Global Supply Chain Costs Forecast to Rise Above Inflation
Consulting firm Kearney's Supply Chain Navigator model predicts that supply chain costs will rise 2.3% to 4% above baseline inflation in the coming year. The forecast, which claims over 95% accuracy for 10 consecutive quarters, cites tariff rates, critical mineral scarcity, geopolitical risk, and high global inventory levels as key cost drivers. The analysis suggests that pressure is easing on commodity prices but remains high across other logistical and risk-related areas.
- Disruptions in the Red Sea are a primary driver of increased shipping costs, with container ship transits through the region dropping by 67%. Rerouting around Africa adds 10-15 days and about $1 million in fuel costs per round trip, causing shipping costs from Shanghai to Europe to more than triple. This could add 0.7 percentage points to global core goods inflation. - The SEC's new climate disclosure rules, adopted in March 2024, will require public companies to report on climate-related risks to their business, including those in their supply chain if they are deemed "material". While the controversial Scope 3 (supply chain) emissions reporting was dropped from the federal rule, it may be revisited, and similar requirements already exist in California and the EU. - U.S. trade policy continues to target Chinese goods, with tariffs on electric vehicles rising to 100% in 2024 and tariffs on lithium-ion EV batteries increasing from 7.5% to 25%. Additionally, 205% tariffs have been imposed on Chinese active anode materials used in lithium-ion batteries. - Nearshoring to Mexico is presenting a significant cost alternative to manufacturing in China, with average manufacturing wages at $4.90 per hour compared to China's $6.50. Shipping a container from Mexico to the U.S. is also cheaper and faster, costing around $2,700 and taking 2-3 days, versus approximately $4,000 and 15-20 days from China. - New EPA regulations taking effect January 1, 2026, will impact refrigerant usage and disposal for manufacturers. OSHA is also implementing stricter rules in 2025, including lowering the permissible exposure limit for lead and introducing a national heat safety standard. - The concentration of processing and refining capacity for critical minerals creates significant supply chain choke points. For example, China controls over 80% of certain segments of the EV battery supply chain. These dependencies expose manufacturers to geopolitical risks and potential export restrictions. - Internal audit's role is expanding to provide independent assurance and oversight of supply chain risks. This includes evaluating the effectiveness of business continuity plans, assessing supplier diversification strategies, and verifying the accuracy of supply chain mapping to identify potential disruptions. - Leading supply chain executives are moving beyond periodic reviews and are embedding continuous, cross-functional scenario planning and AI-led decision-making into their core processes to build operating models that can absorb persistent volatility.
