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February 14, 2019 | Report
Manufacturing producers are shifting away from foreign suppliers of inputs toward more local ones, choosing to “go local.” Data confirms the trend is a clear departure from the heydays of outsourcing: the share of local value added is now increasing in mature economies. The decision to go local is broad-based across industries and countries. Companies that shift towards local suppliers are better positioned to achieve mass customization and respond to changing customer tastes. The shift is also a response to societal concerns over sustainability.
Beginning in the 1990s, supply chains rapidly became more fragmented and more global. To a large extent, the offshoring wave in the 2000s was driven by cost advantages in production, especially in emerging market economies, resulting in an increase in the emerging market value content in global value chains (GVCs). Recent data suggests that this trend reversed in 2011, and the share of local value added is now increasing in mature economies. Manufacturing producers are shifting away from foreign suppliers of intermediate inputs toward more local ones. Indeed, this is the dominant trend in most industries in mature economies.
With generally less lead time in the sourcing of inputs, companies that “go local” are better positioned to achieve mass customization and respond quickly to changing customer tastes. The shift is also a response to societal concerns over sustainability. Industries that “go local” have more pricing power than globalizing ones.
The trend toward shorter global value chains predates the current tensions in the global trade environment
While new trade barriers have led many business planners to revisit the vulnerabilities of their global supply chains, reorganizing global
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