According to the 2024 Gallagher Business Owners Survey, business owners are concerned about ongoing supply chain disruptions, a trend expected to persist in 2025.
As we navigate these challenging times, viewing risk management as a continuous and evolving process will be crucial for businesses to remain agile, competitive and prepared for future challenges. This report aims to equip business leaders with the insights and strategies needed to confidently face the future and safeguard their operations against supply chain disruptions.
Contributing factors
Global supply chains, strained by geopolitical conflicts and extreme weather events, remain vulnerable to disruptions, worsened by pandemic aftershocks. 68% of US survey respondents cited supply chain disruptions as a key concern.
Modern supply chains rely heavily on international suppliers, making them prone to geopolitical disruptions that can slow or even halt the flow of goods. Increasingly frequent natural disasters further disrupt logistics, delaying production and driving up costs for industries like manufacturing, food and agriculture and retail. Meanwhile, there are issues closer to home. Logistics challenges such as driver shortages and port congestion persist, while major cargo accidents can result in chokepoints. More recently, port strikes — linked to fears over the automation of jobs — once again threatened to bring disruption to the East Coast.
Other disruptions can arise from events like product recalls and cyber attacks. Inflation also has increased manufacturing and transportation costs, further straining the network. Additionally, supply chain cargo theft is rising, driven by economic factors, with high-demand commodities like food and beverages frequently targeted.
Impact on business
Supply chain disruptions lead to delays, higher costs and lost customer trust. Longer lead times may drive customers to competitors, while businesses face rising costs from alternative suppliers and expedited shipping. For industries with tight margins, these expenses quickly erode profitability and increase the risk of insolvency. The lack of predictability within supply chains also complicates planning, making it difficult to forecast and meet future demand. A major factor with port closures is not only the number of days they are inoperative but also the speed at which they're able to clear the resulting backlog. Analysis of the impact of the strike on US ports in October of 2024 suggests that even when factoring in excess cargo-handling capacity in port systems, every day the ports are closed equates to five days on average for supply chains to return to normal.
Mitigation strategies
We're monitoring the distressed supply chain for increases in business interruption claims, higher costs for goods and services and potential liability issues. Insurers also may impose stricter terms and higher premiums due to the heightened risk of supply chain disruptions.
Act now:
- Talk to your broker: Explore insurance solutions like business interruption insurance, contingent business interruption coverage and supply chain insurance.
- Diversify suppliers: Work with multiple suppliers across different regions to reduce dependency on any single source and ensure continuity during disruptions.
- Increase inventory buffers: Hold larger reserves of critical materials to cushion the impact of supply chain delays or shortages. Taking a "just in case" approach should help smooth out future supply chain volatility.
- Invest in supply chain technology: Use real-time tracking systems, predictive analytics and automation to gain better visibility into your supply chain and improve response times.
- Strengthen supplier relationships: Foster stronger partnerships with key suppliers to ensure priority access to goods and better communication during times of disruption.
- Adopt flexible logistics strategies: Explore alternative transportation routes and methods, such as air freight or regional suppliers, to navigate around bottlenecks or delays.
Viewing risk management as a continuous and evolving process can help companies protect against short-term disruptions while also laying the groundwork for sustained growth. This ensures that businesses remain agile, competitive and able to adapt to changing circumstances. Whether your business is facing this challenge head-on or anticipating future risks, incorporating these mitigation strategies will help you navigate these uncertain times and face your future with confidence.