Supply chain stress tests are becoming more powerful and accurate

Digital twins, AI and control towers can help companies test vulnerabilities, compare response options and weigh the costs of building a more resilient supply chain.

Global supply chains are increasingly exposed to shocks and disturbances, which are becoming more costly. Businesses are operating in an environment where disruptions can emerge simultaneously and compound one another. Tariffs, geopolitical tensions, weather events, labor constraints, transportation capacity, cybersecurity threats, and demand volatility can all affect the same network.

A Business Continuity Institute 2024 report found that almost 80% of organizations’ supply chains were disrupted over the past 12 months, with most experiencing between one and ten disruptions. According to DHL Supply Chain’s Insight 2030 research , 70% of supply chain executives expect cybersecurity threats to disrupt their operations by 2030. Nearly as many are bracing for rising labor costs (69%), labor shortages (66%), natural disasters (63%), and geopolitical turbulence (62%).

Given how this underscores the need for resilient supply chains, it’s not surprising that a growing number of companies are actively stress testing their networks. The exercise critically enhances and strengthens traditional supply chain planning. A good stress test evaluates how the supply chain would perform under a range of disruptive, high-impact scenarios to determine the operational, financial and customer experience consequences. The goal of the exercise is to expose vulnerabilities and single points of failure before an actual disruption forces a company to discover them in real-time.

Resilience stress testing provides companies with a forward-looking, data-driven view of how crises would impact operations, and enable proactive resilience improvements rather than reactive fixes. For instance, it can reveal where inventory buffers are insufficient, where warehouse capacity becomes constrained and where seemingly minor disruptions could create significant downstream consequences.

How companies can stress-test their supply chain

Stress testing doesn’t have to begin with a costly, time-consuming, enterprise-wide implementation. Companies can start by identifying portions of the supply chain where disruption may have the greatest operational impact or where there are suspected vulnerabilities. Once the scope is determined, the exercise typically starts with a baseline digital representation of the supply chain that covers suppliers, capacities, inventory levels, lead times, and logistics flows.

Defined stress scenarios are then applied to this model, and any performance changes are noted and measured. Unlike general scenario planning, which is often qualitative, resilience stress tests use quantitative simulations to produce quantitative outputs on such things as expected stockouts, time-to-recover, and cost impact, which leaders and AI systems can use to make important decisions.

Simulation scenarios should include both probable (high-likelihood, low-impact) and extreme (low-likelihood, high-impact) events to effectively balance day-to-day cost optimization with long-term business survival. This can include a wide range of disruption events, including the following shocks that reflect real-world events that have repeatedly disrupted global supply chains in recent years:

Loss of a key supplier or manufacturing site

Multi‑week port closures or customs delays

Regional conflicts or political unrest

Sudden shifts in customer demand

Cyberattack taking down a supplier’s system

Increase in freight rates

Weather event like hurricanes, tornados or winter storms

The most effective exercises include involvement from multiple functions and roles. Procurement may understand supplier dependencies, while logistics knows transportation alternatives. Operations understands production constraints, while finance can quantify margin and working-capital impacts. Sales and customer service understand which customers and orders may be most sensitive to delays, while HR can best navigate labor issues. And, of course, IT has vital knowledge and insight when it comes to cyberattack vulnerabilities and impacts.

Technology continues to make stress testing more powerful

Advanced technology has evolved supply chain stress testing from static planning to dynamic, real-time resilience. This ongoing evolution is creating an active, protective layer that automatically flags vulnerabilities and enables resources to be shifted more quickly.

Digital twin technology has emerged as the leading method for stress testing complex supply chains by creating virtual replicas of physical networks. It helps companies identify vulnerabilities and evaluate mitigation strategies before problems arise in the actual supply chain.

Digital twins are quickly moving from single-use applications to utilization in more comprehensive systems, integrating all aspects of logistics operations. Larger 3PLs are leveraging digital twins to enable data-driven decisions that enhance efficiency, resilience and sustainability across the operation. It provides the ability to clearly define tradeoffs and easily understand the implications on total cost to service. In many cases, they can use the technology to quickly model and move to execution in near real time. As the technology matures, its impact is expected to grow as organizations build more interconnected digital ecosystems.

