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Shorter Supply Chains Though Localizing Production

Shorter Supply Chains Through Localizing Production

Oct. 23, 2020
To save on costs, manufacturing companies will relocate part of their production activities from Asia and China to Eastern Europe and Latin America.

Around 30% of manufacturing companies plan to increase production localization efforts over the next 6 months to better shield from future risks, according to research company Euromonitor International.

The production localization progress would make global supply and logistics chains shorter and provide new growth opportunities for North American and European suppliers.

In addition, changing economic conditions and consumer preferences will impact the manufacturing sector, which will have to adapt to the ‘new normal’.

Thus, the future of the global manufacturing industry will be defined by five key trends by 2025:

1.   Transition towards demand-driven supply chain. Manufacturing companies are expected to invest more in a demand-driven supply chain model and greater flexibility in their facilities.

2.    Embracing digital solutions and automation. Around 50% of companies plan to reshape their digital strategies and invest in e-commerce, while one-third of respondents from Euromonitor’s Voice of the Industry survey 2020 will accelerate investments into automation tools.

3.    Greater flexibility of supply chains. The manufacturing sector is predicted to transform supply chains in the next 2-3 years, by making them more localized and flexible.

4.    Repurposing manufacturing capabilities. Companies will look for new ways to utilize their manufacturing capabilities outside of their primary industry.

5.    Greater collaboration. About 50% of companies aim to improve their communication strategy.

“Based on operating costs, it is most likely that manufacturing companies will want to relocate part of their production activities from Asia and China to Eastern Europe and Latin America, as these regions offer lower operating costs and are closer to Western European and North American markets,” concludes Justinas Liuima, senior consultant at Euromonitor International.