Mitigating geopolitical uncertainty: 4 essential tactics for industrial CSCOs

By Marco Sandrone, senior director analyst, Gartner Supply Chain

This year, supply chain leaders have faced significant challenges due to geopolitical factors such as the Red Sea crisis, the Russian invasion of Ukraine and tension between the U.S. and China. These situations are having tangible, primarily negative, impacts on supply chains. For instance, a Gartner survey revealed that 73% of supply chain leaders reported that tensions between Russia and NATO have adversely affected their supply chain performance.

Geopolitical risks present significant challenges for industrial supply chains such as disrupting trade flows, causing shortages in key resources, and inflating raw materials prices. These challenges are leading to sudden changes that require short-term attention and a longer-term, flexible approach to strategic planning and risk mitigation.

To manage the prioritized risks associated with geopolitical tension, industrial supply chains should focus on four strategies that can have the most positive impacts on supply chain performance.

1.) Invest in data visibility for real-time decision-making

In today’s data-driven world, leveraging technology and data insights is crucial for understanding and managing geopolitical risks. Industrial manufacturing organizations, with their intricate supply chains, gain significant advantages from improved data visibility. Real-time data access enables swift responses to changing conditions, which is essential for sectors like aerospace, defense and heavy machinery that depend on numerous small and midsize suppliers.

To accomplish this, chief supply chain officers (CSCOs) should prioritize obtaining real-time data from the entire supply chain, analyzing it dynamically to support immediate decision-making, and promptly implementing those decisions. While technology is a key component, employees' digital proficiency and risk awareness are equally vital. Establishing clear governance, defined roles, and responsibilities ensures that decisions based on real-time data are carried out efficiently.

2.) Build resiliency by regionalizing supply chain

Global geopolitical tensions necessitate a shift toward regionalized or localized supply chain models to enhance agility and resilience. A Gartner survey uncovered that 74% of industrial manufacturers are deploying a strategy that utilizes some regional or local production or finishing processes.

Moving at least part of the production process closer to the end market allows companies to swiftly respond to local market changes and disruptions. With the help of network analytics,  leaders can understand the trade-offs associated with a local or regional manufacturing model. Evaluating these trade-offs based on company objectives, supply and labor availability, government incentives, and costs is essential.

Network shifts should be treated as a process rather than a goal, with periodic reviews to ensure decisions are based on the most up-to-date information. This phased rollout of changes must consider factors like workforce and supplier availability and logistics infrastructure to ensure the network remains fit for purpose.

3.) Prepare for the future with scenario planning

Proactive risk management is crucial amid geopolitical turmoil. Engaging in comprehensive risk assessments and scenario planning exercises helps foresee potential disruptions and develop mitigation strategies. Developing future-focused “what if” scenarios prepares the supply chain to identify risk events that may require adjustments.

For example, facing a complex supply chain with numerous logistics partners and component suppliers, a major aerospace company introduced a supply network control tower to enhance end-to-end visibility and manage potential disruptions. The impact simulation capability is particularly valuable during geopolitical uncertainty, enabling planners to present different scenario outcomes, reallocate components, and adjust timelines to mitigate risks and ensure smooth production.

Control towers are an effective tool for scenario planning due to their ability to provide visibility, support experimentation on supply chain outcomes and offer real-time decision support. For long-term strategic decision-making though, network design tools should be utilized to evaluate the trade-offs between alternative network solutions in response to geopolitical shifts.

4.) Strengthen partnerships to mitigate risks

Collaborating within the industrial supply chain ecosystem helps mitigate geopolitical uncertainties by building resilience, enhancing transparency, and promoting agility. Sharing data among stakeholders—such as suppliers, manufacturers, and logistics providers—improves tracking and demand forecasting, thereby reducing the risk of disruptions.

Thirty-nine percent of industrial manufacturers credited supplier collaboration as a key factor in realizing the benefits of network changes, according to a Gartner survey.

To enable greater collaboration, CSCOs should start by thoroughly assessing the current supply chain landscape, identifying key stakeholders, and mapping out critical processes and touchpoints. It’s crucial to engage with suppliers, manufacturers, logistics providers, and customers to understand their needs and capabilities. This helps foster informed, proactive decision-making, helping to identify vulnerabilities and prepare contingency plans.

Additionally, flexible sourcing strategies and joint contingency plans, such as alternative shipping routes and secondary suppliers, enhance the ecosystem's ability to respond effectively to disruptions.

Securing supply chain success in an uncertain world

Geopolitical risks continually threaten industrial supply chains, but by implementing the right strategies, CSCOs can mitigate their impact. Enhancing data visibility, regionalizing supply chain networks, engaging in scenario planning, and fostering collaboration within the partner ecosystem are essential tactics to boost supply chain resilience and agility. By implementing these approaches, supply chain leaders can effectively navigate the complexities of the geopolitical landscape and maintain consistent performance despite disruptions.

About the author

Marco Sandrone is a senior director analyst in Gartner’s Supply Chain Practice. His research interests include supply chain performance management and metrics, cost-to-serve, supply chain segmentation, integrated business planning (S&OP) and working capital optimization.

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