Between January – March 2024, Ti ran a survey aimed at supply chain professionals which sought to gain an understanding of the current state of the logistics market. The results here make use of respondents who identified as representatives of a company in the 3PL/contract logistics market.
Respondents were asked if they had any plans in the next five years to adjust their network and footprint to accommodate de-globalisation trends. Overwhelmingly, 86% of respondents voted yes.
Do you have any plans in the next five years to adjust your network and footprint to accommodate de-globalisation trends?
Events of recent years have demonstrated that a complex and dispersed supply chain can be disrupted, making a reconnection with domestic and regional supply chains even more attractive. It is becoming ever clearer that we are entering a period of regionalised and self-sufficient supply chains, which is being championed by government regulation. For example, the Biden administration has pushed through landmark fiscal packages – such as the Inflation Reduction Act and chips funding bill – that will involve unprecedented subsidies and funding for the green energy, technology, and semiconductor industries. China is working on a more than 1tn yuan ($144bn) support package for its semiconductor industry, and Europe is sure to follow with similar projects of its own.
Which of these de-globalisation trends (if any) do you expect the majority of your customers to pursue over the next five years?
57.1% of respondents expect that most customers will pursue a strategy of reshoring over the next five years, that is relocating production, manufacturing and/or sourcing to the customer’s original company. A not insignificant number of respondents (32.7%) believe that their customers will pursue a trend of nearshoring over the next 5 years, that is relocating production, manufacturing and/or sourcing to a nearby country.
Nearshoring/reshoring strategies will not happen overnight, nor will the decisions be available to everyone. The cost of localising supply chains appears to be a major barrier to making the change. Bank of America estimates that it would cost around $1tn in capital expenditure over five years to shift all foreign manufacturing not intended for domestic consumption out of China. Also, with a burgeoning middle class in China larger than the population of the US and hungry to consume new products, the Chinese domestic consumption cannot be ignored. This is where 3PL’s expertise will be most needed, to help customers make and execute these decisions.
For a further insight into key investment areas for 3PLs, as well as market challenges and strategies, full survey results are available on GSCi – Ti’s online data platform.
Supply chain strategists can use GSCi – Ti’s online data platform – to identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends and development, as well as understand future impacts on the industry.
Visit GSCI subscription to sign up today or contact Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907
