According to the latest findings from the Lehigh Business Supply Chain Risk Management Index (LRMI) for the second quarter of 2024, supply chain managers are increasingly concerned about the emerging risks posed by generative AI technology.
The report, compiled by Zach G. Zacharia, associate professor of supply chain management and director of the Center for Supply Chain Research at Lehigh University, reveals a notable surge in cybersecurity concerns, which have topped the list of worries for five consecutive quarters.
Generative AI as Technology Risk
Zacharia highlights the significant escalation in apprehension among supply chain professionals regarding cyber threats, data security, and the potential vulnerabilities of generative AI technology.
"Generative AI seems to also account for technology risk moving into second place in the LRMI. This is the second quarter in a row that technology risk has peaked and it's at its highest ranking in the three years this report has been published," Zacharia said in a statement.
The LRMI also illuminates other pressing concerns within the supply chain landscape. Government intervention ranked third in the index, has garnered attention due to uncertainties surrounding regulatory changes and geopolitical tensions exacerbated by global crises such as the Red Sea conflict and ongoing conflicts in regions like Ukraine and the Middle East.
Supplier-related risks have surged to fourth place, fueled by worries about reliance on single-source suppliers, quality control issues, and fluctuating prices.
Despite a slight uptick in the overall risk index compared to the previous quarter, the current level remains relatively low when viewed in a historical context.
Launched in 2020 by the Center for Supply Chain Research at Lehigh in collaboration with the Council of Supply Chain Management Professionals, the LRMI is a vital tool for executives and supply chain managers to anticipate and mitigate risks in their planning processes.
LRMI's Risk Assessment
One distinctive aspect of the LRMI is its holistic approach to risk assessment, allowing for direct comparisons across ten broad categories of supply chain risks.
The top four risks identified for the second quarter of 2024 include cybersecurity, economics, transportation disruption, and customer-related issues.
Moreover, the LRMI provides valuable insights beyond numerical rankings by incorporating candid comments from supply chain managers. These remarks offer a qualitative perspective on the challenges faced by industry professionals.
According to Lehigh University, comments from the latest report underscore concerns about the escalating cybersecurity threats in tandem with the advancing capabilities of AI technology.
Additionally, regulatory burdens imposed by government initiatives aimed at environmental sustainability are mentioned, which are perceived to add operational costs and complexities.
Furthermore, supply chain managers express apprehension about the mismatch between escalating demands for quality, efficiency, and cost-effectiveness from the supply base and the macroeconomic realities of labor shortages and operational constraints.
According to the report, this imbalance creates fertile ground for errors and disruptions within the supply chain ecosystem.
Looking ahead, the LRMI anticipates tightening capacity in the transportation sector, reflecting ongoing shifts in the market dynamics. Despite these challenges, the LRMI remains a valuable resource for industry stakeholders, offering quarterly insights to inform strategic decision-making and risk management efforts.
