Digital Technology Is Making Supply Chains More Resilient

For a long time, digital and physical industries stayed somewhat separated, with tools like Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) software representing the bulk of “digitalization”.

This is changing quickly as manufacturing, logistics, and the entire supply chain are progressively automating and becoming “smart”. The arrival of ever more useful and powerful AI tools will only accelerate that trend. This is leading to a progressive technological convergence of digital and real economy industries.

This gives industrial operators unprecedented insights into every physical link of the supply chain, from strategic planning and risk pre-emption to procurement, production scheduling, and logistics.

As such, this also gives them an unprecedented opportunity for enhancing supply chain resilience.

A new study by two researchers at the  Jiangxi University of Finance and Economics in China is analyzing this question. It found that enhancing resilience of the supply chain is driven by a few key factors: alleviating financing constraints, reducing supply chain concentration, and fostering technological innovation.

They published their findings in International Review of Economics & Finance¹, under the title “The impact of technological convergence between digital and real economy industries on supply chain resilience”.

Ever More Complex & Fragile Supply Chains

A characteristic of the modern economy is that every good produced is dependent on a supply chain whose complexity is ever-increasing. This covers not just the inputs to make a given product, but also all the parts, rare elements, and ultra-specialized machinery required for transforming the base materials into finished products and, indirectly, all the other inputs, parts, and machines to make these tools and base materials.

In times of crisis, like during the Covid pandemic, enmeshed supply chains can buckle up under pressure, causing a cascade of disruptions reverberating across entire industries.

As geopolitical tensions, natural disasters, and trade frictions are increasingly frequent and intense, the old model of just-in-time supply chains vulnerable to external shocks is increasingly questioned.

“For instance, the abrupt imposition of stringent tariffs by the U.S. in early 2025 disrupted the supply of raw materials for numerous firms, compelling a suspension of production activities and incurring substantial economic losses.”

This has caused renewed interest in a more resilient supply chain, which possesses the inherent capacity to absorb and withstand external shocks, thereby safeguarding the continuous supply of essential consumer goods and strategic materials.

Ultimately, long-term stability and sustainability of economic development will be dependent on the development of such a more resilient supply chain.

Digital Technologies & Supply Chain

Merging The Digital Economy To The Physical

The value-added of China’s digital economy is projected to reach 49 trillion RMB by 2025, constituting approximately 35% of the nation’s Gross Domestic Product (GDP), with similar numbers in many other developed economies.

With such a large part of the economy already, the only path for further growth of the digital economy is to merge with the physical one further and boost productivity in both.

On the one hand, this will let digital industry technologies integrate diversified data resources, knowledge capital, and innovative paradigms into the technological framework of real industries.

On the other hand, the real industries serve as a proving ground for digital technologies, providing rich experimental environments and clear optimization directions to make them more impactful on economy-wide productivity.

And there is almost no sector where the impact will be more immediate than with supply chains.

Analyzing Real Supply Chains

The researchers selected Chinese A-share listed firms from 2011 to 2024, with the final dataset comprising 13410 valid company-year observations.

They measured several metrics:

• Supply chain resilience, made up of several sub-components:
  • Supply chain responsiveness, the capacity in the face of external disruptions to swiftly respond to supply and demand fluctuations.
  • Supply chain resistance, the ability to maintain continuous operation and smooth circulation when facing external shocks.
  • Supply chain recovery, reflecting how effectively corporate performance withstands and rebounds from external shocks.
• Technological convergence of digital and real economy industries, measured when a patent is classified outside the digital industry technology domain but cites at least one digital industry technology patent.
• Control variables, like Firm size (Size): The natural logarithm of total assets at year-end; firm age, leverage, return on assets, revenue growth, cash flow, board size, ownership concentration, etc.

How Can Digitalization Improve Supply Chains?

The first step, which is probably the one most advanced already thanks to ERP, is transforming data elements and end-to-end information into strategic information resources.