Advanced AI and analytics

Advanced AI and analytics add a further dynamic layer to resilience stress testing, helping ease deployment and usage of the digital models. AI-powered analytics can ingest and process large volumes of unstructured logistics-related data (e.g., geopolitical shifts, weather patterns, supplier financial health) to identify vulnerability patterns and forecast potential disruptions.

The integration of machine learning allows planners to run thousands of complex shock scenarios simultaneously without disrupting live operations. Advanced algorithms can simulate how a hyper-specific event, such as a port closure or a critical component shortage, cascades through multiple tiers of suppliers. By mapping any and all interdependencies within the supply chain, they expose single points of failure that traditional manual audits often miss. This provides a much more accurate picture and offers strong support to demand forecasting and inventory optimization. They can also help identify alternative solutions with natural language processing (NLP).

Because these AI-powered systems continuously learn from each simulation and real-world disruption, logistics providers are increasingly applying them to operational planning. This is further helping to create supply chains that are more diversified, flexible and nimble to better withstand future crises and minimize disruptions.

Supply chain control towers

Supply chain control towers (SCCTs) can connect resilience stress testing directly to day-to-day operations. Instead of running a stress test once a year and putting the results on a shelf, companies can establish continuous monitoring and trigger predefined scenarios when conditions change.

Similar to a physical control tower, an SCCT is a digital platform that offers end-to-end visibility and control over the supply chain. Through software that analyzes data on a business’ upstream and downstream activity, an SCCT acts as a centralized viewpoint that streamlines the way the movement of goods is managed.

These digital hubs integrate data from various sources, including suppliers, logistics providers, and internal systems, to create a single view of operations that provides real-time insights and facilitates proactive decision-making. Enhancing coordination impacts every level of the supply chain—from procurement and production to distribution and customer service. With SCCTs, businesses have minimized disruptions and optimized performance.

When utilized effectively, SCCTs can be a game-changer when it comes to creating a more resilient supply chain. By identifying trends, inefficiencies, and opportunities for improvement, the platform equips businesses with the ability to make informed decisions and refine their supply chain strategies to ensure competitiveness.

A valuable resource during stress testing

Conducting a comprehensive supply chain resilience stress test can often be daunting for companies due to deep data silos, limited modeling tools, internal blind spots, and the resources and technologies needed to adequately conduct the test. Additionally, most companies are still barely scratching the surface when it comes to the supply chain operational value that can be achieved through gathering data and establishing data analytics processes. This is all where a fourth-party logistics (4PL) provider can be a valuable resource.

A 4PL is a strategic partner that manages, operates and optimizes an entire end-to-end supply chain, using service providers and suppliers on a neutral basis and enabling transparency and continuous improvements to provide a company’s logistics needs. A 4PL does not necessarily replace a 3PL relationship. Rather, it can integrate services of different 3PLs and transportation service providers for multiple operations with the goal of optimizing logistics cost.

Because 4PLs manage the entire supply chain and operate across multiple providers, carriers, modes, facilities and geographies, they can provide an insightful and unique view of transportation and fulfillment risks and threats. A 4PL can help weigh best practices, model alternative transportation strategies, identify capacity constraints, evaluate warehouse options, and develop contingency playbooks that can be activated when predefined triggers occur.

With supply chains becoming more complex, disruptions are going to happen. It’s vital that companies understand what will happen when they occur and how they can respond quickly enough to minimize that disruption. Resilience stress testing helps companies realize the concept of “being more resilient” and translates it into a set of measurable performance standards. Advanced technology also makes the exercise more powerful and accurate. By quantifying the trade-offs between costs and resilience, organizations can make informed strategic and operational decisions to better prepare for real-world events.

Mark Kunar is CEO of DHL Supply Chain North America, overseeing operations across the United States and Canada and a workforce of 52,000 associates. Since joining DHL in 1996, he has held leadership positions spanning operations, finance, strategy and commercial management. Before becoming CEO, Kunar served as chief financial officer and chief strategy officer for the North American business.

Supply chain stress tests are becoming more powerful and accurate

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