Canadian supply chain faces a reality check heading into 2026

There were a multitude of factors that influenced the Canadian supply chain in 2025 — from artificial intelligence and automation to tariffs and trade policy, and from sustainability to the uncertainty of what the future holds.

Logistics and supply chain businesses in Canada have had to embrace flexibility to remain competitive in an industry that has become more visible and appreciated since the pandemic shone a light on its importance. That flexibility is what enables companies to build a more resilient supply chain, an area where Nick Reonegro, leader in transportation and logistics at Avalon, believes there has been progress, but where he cautions there is a risk that businesses could revert to old habits if continued investment and strategic adaptation stall.

“Many Canadian companies have diversified suppliers, increased local sourcing and invested in technology to improve supply chain visibility and adaptability,” Reonegro said of the positive moves being made to become more resilient. “Automation, artificial intelligence and collaborative partnerships are now more widely used to counter labour shortages and improve efficiency, particularly among leaders in retail and logistics.”

Reonegro said there is also a move toward nearshoring and reshoring, as a number of firms have relocated or expanded production closer to home to better control supply chain risks.

He does, however, point to statistics showing some of the momentum has been slow to materialize, and that old habits are at risk of creeping back into the supply chain.

“Only about 45 per cent of organizations have restructured their procurement and supply chains since the pandemic, and even fewer — just 61 per cent — report feeling adequately equipped for future disruptions,” said Reonegro. “While some progress has been made in inventory management and supplier diversification, a segment of businesses still struggles to move away from pre-pandemic ‘just-in-time’ inventory approaches and limited supplier pools.”

The public sector is one area where adaptation has lagged, said Reonegro, with challenges in spreading best practices, upskilling and embedding technological solutions remaining.

“Canadian supply chains are generally more resilient now than before the pandemic, driven by technology, supplier diversity and local investment,” he said. “However, progress is uneven, with some businesses at risk of reverting to less resilient strategies as pressures on costs and convenience return.”

Noah Hoffman, vice-president of North American surface transportation with C.H. Robinson, said 2025 had its share of turbulence for the Canadian supply chain, starting with a surge in activity as companies attempted to get ahead of anticipated U.S. tariffs.

“Although tariffs were delayed multiple times, each delay triggered spikes in cross-border demand,” said Hoffman. “By mid-year, volumes dropped sharply. With shelves stocked, some manufacturers started shifting production, Canadian consumers began adjusting their buying habits, and supply began to outpace demand.”

This has resulted in a shift in cross-border activity, according to Hoffman, with reduced volumes moving from the U.S. into Canada.

“This has made backhauls more difficult for drivers, increasing deadhead miles and operational inefficiencies,” he said. “The rise in carrier bankruptcies has led many owner-operators to turn to larger carriers that offer more stable business.”

Hoffman said request-for-proposal cycles are shortening, with some shippers moving away from traditional one- or two-year contracts in favour of quarterly or six-month options — a shift he aligns with the growing role of AI, which has enabled more agile and data-driven decision-making.

This unpredictable trade policy with the U.S. has been the primary challenge for Canadian businesses in 2025.

“The lack of consistency makes it difficult to commit to long-term strategies. As a result, flexibility has become an increasingly critical component of supply chain planning,” said Hoffman. “We’re helping more companies develop a sourcing hierarchy, which is an intentional, tiered plan that prioritizes geopolitical stability, business continuity and cost efficiency. It helps them make more strategic adjustments when tariffs change or new ones arise.”

Moving forward, Hoffman said a lot will depend on how the U.S. Supreme Court rules on the U.S. tariffs, and many Canadian companies are taking a wait-and-see approach.

Canadian shippers are also reassessing their inventory strategies.

“They’re moving from ‘just-in-case’ pandemic-era models to hybrid approaches that limit carrying costs and position goods closer to customers,” Hoffman said. “That means evaluating trade-offs in sourcing locations, inventory placement and transportation. Every inventory decision affects not just the price of the parts or products, but all the supply chain architecture around that decision. To understand the full implications of your inventory strategy, you have to take into account things like shipment timing, carrier selection and your last-mile costs.”

C.H. Robinson serves approximately 7,500 retail customers and, according to Hoffman, they are looking to manage their inventory differently to avoid passing higher production costs and tariffs to their customer base.

“These conditions are ripe for retailers to switch to managing their inventory at the item level instead of the shipment or load level,” he said. “The reason retailers have astonishingly little visibility into their inbound supply chains is because they often buy products from their suppliers with the storage and transportation included. Their supplier is the one with visibility into what items are where and in what quantity.

“Item-level visibility and centralized purchase orders allows you to avoid prematurely ordering when you don’t need to, shift inventory where it’s needed and order more precisely when you need to.”

Emerging risks in 2026

No one knows what the coming year will mean for the Canadian supply chain, but as Reonegro pointed out, businesses should be aware of the potential risks that lie ahead.

High-value cargo has become more of a target for theft; regulatory tightening — particularly for pharmaceuticals and perishables — is intensifying; and extreme weather events, geopolitical tensions, labour shortages and cybersecurity risks tied to the growth of digital connectivity in supply chains are all areas of concern for Reonegro.

“Logistics leaders who prioritize resilience, visibility, technology adoption and strategic network design will be best positioned to manage the rising risks and disruptions forecast for 2026.”

– Nick Reonegro, leader in transportation and logistics at Avalon

Hoffman said the next year will be shaped by trade policy volatility, AI-driven supply chain orchestration and the rise of regional logistics ecosystems.

He also sees over-the-road transportation networks needing to adapt quickly as companies diversify their global sourcing strategies and seek new trade partnerships.

“Success for Canadian companies will come from building flexible networks, investing in predictive technologies and aligning operations with sustainability goals,” said Hoffman. “Don’t wait for disruption, design for it. Treat supply chain strategy as a boardroom priority, not a back-office function.”

Sustainability also remains a core driver of logistics decisions, according to Hoffman, despite geopolitical and tariff disruptions.

“Canadian companies are under pressure to meet net-zero goals, and many are seeking mode shifts, route optimization and greener packaging,” he said.

“In conversations with customers, we’re hearing that budget constraints are forcing difficult trade-offs. Even if you can’t invest in an alternative vehicle or alternative fuel program, we’re still helping customers reduce their emissions by shifting freight from more carbon-intensive modes to rail and ocean, increasing trailer and container utilization, and using AI to eliminate unnecessary trips and transit time. A more efficient supply chain is by nature a more sustainable one.”