Zach Zacharia on Biggest Threats to Global Supply Chain Heading into 2025

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In this episode of Lehigh University’s College of Business ilLUminate podcast, we are speaking with Zach Zacharia about the most significant trends in the global supply chain in 2024 and the biggest threats facing the supply chain as we move into 2025.

Zacharia is an associate professor of supply chain management, interim department chair of Decision and Technology Analytics (DATA), and director of the Center for Supply Chain Research at Lehigh University. In August 2020, the Center for Supply Chain Research and the Council of Supply Chain Management Professionals launched the quarterly Lehigh Business Supply Chain Risk Management Index (LRMI).

Zacharia spoke with Jack Croft, host of the ilLUminate podcast, about the new 1st Quarter 2025 LRMI report. Listen to the podcast here and subscribe and download Lehigh Business on Apple Podcasts or wherever you get your podcasts.

Below is an edited excerpt from that conversation. Read the complete podcast transcript [PDF]. 

Jack Croft: In 2024 and continuing into 2025, there have been two risk categories—Cybersecurity and Data Risk, and Government Intervention—that have pretty much dominated the list of risks that most concerned supply chain professionals each quarter. So if you could talk about what factors go into each of those risk categories and what accounted for the high anxiety caused by the threats they posed to the supply chain.

Zach Zacharia: The factors in Cybersecurity that I ask the managers to consider are cyberattacks, data corruption, data theft, system viruses, hardware and software issues, and security platform controls. As you noted, Cybersecurity has been essentially the number one risk for the past year, except for one quarter when Government Intervention sort of jumped up. 

And there are a number of reasons why supply chain managers are particularly worried about Cybersecurity. The first thing that really sort of reaches out is there's an increased dependence on digitalization. In other words, we've moved to more working from home. We put more of that kind of information up on the clouds. We have a lot more things associated with the Internet of Things. 

The second thing that really has happened is that the criminals are getting much, much more sophisticated. They're using machine learning to automate these kinds of attacks. So the number of attacks has been increasing. There has been a real push to get state-sponsored agencies who are-- there are global conflicts, obviously, and there are other countries who are specifically targeting U.S. companies.

One of the things that has sort of come out of the rise in cryptocurrency is that now there is a way for attackers to get payments anonymously. And I know that there are people who believe there's a lot of value in cryptocurrency, and I'm not questioning that. But that definitely makes it easier for these criminals to receive these payments. 

And finally, it must be noted that many companies still have a lot of legacy systems that require a lot of work to fix. So this is a very, very top-of-the-mind issue. 

Now, the factors in Government Intervention are new regulations, tariffs and trade wars, government restrictions on source material methodologies or technologies. One thing I must say, the Government Intervention really only jumped up to among a top risk really the third quarter when there was a lot of uncertainty in what was going to happen with the election. So it is the very first time in all the years we've ran the LRMI that Government Intervention became number one.

And again, it sort of makes sense, because there was a lot of uncertainty about the election, what are the new policies of the incoming administration? The average risk for government intervention was 72. And then it jumped up to 81. And as you know, that is a very, very significant jump. But then it dropped down to 74. So people still see there's a lot of uncertainty, especially when it comes to tariffs. And so that is one reason why government intervention has jumped so high. And I still think that there's a lot of uncertainty about what's going to happen going forward.

Croft: On a related note, Supplier Risk … rose into a tie with Government Intervention for the second spot in the new risk index. The issue of tariffs and trade wars seems to be driving a lot of that. I'm wondering, what are you hearing in the surveys for the first quarter specifically that people are concerned about with the approach to tariffs?

Zacharia: As you know, I actually have executives as part of the Center for Supply Chain Research. We have meetings where we talk about what's going on in the economy, how are we dealing with the economy? And interestingly enough, because they're worried about tariffs, many of the executives told me that they are buying ahead of when the administration comes in and these new tariffs take effect. 

