Why manufacturers are decoupling supply chains to stay competitive

Due to a concurrence of large-scale global events, geopolitical issues and wage inflation in lower-cost countries, industrial companies are restructuring their traditional supply chains. According to the EY Industrial Supply Chain Survey, most firms are strategizing and implementing supply chain transformations, including decoupling their existing supply chains, and repositioning production facilities and suppliers closer to their customers. While reimagining their supply chains, industrial leaders must integrate agility into their supply chain footprint and supplier network. They must also utilize this once-in-a-generation opportunity to make their supply chains more sustainable. The widespread near-shoring of business operations and new regulatory measures, such as the EU’s carbon border tax, suggest that these transformations may alter the established global supply chain models. Consequently, these initiatives will yield clear winners and losers in the market.

Key takeaways:

• Industrial companies have responded to supply chain constraints by remodeling their global supply chains — with 53% of the respondents of the EY Industrial Supply Chain Survey saying that they have already nearshored or re-shored some of their operations in the last 24 months.
• As a result of the US government’s support for domestic manufacturing and sourcing, industrial companies in North America have started bringing production and suppliers closer to home — to reduce complexity and ease delays.
• Firms should conduct a holistic assessment of their global business operations, and implement a supply chain architecture that can handle new risks and opportunities.

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