Anirban Bose, CEO, Americas, Capgemini.
The resurgence of American manufacturing isn’t just about bringing production back home—it’s about making businesses smarter, more sustainable and more competitive.
In this business landscape, leaders are eager for an edge. The modern organization faces layers of complex challenges, from geopolitical tensions to economic uncertainty, and wins are seemingly hard to come by. Driven by the need to overcome these barriers, research by my company found that reindustrialization—which involves reconfiguring and diversifying global supply chains and manufacturing capacity—is being widely embraced across Europe- and U.S.-based manufacturers to proactively reduce risk.
To ease the transition and improve long-term outcomes, it’s clear that technology and innovation must lie at the heart of future operations.
The Future Of Supply Chains: Moving Closer To Home
Many leaders are shifting their focus from cost-optimized offshoring to prioritizing the resilience and autonomy that can be found closer to home. Our research found, “In the next three years, onshore operations are expected to rise to 48%, nearshore to 24%, while offshore will drop to 28%.” Leaders cited supply chain security, tariffs and geopolitical tensions as some of the main propellants for this shift.
Research from the World Bank Group shows similar findings and illustrates an intensification of reshoring and nearshoring by U.S. companies. “This shift is estimated to have doubled the number of direct jobs associated with greenfield investment announcements in the US and its neighboring countries,” according to the report (download required).
What I expect to rise to the top is “rightshoring,” a strategy that aims to strike the right balance of reindustrialization practices to enable resilience. By combining commitments to friendshoring, reshoring and nearshoring, organizations can develop operations that meet their unique business needs while considering growth trajectory and evolving market demands.
Costs And Challenges Of Reindustrialization
While these strategic shifts are intended to heighten supply chain resilience, cost concerns remain a challenge. Those we surveyed are expecting increases of around 10%, on average, in initial capital fees like energy, domestic labor and raw materials over the next three years. Not only can fluctuations like these impact revenue, but they can also result in price hikes for consumers, which can, in turn, threaten customer loyalty and an organization’s ability to stay competitive.
Organizations will also have to manage some additional hurdles to successfully bring their operations home. For example, finding the right talent could present a barrier to those localizing their supply chains. More than 60% of leaders told us they “view the domestic skills gap as a major challenge.” Research from Gartner backs this finding, with North American leaders citing the shortage of factory workers as a common challenge they face when expanding operations to new locations.
Reindustrialization will require a highly skilled industrial workforce, and finding the right skill set to fill new roles may prove to be difficult as the workforce ages. Without skilled people to lead and optimize new systems, any return on investment will be stalled.
A lack of existing infrastructure and local partner ecosystem can also pose obstacles. Many organizations will need to invest in modernizing facilities and developing strong collaboration with suppliers, regulators and partners neighboring their new operations.
Addressing Hurdles
To help overcome these challenges and achieve successful reindustrialization, there are a number of steps organizations can explore.
First, consider how technology may help. For example, generative AI (GenAI), cloud computing, 5G and digital twins can support use cases such as real-time data integration, inventory management and material price forecasting. In fact, Gartner research found that 71% of manufacturers believe advanced analytics will be particularly important over the next 10 years; 67% said the same about GenAI. Scenario modeling, led by these tools, can also help organizations anticipate delays and make data-driven decisions. This can help improve resilience and adaptability and lead to opportunities for self-monitoring and self-improving supply chains.
However, manufacturers are bound to encounter some challenges when implementing these technologies, such as interoperability gaps, effective scalability, skills shortages and resistance to change. To overcome these barriers, leaders should take time to define a digital transformation strategy early on that clearly communicates guidelines for purpose, use, governance and scope. In addition to keeping humans at the center of new initiatives to ensure maximum innovation and seamless change management, strong data management will also be essential for an agile workforce.
Upskilling the workforce is another critical step. Provide on-the-job training to facilitate learning about advanced manufacturing processes for existing employees, uplevel their roles and improve the worker experience. This has direct ties to attracting and retaining talent.
Furthermore, organizations can look for opportunities to use GenAI, AI and machine learning to support gaps in the workforce by automating tasks and streamlining data-driven decision making. This could reduce stress on existing employees during periods of hiring and staffing shortages.
For leaders feeling overwhelmed as we crest this watershed moment in manufacturing, my best advice would be to start small. Work with your peers and stakeholders to assess existing challenges, and identify areas where there will be the most impact. For those considering investing in new digital tools, ensure the solutions you choose can support upskilling, factory operations and general productivity.
Reimagining The Way We Do Business—For The Better
Reindustrialization can help tackle more than just emergent concerns. For example, shorter supply chains can mean fewer carbon emissions. This illustrates a natural connection between nearshoring and sustainability, especially as our research also found that leaders are anticipating a 10% reduction in their carbon emissions over the next three years from their efforts to shorten supply chains.
Future-proofing supply chains won’t be simple, but it will be worthwhile. Using the right tools and adequately preparing staff will be essential for the next generation of business operations. Starting now could give leaders the competitive edge they need to navigate the increasingly complex global landscape and shift toward reindustrialization.
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