Regionalisation

Trend Definition 

What is the essence of this trend? What is its impact? 

• Essence: Regionalisation implies that companies shift away from a full global sourcing approach to one that relies on regional and local production, often driven by a political desire to become less dependent on other regions
• Impact: Regionalisation requires a new configuration of supply chains and procurement processes since the current ones are mostly aligned with global activities

Trend Drivers 

Why is this trend emerging now? What’s changing? 

• Reduction of Labor Dependency: Advancements in technologies reduce the dependence on manual labour due to a high degree of automation, enabling companies to shift their activities to countries with high labour prices 
• Environmental Effects: The introduction of carbon emission prices and trading require companies to strictly reduce their footprint which can also be achieved through shorter transport distances 
• Political Initiatives: Initiatives like the Atlantic Council foster ally-shoring, in response to current and future geopolitical tensions, to increase supply chain resilience 

Use Cases 

How to apply this trend? 

• Supply Chain Restructuring under USMCA: Minimum level of locally sourced parts 
  Example: In response to the USMCA (US-Mexico-Canada Agreement), automotive OEMs like Ford and General Motors restructure their procurement activities to meet the requirements of at least 75% of the parts used originating in the US, Canada or Mexico 
• Globalising and Localising: Importing while regionalising other parts of the production 
  Example: Siemens Energy’s Procurement department needs to handle regional sourcing of certain finished goods and services as part of the companies’ regionalisation strategy as well as global imports of raw materials and other inputs 

Procurement Relevance & Response Strategies 

How should Procurement adapt its Processes, Organisation, and Strategy?

• Incorporation of Regionalisation in Sourcing Activities: Procurement departments must evaluate on a case-by-case basis whether global or regional sourcing is preferable based on resilience, cost, and emission considerations
• Investment in Regional Capabilities: Invest in building capabilities and partnerships in new regional hubs, which could involve new facilities or collaboration with local firms