Rethinking supply chains: 82% of firms eye less reliance on China
Dependence on China limits 65% of large companies in the USA and Europe, while 82% plan to address this, according to a report by Capgemini Engineering. This situation is tied to the reindustrialization process, which is hastened by rising tariffs and intensifying trade conflicts.
The authors of the latest Capgemini Engineering report noted that large companies in the United States and Europe are increasingly focused on reindustrialization. This process involves revitalizing a country or region's industrial base, creating new facilities often based on modern technologies, and boosting employment in the industry.
For years, production has been massively relocated to countries with lower labor costs, becoming standard in the strategies of large companies, and it "seemed" to have no alternative, according to the press release. However, the report's authors point out that the COVID-19 pandemic and the full-scale war in Ukraine have exposed the fragility of global supply chains, prompting companies to reconsider their approach.
During this time, discussions about the need for reindustrialization as a response to disrupted logistical connections and geopolitical tensions began. The risk of dependence on production in China and other distant regions was "highlighted" by rising tariffs and intensifying trade conflicts, the authors assess. Capgemini Engineering experts note that it's no surprise that nearly 95% of executives point to pressure on supply chains as a key issue, and 93% express concerns about the negative effects of rising tariffs.
What Western giants want to do now
A strategic priority for large companies is to restructure global supply chains and production capacities, including bringing production back to the country (reshoring), closer to the target location (nearshoring), and to allied countries (friendshoring). Another priority for companies is to diversify sources of supply, even at the expense of short-term profitability: 60% of executives aim to continue these actions despite higher expenses.
65% of companies are reducing their dependence on Chinese products, and 82% plan to do so. Within the next three years, they intend to increase investments in friendshoring. Companies surveyed are looking to relocate some production to countries and regions such as North America, the United Kingdom, Mexico, Vietnam, India, and North Africa.
The new production model relies on technologies and processes such as automation, artificial intelligence, or blockchain (decentralized data registry), which enable companies to reduce costs, increase efficiency, and enhance operational resilience. Over 60% of organizations plan to develop technologies such as data analysis, artificial intelligence, and machine learning in the next three years. Investments in innovative production solutions aim to support reindustrialization processes and address logistical and sustainability challenges.
Capgemini Engineering experts comment that reindustrialization is no longer just a temporary reaction to a crisis but a long-term strategy for building flexible and resilient supply chains.
This company's report, titled "The Resurgence of Manufacturing: Reindustrialization Strategies in Europe and the US – 2025," was based on a survey conducted from January 1–20 among 1,401 executive representatives in companies with annual revenues exceeding one billion dollars from the USA, the United Kingdom, France, Germany, Italy, the Netherlands, Spain, and the Nordic countries.
