Powering Through Geopolitical Storms With Local Supply Chains That Have Safety Built In

Summary

Manufacturers now more than ever are having to manage the fallout from global events, such as the U.S. tariffs on imports & exports, as well as ongoing conflicts like the Ukraine-Russia war. Localization presents a key solution for future-proofing supply chains, allowing manufacturers to rely on local assets, but it brings its own set of challenges, often including higher distribution costs. Let's explore how manufacturers must tweak their operations across four business areas–remanufacturing, product design, sustainability reporting and Industrial AI-powered event forecasting to enjoy the benefits of localized supply chains.

All eyes are on localization; 68% of top management executives believe localized supply chains are a key strategy this year. However, for manufacturers making the shift to localization, the process presents its own obstacles, such as aging infrastructure, which can lead to disruptions and increases in distribution costs. The switch to localization, especially with sourcing raw materials, can be made worse with outdated technologies that blur visibility and overall connectivity within the supply chain. But Industrial AI is ready and waiting to bridge the gap.

Localization needs the transformative power of Industrial AI to turn it into a future-proofing plan that can help manufacturers enjoy immediate benefits. Already, 82% of companies are improving resilience with localization, and another 77% reaping the benefits of decreased costs as localization eliminates the need for costly transport and currency inflation. So how can others make the shift to localization and start reaping the rewards?

1. Say goodbye to single source by streamlining the process of supplying parts

One of the most overlooked causes of supply chain vulnerability is product design. Highly customized components, for instance, can limit a manufacturer’s flexibility by tying them to single-source suppliers or long-lead-time-parts that are difficult to replace during supply chain disruptions. This is why manufacturers that simplify product designs by shifting from bespoke to standardized components can open themselves up to a wider pool of suppliers, including those closer to home.

Agile automotive manufacturers led by example during the semi-conductor shortage by making decisions to replace custom chips with more commonly used, multipurpose ones that are found in consumer electronics. In doing so, they were able to offset the initial dip in revenue, which saw global car sales in 2021 down by more than 12% compared to 2019. Standardization helped the industry become less dependent on certain critical resources and allowed companies to build more resilient and shorter supply chains. So, what key lessons can be learned from this experience?

Manufacturers that design with flexibility in mind and pivot to standardized, modular designs can support faster procurement, reduce lead times and make it easier to manage inventory, all while enabling quicker responses to shifts in customer demand and raw material availability.

2. Upcycle materials for greener carbon footprints

As remanufacturing reduces the need for raw material extraction and long-distance transport, it can be a crucial strategy for manufacturers to reduce carbon footprints and supply risk. In fact, the Environmental Protection Agency (EPA) calls out remanufacturing as one of the most effective ways to lower environmental impact while conserving resources. Local dismantling and repair centers also bring production physically closer to the consumer, which creates regional loops that are more sustainable and responsive.

Research estimates that the automotive remanufacturing market in the U.S. is projected to grow significantly, reaching an estimated value of USD 24.30 billion by 2030, as manufacturers compete to keep costs low. But this barely scratches the surface of how remanufacturing can benefit manufacturing companies.

When manufacturers add Industrial AI into the mix, the potential to streamline remanufacturing processes becomes tenfold. Industrial AI can assess which components are reusable, match recovered parts to new production needs, predict failures to improve recovery planning, identify the shortest supply chain, and even flag companies that can use one company’s waste as their raw material. When it comes to core forecasting, Industrial AI tools can even help remanufacturers reduce core safety stock by 2-4% and save 3-5% in freight costs by reducing the cost of expedited shipping.

3. Transparent sustainability is now mission-critical to business success

Sustainability practices are no longer just good for the planet, they’ve become essential for long-term business success. Regulators, investors and consumers now expect greater transparency from companies, especially around Scope 3 emissions. Witness the fact that 80% of American consumers would be willing to pay more for sustainable products, driven by their commitment to environmental health.

Supply chain localization offers a way to reduce transportation emissions and allows for better oversight of supplier practices, including energy use and labor conditions, which can help ensure manufacturers meet regulatory targets. But how can manufacturers clearly display that their companies are meeting these?
Sustainability at the back end needs to be visible, transparent and auditable, which is where AI-driven data collection and analysis is key in producing these records. Manufacturers can use Industrial AI to automate emissions calculations and embed sustainability into daily operations. This can help businesses achieve accurate carbon insights at scale and embed sustainability into day-to-day operations.

4. Unleash the power of AI to mitigate the next supply chain hit

The final piece of the puzzle is scenario planning. Currently, just 5% of organizations globally can proactively predict and mitigate disruption before it impacts their business. What’s more, 75% of global manufacturers are still utilizing static systems and siloed organizations with minimal collaboration between engineering and supply chain teams. This is where real-time intelligence and always-on insights can enable a more proactive approach to supply chain risks—and Industrial AI holds the key.

Manufacturers can use Agentic AI systems embedded into their enterprise systems to say goodbye to what-ifs and instead simulate disruptions and re-plan in minutes. Where previously scenario planning would have taken a week for a human-led team to test a few key factors, AI agents can ingest massive datasets—be that supplier performance, geopolitical risk, weather—and suggest real-time actions based on learned patterns.

AI also enables upside-down Material Requirements Planning logic by suggesting what can be built with available inventory, rather than just what should be built based on outdated assumptions. For instance, if a supplier experiences delays during a specific holiday season, AI can flag the risks and suggest alternative products that manufacturers can make based on the resources available to ensure the production program is not disrupted.

The smart way to localize supply chains

For manufacturers, localization isn’t about supply chains making their way through the oncoming storm but overcoming any forecasted obstacles with the aid of Industrial AI.

Today’s supply chain model must accommodate ESG impact and sustainability issues, while allowing manufacturers to remain agile to adapt to external factors and geopolitical forces. The manufacturers who take the initiative to realign their localized supply chain strategy will set themselves up as market leaders.