to Decisions

The idea of ‘futureproofing’ has taken central stage in supply chain strategy and business continuity plan. As McKinsey’s 2022 insights point out, companies must go beyond traditional risk mitigation strategies. Traditional drills are annual, manual, and siloed data-based risk assessment of an overall area (or location) based on historical trends, satellite imageries, GIS tools. These drills are unreliable, cost and time intensive, and ineffective.

Resilience needs a decision system that can measure, monitor, and manage the supply chain network of raw material supplies, production, logistics and transportation, and sales centres amidst natural disasters. Digital transformation is a key enabler of this shift. Leveraging advanced technologies of artificial intelligence (AI), machine learning (ML) and enterprise software, a decision system can assess risk and identify vulnerabilities in near-real time for each building of supply chain network using integrated scientific evidence, provide diagnostics in simple and understandable language, anticipate potential disruptions, plan customized mitigation action in a digitalized structure, monitor the action across interdepartmental stakeholders and prepare a disaster risk record of data and decisions of each site improving traceability across supply chain. Human collaboration, transparent communication, and shared accountability among suppliers, manufacturers, partners and customers remain vital.

Resilience today is not a one-time investment or a one-time compliance report; it’s an ongoing capability. Organizations that foster robust decision-based supply networks are more likely to differentiate with speedy adaptation decisions and efficient business continuity when disruptions occur.

The Road Ahead: A Shift Toward Profit and Impact

Looking ahead, resilience and sustainability are becoming deeply intertwined. As regulatory and consumer expectations evolve, businesses that integrate business continuity and social responsibility into their supply chains will be better placed to lead.

Sustainable practices such as net-zero targets, ethical sourcing, and circular supply chains have progressed from compliance checkboxes to operational must-haves. They are becoming competitive differentiators in a changing marketplace. As stakeholders increasingly demand accountability, businesses will be expected to demonstrate how their supply chains are aligned with broader net-safe goals. Net zero and (not or) Net safe is the mantra for resilient business.

Resilience as a Strategic Advantage

In an unpredictable world, resilience emerges as a defining trait of leading organizations. Supply chains that can adapt, recover, and evolve while also meeting sustainability benchmarks will drive long-term value. The journey to resilience is not without its complexities, but it offers a clear path to future-readiness.

By combining technological advancement with human-thinking at the core of business and social responsibility decisions, organizations can build supply chains that are prepared for disruption as well as capable of thriving through it by serving customers and communities.

Views are personal. The author is Co-founder & CEO, Resilience AI