Supply chain resiliency could prove to be too expensive for some firms in 2024, according to a new study.

In a report published by S&P Market Intelligence November 14, entitled “2024 Supply Chain Outlook: Delivering resilience in adversity,” analysts said they expect gross operating profit margins to fall by 10.4% in 2024 while capital expenditures will likely exceed gross operating profits by 5%. Analysts said that reinvesting in capital stock may take priority over supply chain spending as a result of these changes, which could hurt overall resiliency.

The report said that corporate investment in inventory management features and other supply chain tools could be limited by high financing costs and lower profits.

The report also found that companies are cutting back their inventories, suggesting just-in-case models have fallen out of favor. Multi-sourcing is also on the decline after the number of suppliers-per-buyer among the top 500 importers in the U.S. during Q3 2023 fell below levels seen prior to the COVID-19 pandemic in 2019.

Reshoring has yet to fall out of favor with U.S. importers, the study showed.

“Global supply chains largely normalized in 2023 after years of disruption, and the need for resilience is clear. The willingness of corporations to build that resiliency is not,” the report’s authors wrote. “Falling operating margins and higher interest rates may be leading companies to cut their inventory balances and reverse recent supplier diversification increases… Organizational alignments are necessary to ensure continuing supply chain resilience. Tools for success include increased engagement with labor unions, geographic diversification with an eye to mitigating operational risk, closer tracking of environment profiles, reshoring and enhanced supplier engagement to manage tariff and geopolitical risk.”