The Rise of Local Supply Chains: A Strategic Shift in a Fractured World 

For decades, globalisation has been the undisputed champion of supply chain efficiency. From the late 1990s to the early 2000s, the hyper-globalisation heralded an unprecedented era of connectivity, slashing costs and breaking down trade barriers. Goods travelled thousands of miles with little resistance, supply chains sprawled across continents, and businesses enjoyed the fruits of an intricately interconnected world. 

Fast forward to today, and the narrative has shifted. The once-gilded promise of a seamless global supply chain now appears riddled with vulnerabilities. Geopolitical tensions, climate crises, and the aftershocks of a global pandemic have exposed the perils of overdependence on distant suppliers. Just-in-time manufacturing, once considered the epitome of efficiency, has given way to a more cautious, resilience-focused ‘just-in-case’ strategy. Enter the rise of local supply chains—a movement as much about necessity as it is about strategy. 

A Global System in Flux 

It is no secret that globalisation is facing its sternest test in decades. Trade restrictions, imposed in the name of national security and economic competitiveness, have surged worldwide. The value of trade affected by new import barriers has skyrocketed from USD 170 billion in 2014-15 to a staggering USD 1.32 trillion in 2023-24.  

Meanwhile, pandemic-induced disruptions, such as port closures and raw material shortages, forced companies to rethink their supply chain models. When the world’s largest shipping routes ground to a halt, businesses were left scrambling for alternatives, exposing the fragility of supply chains stretched too thin. 

In response, many companies have taken decisive steps to reconfigure their networks. Nearshoring and onshoring strategies—bringing production closer to home—are no longer outliers but central tenets of corporate strategy. The push for local supply chains is being driven by a mix of practical concerns, risk mitigation, and in some cases, a touch of economic nationalism. 

The Benefits of Going Local 

The pivot towards localisation is not merely reactionary; it is strategic. Companies have found that integrating local suppliers into their networks yields a host of advantages, from cost predictability to increased agility. 

1. Supply Chain Resilience 

COVID-19 underscored the risks of relying on a single global production hub. According to Accenture, 94% of Fortune 1000 companies experienced supply chain disruptions due to the pandemic, highlighting the fragility of overextended networks. Local supply chains mitigate these risks by reducing exposure to international disruptions, whether caused by trade wars, pandemics, or climate-related events. 

2. Faster Market Response 

With production hubs located closer to end consumers, businesses can adapt more swiftly to changes in demand. Shorter lead times mean that companies can recalibrate production schedules without waiting weeks for shipments from overseas. For instance, a Minneapolis-based company previously manufacturing plastic housing units for battery chargers in China faced an 18-month lead time. By partnering with AdvanTech Plastics in the US, it reduced this lead time to six months. The proximity facilitated easier communication and collaboration, allowing for optimised production processes and cost savings. 

3. Cost Efficiency—But With Caveats 

While conventional wisdom suggests that local production is more expensive due to higher labour costs, reduced shipping expenses, tariffs, and logistical complexities can offset these costs. Additionally, businesses gain greater predictability over expenses, avoiding the price volatility associated with long-distance transportation.  

4. Navigating Trade Protectionism 

The resurgence of trade protectionism, marked by escalating tariffs and trade barriers, is compelling companies to reassess their global supply chains. The U.S. administration’s recent imposition of a 25% tariff on imports from Mexico and Canada, alongside a 10% levy on Chinese goods, signifies a shift towards economic nationalism and reshoring critical industries.  

These measures have disrupted longstanding trade relationships, prompting businesses to explore local manufacturing options to mitigate tariff-induced costs. For instance, Lindt & Sprüngli is relocating some of its US-based chocolate production to Europe to avoid Canada’s retaliatory tariffs, highlighting the complex decisions companies face in this environment. Conversely, Newell Brands, known for products like Sharpie markers and Rubbermaid containers, has been relocating production from China to the US, Mexico, Vietnam, Indonesia, and Thailand to mitigate tariff impacts. Furthermore, the tech industry is also witnessing significant reshoring efforts within the US, with companies like Apple expanding chip production facilities in Texas and semiconductor giants such as Intel, TSMC, and Micron investing in new US fabrication plants.  

These strategic moves indicate a re-evaluation of supply chain strategies, with companies and countries alike adapting to the evolving landscape of international trade. 

4. Sustainability and Carbon Footprint Reduction 

As consumers and regulators demand greener business practices, local supply chains offer an advantage by reducing emissions tied to transportation. Shorter shipping distances mean a smaller carbon footprint—an increasingly important factor in the age of ESG (Environmental, Social, and Governance) accountability. A company’s carbon footprint extends beyond its immediate operations, encompassing indirect emissions throughout its value chain. These indirect emissions, known as Scope 3, can constitute up to 90% of a company’s total greenhouse gas emissions. They include all other indirect emissions that occur in a company’s value chain, such as upstream and downstream transportation and distribution.  In fact, international shipping alone contributes around 3% of global greenhouse gas emissions, having grown by 20% over the last decade.  

To address these challenges, companies like the BMW Group are adopting a ‘local for local’ approach, sourcing materials close to their production sites to minimise transportation-related emissions. This strategy not only reduces the carbon footprint but also enhances supply chain resilience by mitigating logistical disruptions and geopolitical risks.  

Similarly, research indicates that if the US could fully bring Crystalline Silicon (c-Si) Photovoltaic (c-Si PV) panel manufacturing back to its shores by 2035, the estimated greenhouse gas emissions and energy consumption would be 30% and 13% lower, respectively, than relying on global imports in 2020.  

5. Economic Growth and Job Creation 

Governments are actively encouraging localisation, not only to secure critical supply chains but also to generate domestic employment. Large EU and U.S. organisations are set to invest USD 3.4 trillion in reindustrialisation over the next three years, underscoring the shift towards more localised production models. Initiatives such as Saudi Arabia’s Vision 2030, the UAE’s Operation 300bn, and India’s ‘Make in India’ aim to bolster local industrial capacity, while policies in the US and Europe incentivise businesses to reshore production.  

The Challenges of Localisation 

Of course, transitioning to local supply chains is not without its challenges. Local sourcing often entails higher operational costs, infrastructure constraints, and, in some cases, shortages in skilled labour. Businesses seeking to localise must also navigate regulatory barriers and invest in upskilling their workforce to support new manufacturing capabilities. 

Furthermore, excessive localisation can have diminishing returns. A recent survey found that while moderate localisation improved supply chain resilience and cost efficiency, excessive dependence on constrained local resources led to inefficiencies and higher costs. Therefore, striking the right balance between global and local sourcing remains critical. 

A Future Defined by Balance 

The rise of local supply chains is not an outright rejection of globalisation but rather an evolution of it. Companies are moving away from an overreliance on a single country or region and embracing diversified sourcing strategies. While global trade networks will continue to play a vital role, the supply chain model of the future is likely to be hybrid—one that balances the best of both worlds. 

Ultimately, the shift towards local supply chains reflects a broader economic recalibration, one that prioritises resilience and adaptability over sheer efficiency. In an era where supply chain disruptions have become the norm rather than the exception, businesses that embrace localisation—while maintaining a global outlook—will be best positioned to navigate the uncertainties of the future.