Accelerating Supply Chains for a Post-Global World

Editor’s Note: Marcin Fic, is Vice President, Supply Chain Solutions, Flex

Globalization drove worldwide economic growth for decades by increasing offshore manufacturing, while spurring low shipping costs, free trade and cheap labor. However, more recently, a substantial shift is being made toward regionalized supply chains, due to higher wages, increased shipping costs and heightened consumer expectations for customization.

This era of post-globalization, or “regionalization”, involves the reorganization and division of manufacturing into smaller segments and more localized economies. It's characterized by the slowing of international trade, loans and supply chains, according to The Economist, as well as technological developments that are bringing production closer to the final destination of goods.

For manufacturers, it begs the questions of “Why now?” and “What does this mean for us?”

Because globalization has been the standard for so long, naturally, companies are unsure what changes they need to make to adjust to increased consumer need for fast products and to react to new tariffs. But there are many benefits the manufacturing industry can reap from this movement, including the opportunity for new regions to flourish and make the supply chain faster by simplifying it.

To start, it will be key to understand the technological advancements leading to regionalization, complexities in the new landscape and expectations for the upcoming years.

Emerging Technologies

Industry 4.0 is aiding the development of advancements in manufacturing technology. Specifically, this era is fostering the intelligent supply chain to further grow, as data analytics and IoT advancements are incorporated into supply chain processes.

For example, today's intelligent supply chains can provide live updates for individual components.

The ability to monitor for and identify risks in real-time helps streamline management, tracking and modeling. Meanwhile, companies that optimize operations and increase efficiency with digitized solutions also reduce labor costs and downtime.

As different markets call for different types of products to meet local needs, regionalized supply chains will expand. And when companies can move their production closer to the end-customer, they can respond faster to market changes and meet increased demand. For example, California-based solar micro inverter company Enphase expanded their manufacturing footprint from China to Mexico to quickly reach customers in North America.

Broader Implications

Although the positive outcomes resulting from post-globalization are undeniable, there are widespread concerns to consider, including the availability of specific, specialized components in different regions, like semiconductors. Reshoring production will call for a balance of resources and expertise between the typical go-to regions and those less equipped to handle globalization, and may call for multiple supply chains in different regions.

This shift will not be easy, given offshore outsourcing has been the norm for years. For instance, as operations costs rise with the ongoing U.S.-China trade dispute, China in particular is experiencing increased unemployment and surplus parts.

To properly support a faster, flexible supply chain, increasing regional manufacturing and maintaining distribution at a consistent level is becoming a more regular practice. As the supply chain itself simplifies, manufacturers will still need to maintain an extended supply chain network to thrive in a regional market for a number of reasons, including:

• Full visibility of the supply chain – ability to improve market agility at the regional level since time and distance will be less important.
• Influence over suppliers – ability to form connections with local suppliers and build new supplier relationships over time.
• Ease of control of operations – ability to anticipate demand for inventory, reducing the likelihood of excess supply.

Companies will need to weigh the current factors in the modern landscape – such as tariffs and customer demand – to determine which new locations make the most sense for their markets. With regionalization, new areas like Mexico or India will have the ability to break into previously Asian-monopolized spaces as manufacturing leaders.

Forward Thinking

Over the next few years, suppliers and manufacturers will form new relationships to create smart, regional supply chains. Thanks to real-time data analytics, heightened visibility into operations will speed up the flow of products and offer more information to manufacturers than ever before – saving money and minimizing lost time.

Complexities within the supply chain itself will continue to rise in the short-term, due to the dramatic shift from off-shore production. This will place more pressure on experts to make sure supply chains deliver expectations of efficiency, customization and speed.

By partnering with contract manufacturers that have operations in many countries, companies can more smoothly sail into the era of regionalization, hedging against potential change and delivering on their customers' high expectations.

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