‘New Cold War’ means shifting sands for supply chains

THE PROPORTION of CEOs and COOs reporting plans to bring supply chains closer to home or main markets jumped to 81% from 63% in 2022.

Almost two-thirds of executives (64%) report ongoing investment and execution in ‘reshoring,’ ‘near-shoring’ and ‘split-shoring’ moves by their businesses.

Only 36% report further investment in offshoring, meanwhile. However, the findings also show reshoring efforts also have much further to run, with only 2% of companies reporting having fully completed their plans.

Bain’s operations survey gathered views from 166 CEOs and COOs, with 90% managing businesses with revenues in excess of $1 billion, more than half at companies with revenues above $5 billion, and two-fifths with $10 billion-plus revenues. 39% of respondent businesses are based in the USA.

Bain & Company partner and global head of the firm’s Performance Improvement practice, Hernan Saenz, says: “We believe the current acceleration of reshoring across key markets worldwide is a crucial trend that demands CEOs’ attention. The multiple disruptions companies have grappled with since the pandemic mean the question for company leaders is no longer whether to reinvent supply chains but how to do that so their operations are made more cost-competitive, resilient, sustainable, and agile in responding to evolving markets and customer needs.”

New economic blocs

Bain’s analysis indicates that reshoring is also being reinforced by deglobalisation trends, with apparent concerns over decoupling of economic blocs contributing to a rise of more than 25% in the proportion of companies seeking to reduce dependence on China. The proportion of companies reporting moves to shift operations out of China has risen to 69% in 2024, from 55% in 2022, the survey results show.

In the US, the findings also point to reshoring having been further stimulated by the 2022 Inflation Reduction Act (IRA). The IRA offers US companies subsidies and tax credits to incentivize reshoring and near-shoring to boost domestic manufacturing and job creation – particularly in sensitive markets, such as those for semiconductors, clean energy technologies such as solar panels and wind turbines, and electric vehicle supply chains.

Moves toward reshoring of semiconductor manufacturing have also been intensified by the US CHIPS Act, which put in place tax incentives and $52 billion in funding to stimulate US domestic production of chips – as well as surging AI-driven demand for graphics processing units (GPUs). Bain’s recent Global Technology Report forecasts that demand for key GPU components could increase by 30% or more by 2026, potentially triggering an AI-induced chip shortage.

Adam Borchert, Bain & Company partner in the firm’s Performance Improvement practice and global lead of its Supply Chain practice, said: “The powerful forces driving the patterns of re-shoring, near-shoring and split-shoring that our findings show will persist and confront company leaders with the challenge and opportunity of transforming their supply chains for reshaped global markets. We are helping clients to navigate these shifts and build supply chains that meet market needs, are resilient and future-proofed, while strengthening management capabilities to adapt to further change in an uncertain world of constant turbulence.”