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Continued from page 1 De-Globalization Some, like Dr. Mohamed El-
Erian chief economic advisor at Allianz, claim we have entered an era of de-globalization. Oth- ers, like MIT professor Dr. Es- ther Duflo, are less dramatic, but recognize that, in the future, we will globalize in a more balanced way. Both agree that these shifts may cause companies to consider greater regionalization of their supply chains. A recent McKinsey survey
found that 93 percent of global supply chain leaders are plan- ning to increase resilience. Lynn Torrel, chief procurement and supply chain officer at Flex ad- mits that a growing number of customers want to explore a more regionalized structure to avoid disruptions in supply chains and reduce their risk. There are benefits to be had
from regionalization, including a more diverse range of suppliers and more opportunity to improve collaboration with them, greater proximity to customers, opportu- nities to improve customer serv- ice and reduced transportation risk and cost. For example, Eu- rope has a thriving manufactur- ing sector and offers many ad- vantages as a regional manufac- turing destination. The European Union (EU) is
a collaboration of 27 nations, and makes up one of the largest mar- kets in the world with almost 450 million consumers. Within the EU, single-market goods, services and people can flow freely and as the world’s largest trading block, it is well-positioned to negotiate favorable trade agreements with the rest of the world. Longstanding members such
as France, Germany, Italy, and The Netherlands with well-estab- lished industrial infrastructures and attractive markets are keen to stake their claim on emerging growth opportunities like 5G, elec- tric and autonomous vehicles and renewable energy. The dozen central and east-
ern European countries that joined the single market as part of the EU’s expansion eastward since the mid 1990s, including Hungary, Poland, Romania, and Czech Re- public, can offer significant cost advantages as they continue to at- tract corporate investment.
Sustainable Supply Chains As pandemic restrictions re-
duced available capacity and made shipping more expensive, it became more difficult to justify the cost and environmental im- pact of shipping finished goods long distances. Many companies are seeing
the benefits of only shipping the components that are not avail- able locally, and assembling, con- figuring, and packaging the final
May, 2021 More Resilient Supply Chains
product closer to the market where it will be sold. Postponement services shor -
ten the lead-time to the end cus- tomer, allow for final products to be customized exactly to each market or customer’s order, and reduce redundant inventory. This is a more profitable approach as it reduces the total landed cost as well as being better for the envi- ronment. We’ve seen business-to- consumer shipments triple and more customers availing of config- ure-to-order and other fulfilment services recently.
Opportunity to Innovate One of the drivers of manu-
facturing’s move east was the low- er cost of labor. However, China’s median net salary is now equal to parts of Europe, and higher than some Eastern European coun- tries. The gap in total cost of own- ership is closing quickly. Economics Nobel Laureate
professor Joseph E. Stiglitz from Columbia University and for- merly the World Bank says that while manufacturing and supply chains may return, it doesn’t mean that the same number of jobs will follow. His comments relate to the
opportunities that relocation and regionalization offer to upgrade production with technologies like automation and robotics. Industry 4.0 is likely to be a
key element of relocation projects where simulation, digitalization, high penetration of automation and additive manufacturing will feature in their design. Manufac- turing simulation for example, al- lows production flows to be mapped and remapped until the optimum factory set up is de- signed. Only then will the highly efficient lines be physically con- structed. With constraints on cost and
labor availability, there are some key elements for medium to large manufacturing entities to success- fully regionalize operations. These include their ability to manage the complexity of the transition and ramp-up without disturbing overall production. They must manage both the basic electronic assembly and the vertical integra- tion of plastics and metals, while understanding the specifics of manufacturing for particular mar- kets; and they must efficiently de- ploy Industry 4.0 and increase lo- calization of supplies. Regionalization is not a bina-
ry decision that calls for closing overseas plants. Instead,
it
should be considered as part of a business resiliency strategy that is environmentally sensitive and that helps better serve customers.
This article was originally
published by Flex, Ltd., and has been lightly edited. To read the original, visit
www.flex.com/re- sources. r
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