Beyond Reshoring to Regionalization
Senior Supply Chain Director, Ascential Medical & Life Sciences todd.bauman@ascential
tech.com
763-464-2479
Recent and ongoing tariff discussions have some supply chain leaders rethinking their global supply strategy. While this has led many manufacturers to consider reshoring, an alternate strategy is growing around regionalization and rightshoring.
Instead of a blanket approach of relocating manufacturing domestically, companies should aim to produce as close to their customer base as possible. This strategic shift allows for improved cost efficiency, supply chain resilience, and dynamic adaptability in today’s unpredictable global landscape.
Risk management is the main responsibility of supply chain leaders, and cost is one of the most obvious and significant risks to a business. As we examine the proposed tariffs, a comprehensive analysis is essential, extending beyond direct suppliers to secondary and tertiary suppliers as well. Understanding the full picture of tariff implications allows companies to make informed and intentional decisions.
The Case for Regionalization
The traditional reshoring conversation tends to oversimplify the reality of modern supply chains. Rather than relocating all manufacturing back to a single home country, companies should adopt a regionalized supply chain model to reduce risk as well as to improve both cost efficiency and responsiveness.
Ascential Medical & Life Sciences utilizes this approach by operating across North America, South America, Europe, and Asia, ensuring that all production remains close to key customer bases. This strategy focuses on both the landed-cost model and advances into the total cost of ownership framework. Regionalization enhances resilience by diversifying supply chain risks and reducing dependence on any one geographic area.
A Comprehensive Approach
While strategic location selection is critical, a comprehensive approach to supply chain resilience must also consider geopolitical stability, climate change risks, and automation and innovation.
Manufacturers should prioritize automation in their manufacturing processes to ensure competitiveness while reducing reliance on variable labor costs. By integrating some of these broader considerations, companies are able to build supply chains that are agile, adaptive, and able to withstand global disruptions.
When developing a regionalized supply chain strategy, following these five best practices will improve the chances of success:
1. Prioritize strategic regionalization and rightshoring to reduce risks while being cost-effective and responsive rather than defaulting to reshoring.
2. Perform thorough tariff impact analyses to understand cost impacts across all tiers of suppliers.
3. Leverage free trade zones and duty drawbacks where applicable to capitalize on cost savings.
4. Plan for long-term resilience by including automation, climate risk mitigation, and geopolitical factors in robust supply chain strategies.
5. Stay informed on trade policy changes, such as USMCA renegotiations, to proactively prepare for shifting regulatory landscapes.
The future of supply chain strategy should not rely on specific strategies like “China for China” or reshoring everything back to the mother country; instead, supply chain leaders should strategically position their operations and supply chain where it makes the most sense.
By embracing intentional regionalization, companies are able to create cost-effective, resilient, and agile supply chains, prepared for economic and global uncertainties.