High-fidelity risk surveillance models can accurately sense potential vulnerabilities, such as upstream supply constraints and logistical disruptions. The key factor will be to move risk management from reactive mitigation toward proactive anticipation, potentially with the use of dedicated AI agents.

Another step is the deployment of tools like digital twins and virtual simulation resources. They can model disruption scenarios within virtual environments, so that firms can pre-emptively formulate flexible reconfiguration protocols for critical supply chain nodes.

When encountering real disruptions, pre-tested agile resource deployment can effectively mitigate damage to the overall system.

Another step will be to dismantle inter-industrial knowledge silos and facilitate end-to-end data integration spanning from upstream manufacturing to downstream consumption.

This way, firms can rapidly identify distressed nodes following shocks, synchronize unified emergency protocols with supply chain partners, and efficiently mobilize critical resources to distressed segments.

And of course, for all of these initiatives and data, solid encryption and access control will be crucial to safeguard the confidentiality and integrity of companies’ core data.

Lifting Financial Constraints

More accurate data can provide financial institutions with reliable insights into firms’ underlying operational viability and fulfillment capacity.

For example, big data technology integrates multi-source information, such as tax and social security data, to construct dynamic credit profiles for enterprises.

Risks associated with pre-loan approval and in-process monitoring costs can be reduced by tracking real-time flows of goods, information, and capital.

This should ultimately drive down the cost of capital and fortify the financial underpinning of supply chain resilience.

Greater Supply Diversity

A lot of supply chain fragility comes from a lack of information about existing options. This often leads to reliance on a small, entrenched set of partners, which increases their exposure to moral hazards such as partner default and fraudulent behavior.

“Within conventional supply chain models, prohibitive search costs and information asymmetry impede a firm’s capacity to effectively identify and evaluate potential suppliers and customers on a global basis. ”

In contrast, data-driven & digital real-time identification, screening, and analysis of global supply-demand intelligence can provide much-needed alternatives.

This can be especially valuable when a particular node is impacted by a disruption. Overall, it can improve a firm’s market influence and resource allocation capabilities, reduce its reliance on any single supplier or geographical region, and ultimately drive supply chain diversification from the demand side.

It can have important systemic effects, as a given disruption is then stopped from spreading to other supply chain nodes, improving the entire supply chain resilience unseen.

Boosting Innovation

Digital and more transparent supply chain also means enabling the precise matching and elastic supply of innovation resources. This can boost innovation quality through better efficiency of innovation resource allocation.

“It enables firms to monitor the real-time performance of new technologies and to quantify their contributions to production efficiency and cost savings and significantly reducing the search, trial-and-error, and matching costs inherent in the research and development (R&D) process”

It could also ultimately create a paradigm shift in corporate innovation strategy from “closed” to “open and collaborative” and facilitate the free flow and efficient integration of innovation resources within the ecosystem.

Building Resilient Digital Supply Chains

State-Owned Versus Private Firms

State-Owned Enterprises (SOEs) benefit from a form of “resource slack,” including preferential access to bank credit, government subsidies, and dominant market positions, while private companies often operate under much tighter resource constraints.

This creates the situation where resilience-enhancing digital initiatives are more impactful for more vulnerable private companies.

Intellectual Property & Digital Ecosystem

Another effect the researchers found is that strong intellectual property protection and well-developed digital infrastructure also improve the effect of supply chain resilience initiatives.

In this case, this is likely driven by the fact that greater commitment and larger-scale investments in innovation are made when they are protected by mechanisms like patents, software copyrights, and trade secrets.

“Within a weak IPP regime, firms are more susceptible to the risks of technological disclosure, which undermines the link between innovation investment and expected returns. Consequently, the impetus for firms to engage in deep-level technological innovation is diminished, prompting them to favor a “wait-and-see” strategy or limit themselves to shallow-level technology adoption.”

So the regulatory environment and national institutions can have a major impact on the convergence of digital and physical economies, including regarding supply chains.

Similarly, digital infrastructure development, like access to resources such as cloud computing and major data centers, can accelerate the development, iteration, and commercialization processes of digital products.

