Zach Zacharia on Supply Chain Risks in the 3rd Quarter of 2026

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In this episode of Lehigh University’s College of Business ilLUminate podcast, host Stephanie Veto talks with Zach Zacharia about the 2026 Lehigh Business Supply Chain Risk Management Index third quarter report. 

Zacharia is an associate professor of supply chain management and director of the Center for Supply Chain Research at Lehigh. He teaches graduate and undergraduate courses in supply chain operations management and logistics and transportation.

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

Veto: Can we talk about how Q3 is looking? 

Zacharia: Noticeably worse. Our overall index jumped from 65.7 to 69.34. Now that may not sound dramatic. But, this kind of a scale is not an arithmetic scale, where 50 means no change. A nearly four-point jump in a single quarter is a significant escalation. The driver was the US-Iran war and the blockade of the Strait of Hormuz. It sent fuel and diesel prices spiking and rippled straight into the transportation broader economy. So Q3 is a quarter where a single geopolitical event moved almost every category at once. 

Veto: And six of the 10 risk categories rose overall, right? 

Zacharia: That's right. Six of the 10 increased. And that's what pushed the average up to 69.34. What stands out isn't the six that rose, but which ones rose and how far. So, transportation went from 71.8 to 87.5. The economic risk index went from 74.07 to almost 84. When your two biggest movers are both tied to energy and fuel, that tells you that the disruption of this quarter wasn't spread randomly. They can be traced back to one common route. 

Veto: You said that the report points to geopolitical events, specifically the war with Iran. Can you talk about how quickly international events can affect global supply chains? 

Zacharia: This quarter is almost like a textbook case. When the conflict escalated, the Strait of Hormuz was blockaded. Within weeks, we saw major events declared between March and May. The diesel and jet fuel prices were climbing. Offshore manufacturing costs were rising across the entire world. The strait is a choke point. Roughly a fifth of the world's oil moves through it. So, disruption there doesn't stay regional. It shows up almost immediately as higher fuel costs, longer lead times, putting pressure on companies that have no direct connection to the Middle East at all. Because modern supply chains are so tightly coupled and so dependent on cheap energy, a shock on one side of the globe reaches a warehouse in Pennsylvania in a matter of weeks, not months. That speed is really the defining feature of risk today. 

Veto: The highest risk category this quarter was transportation. It increased to 87.5, you said. Can you talk about some of the disruptions that are causing transportation risks to increase? 

Zacharia: Transportation was our highest category of this quarter by a wide margin. It's really a number of different pressures hitting at once. Number one is fuel. Diesel and jet fuel prices driven up by the Iran conflict. And essentially, that raises the cost of anything that gets moved. So, on top of that, you have a freight capacity shortage. Our respondents flagged that the first-quarter shipping demand has gone up over 20% against a rather smaller supply of trucks and drivers. We always talk about the chronic driver shortage, and that's always been a problem–long hours and industry consolidations. You have new safety compliance enforcement that is taking drivers out of the road. And, of course, you've got the aging highway infrastructure. So, fuel, capacity, labor and infrastructure–all those forces sort of hit together. We have longer lead times, higher costs and less reliable delivery across the board. That's going to increase the risk associated with transportation. 

Veto: Do you think AI is going to affect supply chains in ways that weren't even discussed a year ago? 

Zacharia: Absolutely. I'm basing this all on the comments in the report. The conversation is mostly optimistic. AI is going to help you for forecasting, for optimization, for efficiency. Interestingly, in this quarter, you're sort of seeing some of the second-order effects people are now talking about, like flawed AI. One respondent pointed out that a flawed AI input got reabsorbed into their ERP system. And those errors sort of compounded as machines sort of learned from other machines' mistakes. Another one talked about AI data centers as a huge driver of energy and water scarcity. That is a supply chain risk. Then there's real anxiety about the AI bubble. What happens if that investment cycle turns? The risks are now more around AI's reliability and the resources used. This wasn't even discussed a year ago. 

Veto: Is there a risk category that concerns you the most? 

Zacharia: Economic risk. At the end of the survey, I always ask my respondents to compare and pick four risks, the highest risk on a head-to-head comparison. And in that ranking, economic risk was number one. Even though transportation is sort of a higher risk, I really believe that if the geopolitical situation stabilizes and fuel prices go down, that risk is going to go down. But economic risk is much broader. It's stickier because it's got inflation, energy costs, labor costs, tariff uncertainty, and AI-driven anxiety. It's really sort of a risk that could tip us into recession. So, when the underlying economy is a concern, it's not, I don't think, resolved in a single quarter. And that's the one I feel is going to drag most of the other categories along with it.