Time for a strategic manufacturing footprint reassessment

Investment Rating - The report emphasizes the urgent need for manufacturing firms to reassess their supply chain strategies, focusing on resilience, adaptability, and responsibility rather than solely on cost efficiency [2][3][24] Core Insights - The current global supply chain model is under reevaluation due to challenges such as material shortages, rising energy costs, and geopolitical tensions, necessitating a shift towards more resilient and responsible manufacturing practices [3][4][24] - Consumer demand for transparency and ethical practices is driving companies to prioritize domestic production and sustainable practices, particularly among younger consumers [15][16][24] Summary by Sections Strategic Manufacturing Reassessment - Manufacturing firms must reassess their geographic footprint to enhance resilience and adaptability in a complex global market [3][4] - The report identifies three urgent reasons for reassessing manufacturing footprints: understanding the actual cost of globalized networks, ensuring supply chain resilience, and adapting to customer sentiment [5][11] Economic and Regulatory Landscape - The US Inflation Reduction Act and Infrastructure Investment and Jobs Act are catalyzing domestic manufacturing, particularly in clean energy and electric vehicle sectors, with investments reaching US $210 billion by early 2023 [5][7] - China's new export license policy for graphite and the EU's Carbon Border Adjustment Mechanism are influencing global supply chains and prompting companies to seek alternative production sources [7][8] Cost Analysis and Labor Trends - Reevaluating the total cost of ownership for global supply chains includes indirect costs and complexities, with disruptions during the pandemic costing 6%-10% of annual revenues [8][9] - Rising wages in developing countries and opportunities for automation are diminishing the advantages of outsourcing, prompting a shift towards nearshoring [9][10] Resilience and Risk Mitigation - The COVID-19 pandemic and other disruptions have highlighted the fragility of global supply chains, leading 60% of executives to prioritize resilience over speed [11][13] - Companies like Intel and Novo Nordisk are investing significantly in domestic manufacturing to enhance operational resilience [12][14] Consumer Sentiment and Ethical Practices - A significant portion of consumers, particularly Gen Z, prefer brands that align with their ethical values, driving a shift towards domestically produced goods [15][16] - The "Made in America Report" indicates that 65% of US consumers prefer domestic products, with 48% willing to pay more for them [16][20] Steps for Reviewing Manufacturing Footprint - The report outlines a four-step process for reviewing manufacturing footprints: mapping the current state, defining future ambitions, planning for gradual improvement, and developing a business case and roadmap [18][19][21]