Claudio Knizek, global leader of advanced manufacturing with EY, discusses the results of the firm’s new survey on shifting trends in industrial manufacturing and sourcing.
EY reached out to executives in industrial countries around the world, to gauge shifts in sourcing and supply chain strategy. What it found was a major trend “unfolding right now before our eyes across global supply chains,” he says — the “decoupling” of extended supply lines that were put into place over the past 30 years. Instead, industrial leaders are redesigning supply chains to be “more resilient, agile, responsive and in some cases closer to home.”
Knizek was surprised to learn of the number of companies either considering or already making changes. More than half said they were rethinking their supply chain strategy, while 60% of industrial executives said they had already made some changes to their supply base. An addition 40% said they planned to make additional changes in the years ahead, whether by expanding the number of suppliers or reshoring some manufacturing operations. All are being driven by changing macroeconomic conditions, including rising wage rates in low-cost countries, the COVID-19 pandemic and limitations on export opportunities caused by a heightened sense of nationalism among trading countries.
Cost has long been the main consideration in determining where to manufacture goods. Recently, however, that blinkered view of global sourcing has resulted in severe disruptions to supply lines. Now, says Knizek, manufacturers are balancing the need to manage costs with that of diversifying sourcing to mitigate supply chain risks. In some cases, that means shifting production to low-cost sources in the western hemisphere, such as Mexico and parts of Central America, while in others it signals a return to manufacturing in the U.S. Automation and other technologies are making the latter choice increasingly attractive, Knizek says.
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