Several factors are expected to cause the supply chain to experience a high rate of inflation by the fourth quarter of 2025.
"Inventories stockpiled ahead of tariff deadlines are now being depleted, forcing companies to restock at higher prices," said Suketu Gandhi, a partner at Kearney. "This is an early signal that the cost of goods and materials is rising before they reach store shelves, creating intensifying margin pressure."
A new Supply Chain Navigator report from Kearney concludes that, looking purely at economic factors, supply chain costs are expected to rise about 2% above inflation. However, when accounting for tariffs, sentiment, and other risk-based factors, that increase could reach 4% to 7% above inflation.
Trade friction is constant, with applied tariffs up 30% year over year. Add in tight labor markets, which are exerting price pressure.
However, a bright spot is that energy and freight costs are declining but remain volatile due to geopolitical risks.
How are Companies Responding?
While 73% of COOs report having a supply chain strategy, according to a recent Kearney survey, just half review it quarterly or plan more than 12 months out. Even fewer have implemented scenario planning or redesigned their networks in the past year.
However, top-performing companies are using the following capabilities to adapt to the current supply chain situation.
Adaptive networks and scenario planning
Leading teams are making scenario planning a continuous, cross-functional discipline to stay aligned and responsive as conditions shift.
AI-led decision-making
Instead of focusing on isolated use cases, forward-looking organizations are redesigning core business processes with AI at the center to improve speed, scalability, and decision quality.
Ecosystem-based collaboration
The most competitive supply chains now operate through high-trust networks that share data, coordinate planning, and respond quickly to disruption
