Supplier Diversification, AI Readiness, and Circularity Top Supply Chain Priorities for 2025

One effect of the global pandemic was the elevation of supply chain management from a back-office business function to a C-level strategic priority. As we begin 2025, all indicators suggest that for most industries, including retail, optimizing the supply chain to meet the needs of a post-pandemic world is more than ever a priority.

To stay competitive, businesses can no longer rely solely on past supply chain measures such as cost reduction, inventory minimization, and service improvements. A recent Bain & Company survey of CEO priorities highlights the need for leaders to balance traditional supply chain priorities with newer ones, such as increasing resilience, improving sustainability, and responsiveness to customer expectations.

Based on extensive industry research and discussions with our customers and the broader retail community, TradeBeyond’s new Retail Sourcing Report: 2025 Supply Chain Trends highlights the concerns and priorities that are most top of mind for supply chain leaders in 2025. These include diversifying and de-risking global sourcing and manufacturing, preparing for the long-awaited broad adoption of artificial intelligence in supply chain operations, and advancing sustainability initiatives beyond compliance.

Diversification and De-Risking

Ongoing disruption to supply chains is now the norm rather than the exception. In the coming year, we can expect to see similar hiccups in supply chains due to trade wars between regional economic blocs, ongoing conflict in the Middle East and Eastern Europe, and extreme weather — to name a few. Close to half (47 percent) of global supply chain executives recently surveyed by KPMG see their business as vulnerable to disruption.

Leading companies in this new-normal are focused on resilience, supported by flexibility in their operations, enabling them to quickly respond to potential disruptions. To ensure business continuity, companies will need to make a real-time cost/risk assessment, sometimes accepting higher costs.

Many companies will continue to focus on diversifying their supply chains in the coming year. This might take the form of avoiding reliance on a single supplier, factory or region. Depending on the product and market, this could also mean shifting manufacturing domestically (onshoring) or closer to the market (nearshoring). Despite the obvious upstream/downstream benefits of manufacturing in China, Vietnam or Mexico, companies will need to keep adapting to the evolving geopolitical environment.

No question, the recent U.S. election will have further implications on global supply chains, with escalation in trade wars and significant tariffs likely. This is just one more implication of the post-globalization era.

AI: Beyond the Fundamentals

AI is laying the foundation for dramatic transformation across global supply chains. As industries increasingly turn to digital solutions, AI technologies are now poised to drive significant economic value for retail sourcing and supply chain operations. From improving traceability and risk management to automating time-consuming processes, 2025 is set to be a pivotal year for AI adoption.

Core AI technologies such as machine learning and advanced analytics are ready for widespread implementation. Many companies are already leveraging these tools for “level 1” applications, including AI-powered quality risk management and chain-of-custody tools. These technologies have enhanced supply chain visibility, ensured regulatory compliance, and reduced manual effort, marking significant progress in operational efficiency and sustainability. Jeff Alpert, founder and CEO of Pillar AI, notes, “The ability to monitor and analyze supply chains in real time has already unlocked considerable value for forward-thinking organizations.”

While these foundational applications are already adding measurable impact, that’s only the surface of AI’s potential in supply chains. Within the next year or two, AI is on track to make deeper inroads into complex supply chain functions, such as probabilistic demand planning, advanced risk assessment, and predictive ESG performance analysis. These “level 2” applications will help businesses not only respond to challenges but anticipate and mitigate them with unparalleled accuracy.

To unlock the full value of AI, organizations must focus on building robust data ecosystems. By centralizing proprietary and external supply chain data in accessible platforms, businesses can empower AI to deliver transformative insights. A well-prepared data foundation enables AI tools to generate breakthroughs in speed, precision and agility — transforming supply chains into engines of innovation and competitive advantage.

Sustainability is Growing Up

Over the last few years, most businesses have been heavily focused on sustainability, both from a marketing perspective and to meet an ever-growing body of compliance requirements. In the initial stages of the sustainability movement in the apparel sector, retailers and brands could make unsupported ESG-related claims about material content and origin, emissions, and other criteria, but those days are ending.

Today, across the globe, rigorous standards are in play to enforce green claims and limit greenwashing. This includes top-down standards governing transparency, traceability and other areas of ESG compliance. TradeBeyond has produced several reports this year which cover retail supply chain sustainability trends and traceability in greater detail.

In 2025, we expect to see a greater focus on a more mature approach to sustainability, such as building in circularity into the business ethos. Increasingly we're seeing leading retailers and brands taking a step back and re-evaluating their business models, building sustainability and circularity into their core, much like brands such as Patagonia and others have done since inception.

Circularity in the retail supply chain refers to a shift away from the traditional linear retail model. Rather than selling new products at increasing speeds, only for them to end up in landfills within a year or two, circularity aims to create a value chain that slows and closes the material loop. While fast-fashion is unlikely to go away anytime soon, there is a nascent trend toward what some call “slow-fashion,” which considers the impact of a product in the broader context of people and planet.

Other indicative trends which point to evolution in the sustainability movement include the growth in the resale of secondhand clothing. The global secondhand clothing market is forecast to reach $350 billion by 2027, up from $43 billion in 2023, ThredUp reported. A wide range of brands, including REI, H&M, Carhartt and others now have resale models in place.

Much like AI, the will and the need for circularity exist, as does the supporting technology and systems, but retailers and brands must play catch-up. For example, FibreTrace, a technology which provides digital transparency into the life cycle of apparel and other products, can track a piece of apparel from the material origin to the product’s end-of-life, either in a landfill or through recycling.

The above is only a brief overview of the many exciting trends we're observing across both the front- and back-end of retail. We cover more of these in greater detail in TradeBeyond’s Retail Sourcing Report: 2025 Supply Chain Trends Report.

Lilian Bories is chief marketing officer for TradeBeyond, retail’s leading provider of SaaS supply chain solutions.