This is the term we call forward buying. As long as the orders were placed before the end of the year, you can avoid those tariffs because, of course, transportation can take a while for it to actually come in. That means a lot of companies are doing that. And … companies are stockpiling inventory. 

So I think that people are now worried about, will their suppliers be able to provide the products that they are asking for with some of the global conflicts you talked about? Will the shippers, will the transportation actually be able to bring those products in without a significant increase in cost? So people are worried about suppliers. And that's why Supplier Risk has jumped essentially to a tie in second place with Government Intervention.

Croft: From the fourth quarter of 2024 to the first quarter of 2025, [Economic Risk], similar to Government Intervention, dropped 10 points, which is pretty significant in one quarter. So what's going on there? It remains in the top four categories. So it's not like it's gone away, but what is that shift telling us?

Zacharia: People are still really worried about price volatility, increasing energy costs, global energy shortages. They are factors that are important, but other risks have become more important. So by virtue of the fact that other risks have moved up, Economic Risk has gone down. 

People are not as worried about demand as they are worried about supply. So I think that that's definitely something to go there. One other thing that I might actually bring up which might go with the idea of Supplier Risk is that a lot of the executives that I talked to are very much concerned about labor shortages being that, it's not because people want to produce in China or in other countries. It's because it has been very hard to get labor for manufacturing.

There has been a recent trend, especially after COVID, where the executives are telling me that they are hiring workers who want to look for options to work from home. Well, you can't load a truck from home. You can't produce syringes sitting at home. I mean, manufacturing, warehousing, all these things actually need to be at the factory. And there has been a problem in getting enough workers to do this. 

So there has been this increased focus on automation. And all of these things, again, goes to that idea of the supply side. Will we be able to manufacture enough to meet demand? So I think that that's also worthwhile considering when we're thinking about Supplier Risk and, in some sense, Economic Risk.

Croft: Labor has obviously been an ongoing issue since the LRMI started. And for various reasons. Obviously, the pandemic was a giant sea change in terms of how people worked, and we're still trying to figure out the ramifications of that long term afterwards. Technological or Competitive Risk has been trending up over the last three quarters and made it into the top five for the first quarter in 2025. So what are the main concerns driving Technological or Competitive Risk?

Zacharia: Technological risk talks about disruptive or replacement technologies, introduction of new competitor firms or ineffective or nonexistent regulations for competitors. The real big key issue that everybody's worried about, and I think that fits under the technological risk category, is the role that AI is playing going forward and the role of machine learning. 

Large language models have become sort of ubiquitous. Everybody knows what ChatGPT can do. And obviously, there are errors in ChatGPT, but I clearly see that it is actually affecting a lot of people. We are all looking for ways that we can actually utilize it. There are some greater efficiencies that could come out of it, but people are very much not sure exactly all the ramifications as they introduce AI. So I think that this particular risk captures the concern that supply chain managers have when it comes to AI and machine learning going forward.

Croft: What in the first quarter report of 2025 gives you hope for the new year?

Zacharia: I think one of the key trends I think that's going to go on is an increased adoption of AI and machine learning. I think that we're going to become better at being able to harness the power of AI. And I think that's going to help all of us do our jobs better. And I think that that's going to be of use going forward. 

Next thing I think is going to be likely, we're also going to get better at automating more robotics because as we do that, I think we will be able to improve some of the economic efficiencies and not have as much issues with the labor shortages that are really going on. 

I think also companies are going to get better at diversifying. Perhaps maybe not onshoring as much, but look at ways to do nearshoring, look at ways to diversify their manufacturing bases, and look for some ways to bring production closer to home, maybe diversify from their suppliers. And I think that companies are also going to get better at managing their inventory. I think that this is something that obviously is important in your supply chain.

And finally, with a little bit of optimism, I'm hoping that there is going to be greater stability. Unfortunately, I think we'll still be talking about major global conflicts. But hopefully, going forward, they'll look for ways that they could stabilize some of those things and perhaps figure out ways to continue to make the supply chain more efficient and hopefully lead to a more successful 2025.