“In contrast, regions with underdeveloped digital infrastructure are often characterized by deficiencies such as inadequate IoT coverage and insufficient computational power. These limitations impede large-scale, real-time data acquisition and analysis, which in turn prevents the TCDR from effectively boosting supply chain resilience.”

This directly leads to a reduction of the trial-and-error costs for firms in technological innovation and accelerates the convergence of the digital and physical economies.

Investing Takeaways

Digital transformation has usually been seen through the lens of improving efficiency. But increasingly, it is about creating a measurable resilience advantage for industrial companies, especially when they are operating in sectors with complex technologies and elaborate international supply chains.

The convergence of digital and physical is improving supply chains through three main channels: alleviating financing constraints, reducing supply chain concentration, and fostering technological innovation.

So digital technologies should today be seen as a competitive advantage and an essential part of resilience infrastructure instead of discretionary IT spending.

This is especially true for the most data-creating and advanced tools like industrial AI, digital twins, simulation, connected manufacturing, and supply-chain software.

Investing In Industrial Data

Siemens AG

Siemens is a giant of industrial tools and manufacturing, with unmatched breadth when it comes to digital technologies for automation of production, IoT (Internet of Things), industrial software, industrial AI, simulation, digital twins, and overall “smart manufacturing”.

“The concept envisions factories where collaborative robots work safely alongside humans, where artificial intelligence supports rather than supplants human decision-making, and where production processes are designed to minimize environmental impact while maximizing personalization and flexibility.

Industry 5.0: Bridging human-machine collaboration.”

It is also a key supplier of essential physical components like industrial controllers and programmable logic controllers (PLCs), drives and inverters, switchgear, grid controls, building automation, etc.

It is also not merely a software supplier, but an industrial operator in its own right through businesses such as Siemens Mobility, which produces trains and rail infrastructure.

Altogether, this makes Siemens’ profile the perfect partner for major global enterprises to upgrade their manufacturing capacity, be it with Intel (INTC ) in semiconductors, with Hyundai in shipbuilding, with Foxconn for smart electric vehicles, or with Nvidia (NVDA ) for physics-compliant digital twins of entire factories.

Source: Siemens

Siemens’ direct and ongoing experience in manufacturing, combined with its wide range of industrial partnerships, makes it a well-positioned company to benefit from the ongoing fusion of the digital and physical economies, and increasingly digitalized manufacturing and supply chains.

“AI-powered systems can analyze vast amounts of real-time data collected from IoT sensors across the factory floor, identifying patterns, predicting equipment failures, and autonomously adjusting production parameters to improve efficiency and quality.  The impact of AI extends far beyond just operational efficiency. These intelligent systems enable manufacturers to make more informed, data-driven decisions about product design, supply chain management, and strategic planning. ”

A key component of Siemens’ future “5.0 factories” will be the Intelligence Center X, its enterprise-grade industrial AI orchestration software. It can be used to deploy autonomous AI agents alongside human workers and bring together all levels of data silos currently separated on factory floors.

Source: Siemens

The company is already seeing strong demand across its digital and infrastructure businesses. In Q3 FY2026, Digital Industries software revenue rose 15%, while Smart Infrastructure orders increased 42%, including an 81% jump in the U.S. This makes it one of the rare German companies benefiting both from the Chinese market and from the EU and USA efforts to reindustrialize.

Source: Siemens

The same can be said for smart infrastructure (orders up 81% in the USA and double-digit growth everywhere else), while the mobility business (trains) is stable.

Altogether, this makes Siemens a company that was historically a key German producer of trains and turbines, but increasingly the global key partner everywhere for advancing smart manufacturing, industrial AI, and reactive/resilient supply chains.

Latest Siemens AG (SIE) Stock News and Developments

Study Referenced

^{1. Haohua Liu and Qiang Pan. The impact of technological convergence between digital and real economy industries on supply chain resilience. International Review of Economics & Finance. October 2026. Article: 105741. Volume 111.}