CSCMP's Supply Chain Quarterly
February 22, 2020
Forward Thinking

Regionalized supply chains are on the rise

Trends in the engineering and manufacturing sector, such as growing demand from emerging markets and an increase in product customization, are requiring companies to change how they organize their supply chains, says a DHL report.

Big changes are coming to the engineering and manufacturing sector (which includes the four subsectors of aviation and aerospace, nonenergy mining, industrial equipment, and construction equipment) according to a recent report by third-party logistics giant DHL. New markets are developing in emerging economies. Customers are increasingly demanding customized products and services. And technologies, such as the industrial Internet of Things, are allowing plants and factories to respond more quickly to customer demand.

One of the main outcomes of these changes may be the rise of "regionalized" supply chains, according to "Building the World—A DHL Perspective on Future Engineering & Manufacturing Supply Chains."

One reason, the report says, is that demand for engineering and manufacturing products is becoming more geographically diverse. While China and India continue to grow in importance, demand for engineering and manufacturing products is also building in the so-called MINT countries of Mexico, Indonesia, Nigeria, and Turkey. Meanwhile, there has been an increase in manufacturing operations moving from low-labor-cost locations to more developed countries. For example, in 2014, about 60,000 manufacturing jobs were brought back the United States, the report says. This "reshoring" trend has given rise to a corresponding increase in demand for related products such as industrial equipment and construction equipment.

At the same time that demand for such products has become geographically more dispersed and fragmented, it has also shifted from large orders of standard products to more customized orders. Accordingly, more manufacturing and engineering companies are discovering that they must adopt a service-oriented business model in order to stay competitive.

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