In the past few years, many companies have begun leveraging regionalized manufacturing ecosystems as a response to global disruptions and supply chain challenges. Recent Gartner research identifies resilience and agility in supply chain management as the main priorities for almost all organizations, with about 90% due to invest in such resilience over the next two years.
Regionalization is becoming a powerful strategy to overcome risks to business continuity arising from tariffs, geopolitical tensions, supply chain disruptions and other challenges. But using it purely as a defensive de-risking maneuver misses the overall narrative.
Regionalization offers myriad other benefits. The most obvious is achieving manufacturing and supply chain resiliency. This is especially true in the wake of the global pandemic and geopolitical issues, as well as component shortages and the ongoing war for talent. Indeed, supply chain disruptions during the pandemic served as a catalyst, pushing companies to develop alternate solutions and reconfigure legacy supply chain and manufacturing ecosystems, which creates multiple points of agility. Regionalization improves responsiveness to regional customer demand to help companies get products to market faster.
In some cases, proximity to end markets can also result in better alignment between final production and demand signals. This allows companies to innovate by further tailoring products in response to local tastes and regional trends. In operating closer to the end customer, companies can better understand consumer behavior and translate their nuanced preferences into product features. Additionally, by assembling finished goods closer to the end market, companies can wait to load the latest firmware and features into products so that they’re ready to use upon delivery—thus improving end-user experience.
Regionalization also enables companies to boost sustainability amid increasing regulatory requirements and consumer interest in the environmental impact of the brands they support. By manufacturing closer to end markets, companies can achieve a shorter supply network that reduces delivery risks and time, and minimizes carbon footprints. Circular economy practices can be integrated into regional manufacturing, allowing part harvesting, recycling and refurbishment.
There also is a trend toward factory digitization and the deployment of advanced manufacturing capabilities such as automation, augmented reality, simulation and artificial intelligence. Marrying these capabilities to a well-defined regionalization strategy allows companies to remain operationally efficient and competitive in today’s environment.
The common tradeoffs or pitfalls of regionalized manufacturing—including cost, labor availability and bringing operations to a new location—can be mitigated through advanced manufacturing. For example, the right technology and expertise can make it easier to replicate operational workflow or ramp up regional manufacturing capacity.
Moreover, some of these technologies can help set strategy by identifying regionalized scenarios through simulation and delivering supply chain visibility for data-driven decision making. Using advanced manufacturing can also enable greater productivity through automation and facilitate the measurement, implementation and success of sustainability requirements and initiatives.
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