Most companies today have globalized industrial value chains, with free-flowing movement of goods and services that serve every customer globally. Local sourcing is limited and plant specialization remains the order of the day, with one plant in one location mass-producing one specific product.
However, the turbulence of the last few years has shown just how vulnerable these highly globalized supply and production networks are. Now many businesses are rethinking this set-up—and regionalization strategies are high on their list.
According to a recent Accenture survey, 65% of companies intend to buy most key items from regional suppliers by 2026, up from 38% today. Even more organizations (85%) plan to produce and sell most of their products in the same region by 2026, almost doubling from 43%. The survey was part of a research project in which Accenture analyzed what really made supply and production networks resilient.
We define resiliency as a company’s ability to sense, absorb, adapt to and recover from a force of change that disrupts their engineering, supply chain, production and operations functions. Examples of these forces are inflationary pressures, fluctuating energy prices, material shortages, talent scarcity, and even technological breakthroughs like Generative AI.
According to our findings, companies indeed tend to be less vulnerable if they have a more local supply base and transportation flow.
However, what separates the wheat from the chaff is having command of a set of emerging capabilities. We were able to link maturity in these “Resiliency 2.0 capabilities” directly to hard financial and performance data.
Resiliency 2.0 capabilities fall into the following categories.
Many companies applied short-term fixes to their complex global production and supply networks in recent years. These networks had been designed for just-in-time deliveries and to be as cost-efficient as possible. Now is the time to strategically redesign them for sustained resiliency—and sustainability.
As determination to go “net zero” grows across society and governments, reducing emissions becomes a building block of resilience. When companies redesign their supply chain and production networks, they must do so with this goal in mind.
For example: Up to 80% of a company’s upstream emissions come from Tier 2-plus suppliers. However, most businesses today are unable to detect and track which supplier emits how much.
One central action companies should take is integrating emissions into their supply chain control tower—and complement the control tower with a digital twin of the supply chain. This virtual replica not only maps physical material flows and uncovers sub-tier suppliers and risks, but can also simulate the carbon footprint of the entire network.
This example shows how the rapid innovation in data, AI and other technologies provides ample opportunity for businesses to build Resiliency 2.0 capabilities. Companies that invest in their digital maturity will be best positioned to get ahead of disruption.