Regionalization of supply chains is becoming more of a reality in a post-outsourcing world, says Hans Thalbauer, managing director of supply chain and manufacturing with Google Cloud.

Given the rather long list of challenges that supply chains have had to deal with globally in the last couple of years — drought, semiconductor chip shortage, war, high fuel costs, and the pandemic, of course — Thalbauer gives the industry a surprisingly good report card. “I think they have responded rather well, given what they have had to handle.”

As he sees shortages and disruptions continuing, how should companies adjust? “We talk with companies around the world constantly. And we see there is no way back to, let's say, the old normal. There will be changes and new ways to run supply chains in the future.”

In fact, Thalbauer says, he sees more regionalization of supply because companies want less risk and dependence on long lead times. “The idea is, if I have shorter lead times, if I have everything in the region, then I can actually produce faster and with less disruption. So this idea of regionalization is a big one.”

He thinks the number of semiconductor plants planned for the U.S. and other countries exemplifies regionalization. Companies hope their chip suppliers will be closer and more dependable, he says. But Thalbauer goes further. “I even believe we are living in a post-outsourcing world. That traditional way of outsourcing to China because there's cheap labor — not so much anymore. Actually, labor costs in China are going up quite significantly. And it's not about cheap labor anymore. You go to China in order to sell your finished products, but not necessarily to outsource.”

Consequently, Thalbauer is one who sees nearshoring becoming more of a reality.