Supply chain digitalization boosts resistance and recovery from shocks

Global supply chains are facing sustained pressure from geopolitical conflict, trade fragmentation and recurring external shocks, forcing companies to rethink how they protect core operations. A new large-scale study finds that firms investing in end-to-end digital transformation are significantly better positioned to withstand disruptions and recover faster when crises hit.

The research, titled Supply Chain Digitalization and Its Resilience: A Systematic Framework and Empirical Evidence, published in the journal Systems, shows robust statistical evidence that digitalization across planning, procurement, production, delivery and service strengthens both the resistance and recovery capacity of supply chains.

Digital transformation strengthens resistance and recovery

According to the study, supply chain is not a simple linear pipeline but as a dynamic network of interconnected firms, processes and feedback loops. In this framework, resilience is defined through two core dimensions: resistance, the ability to absorb shocks without operational collapse, and recovery capability, the ability to rebound quickly after disruption.

To measure resilience, the researchers construct a composite index based on five operational indicators. Resistance is captured through a transformed cash conversion cycle, which reflects liquidity and capital turnover efficiency, as well as the stability of core suppliers and customers across consecutive periods. Recovery capability is measured using supply–demand matching efficiency and the speed at which firm performance returns to expected levels after a shock.

On the digitalization side, the study adopts a systematic, process-oriented measurement approach. Rather than focusing on a single technology such as blockchain or artificial intelligence, the authors conceptualize supply chain digitalization as a comprehensive transformation spanning planning, procurement, production, delivery and service. Using large language models to build a specialized keyword dictionary, they analyze Management Discussion and Analysis sections of corporate annual reports to quantify digital transformation intensity.

The baseline regression results are clear. After controlling for firm size, leverage, profitability, innovation investment, governance structure, industry and year effects, supply chain digitalization shows a statistically significant positive impact on overall supply chain resilience. Even when digitalization is measured using alternative keyword selection criteria or weighted through TF-IDF methods, the results remain robust.

To address potential reverse causality, the researchers apply an instrumental variable approach using regional internet penetration as an exogenous driver of digital adoption. The two-stage least squares analysis confirms a causal relationship: firms operating in more digitally developed environments are more likely to adopt supply chain digitalization practices, and this adoption directly improves resilience outcomes.

Importantly, digitalization enhances not only the composite resilience index but also each of its underlying dimensions. The strongest effect appears in supply–demand matching, suggesting that digital tools significantly improve dynamic coordination between production and demand fluctuations. Effects on recovery speed and liquidity management are also substantial, while improvements in supplier and customer stability are positive but comparatively smaller.

Three mechanisms drive the resilience effect

The study identifies three core mechanisms through which supply chain digitalization strengthens resilience: information transparency, operational collaboration and resource flexibility.

At the information level, digitalization improves both the breadth and depth of data flows. Firms adopting digital supply chain tools show stronger internal information coordination, measured by the frequency of disclosures related to system integration and data sharing. They also provide more detailed and forward-looking disclosures in annual reports, indicating greater strategic visibility.

Enhanced transparency reduces information asymmetry across supply chain partners, mitigates demand signal distortion and allows earlier identification of potential risks. When disruptions occur, firms with better data integration can coordinate responses more quickly and accurately, improving decision quality and lowering the likelihood of cascading failures.

At the collaboration level, digitalization reduces sales and administrative expense ratios, signaling greater operational efficiency and lower transaction costs. Enterprise resource planning systems, supply chain management platforms and collaborative digital interfaces streamline cross-firm coordination. As collaboration costs decline, firms can reallocate resources more effectively during crises, supporting agility and rapid adjustment.

At the resource level, digitalization promotes greater asset and output flexibility. Firms shift toward a higher proportion of intangible assets relative to fixed assets, reflecting more adaptable and reconfigurable resource structures. Capital expenditure intensity declines, consistent with asset-light strategies and deeper collaboration across the industrial chain. At the same time, product diversity increases, indicating a broader output base that can buffer demand shocks.

Together, these three channels form an integrated resilience architecture. Digitalization first improves visibility, then translates information into coordinated action and finally supports rapid physical reconfiguration of resources. The study's mechanism tests confirm that each channel plays a statistically significant mediating role in the digitalization–resilience relationship.

Institutional and organizational context shapes outcomes

The resilience-enhancing benefits of digital transformation are not uniform across all firms. Guided by the Technology–Organization–Environment framework, the researchers conduct heterogeneity analysis to identify boundary conditions.

The positive effect of digitalization on resilience is significantly stronger in regions with higher levels of marketization. In more market-oriented environments, well-developed legal systems and competitive market mechanisms amplify the effectiveness of digital tools. Firms in these regions are better positioned to leverage digital platforms for cross-organizational collaboration and coordinated risk management.

Ownership structure also matters. Non-state-owned enterprises experience a much stronger resilience boost from digitalization compared to state-owned enterprises. The findings suggest that market-driven governance structures and profit-oriented incentives enable faster translation of digital investments into operational gains. In contrast, structural rigidities in state-owned firms may dampen the effectiveness of digital transformation.

Industry technological intensity further shapes outcomes. High-tech firms show a stronger positive relationship between digitalization and resilience than non-high-tech firms. Their superior innovation capabilities and IT infrastructure likely facilitate deeper integration of digital technologies into supply chain processes.

These heterogeneous effects underscore that digital transformation is not a one-size-fits-all solution. Institutional context, governance structure and technological capabilities influence how effectively firms convert digital investment into resilience gains.

Policy and managerial implications

The findings carry significant implications for both managers and policymakers.

For corporate leaders, the study suggests that digital transformation should not be confined to isolated technological upgrades. Instead, firms should adopt a systematic approach that integrates digital tools across planning, procurement, production, delivery and service functions. Prioritizing information transparency, strengthening cross-firm collaboration and enhancing resource flexibility can collectively build a more adaptive supply chain network.

For policymakers, the research highlights the importance of institutional support. Strengthening digital infrastructure, improving market mechanisms and tailoring policy tools to different ownership types and industry sectors can amplify the resilience benefits of supply chain digitalization. Firms in less marketized regions or traditional industries may require targeted support to close digital capability gaps.

Advancing theory on digital supply chain resilience

The study makes three notable theoretical contributions. First, it develops a comprehensive measurement framework for supply chain digitalization that captures transformation across multiple processes rather than focusing on isolated technologies. By leveraging large language models for keyword expansion and text analysis, the research introduces a replicable methodology for empirical studies.

Second, it advances the digitalization–resilience literature through a complex systems perspective. Rather than treating digital adoption as a firm-level characteristic, the study conceptualizes supply chain digitalization as a systemic transformation that reshapes interactions among multiple actors.

Third, by identifying heterogeneity across institutional and organizational contexts, the research clarifies boundary conditions that had previously been underexplored.

The authors also acknowledge a few limitations. The digitalization measure relies on corporate disclosure intensity, which may not fully reflect implementation depth. The China-focused sample may limit generalizability, and nonlinear effects or technology-specific impacts warrant further investigation.