Someone has already talked about the end of the Age of Globalization, sanctioned by the pandemic and international tensions with Russia. But the phenomenon of reshoringthat is, the return of productive activities or the supply chain previously relocated to other countries, it does not mark the abandonment of globalization, but an important one reorganization of industrial processes, which began quietly before 2020.
This is a growing phenomenon – albeit at the moment still limited – which mainly affects hi-tech manufacturing in Europe, with Italy among the top countries in terms of number of cases. And which, however, does not automatically entail “repatriation” (backshoring) of business from abroad, but which suggests, for example, relocation to a neighboring country (nearshoring) or diversification into several countries, precisely to avoid the concentration of production or supplies in single geographical areas.
To get an idea: A 2020 study by global consulting firm McKinsey indicated that, in the case of as many as 180 products from the supply chain, a single country accounted for at least 70% of global exports. Then, however, Covid-19 arrived, which produced delays in deliveries and production, as well as a dangerous thinning of stocks (also the result of decades of just in time) of “non-essential” goods, which exploded dramatically with the sudden return of demand. And, as the Bank of Italy explained in 2021, “geopolitical tensions have further contributed to slowing down the processes of international integration, due to the greater uncertainty over trade policies”.
Relocate and / or differentiate: there is also Italy
According to a report by the European insurance giant Allianz, of about 1,200 multinationals based in the US, UK, France, Germany and Italy, “less than 15% of these are considering the possibility of bringing production back to the country of origin, while about the double could relocate some plants to neighboring countries “.
As for theItalia, the first results of a survey conducted by the Re4it working group and the Confindustria Study Center among companies that have partially or totally purchased supplies abroad, say that 23% have backshored their supplies (in varying percentages) in the past five years. And 10% chose to completely reconfigure it in Italy. Especially because it can rely on an existing network of suppliers and to reduce delivery times. A widespread choice in various sectors, including that of machinery and their repairs, which previously had made very strong use of relocation.
An example? It is Bianchi in Treviglio, a historic bicycle manufacturer, which has decided to bring production back to Italy after a long period of relocation.
Specific skills are needed
A choice, that of reshoring, which, however, must also rely on specialists in the sector, capable of quickly and completely assessing the difficulties of production abroad and the opportunities to relocate. This is the case of EIM, which for 30 years has managed an international network of independent professionals and is a strategic partner for the improvement, expansion or start-up of production plants in Western and Central Eastern Europe. Recently, EIM gave support to an Italian multinational in the semi-durable goods sector with various plants – as well as in Italy, China and Eastern Europe – which found itself having to face a profound and unexpected crisis of its own production unit (600 people) in an Eastern European country. Sending an EIM Interim Manager to manage the plant served to get a real picture of how things were: unmotivated local staff, lack of management by local management, unjustified investment projects, to cover inefficiencies, huge room for operational improvement. The program adopted by the Interim Manager led on the one hand to immediate savings thanks to the cancellation of unnecessary investments (expansion of spaces and warehouses) and on the other to a significant improvement in performance in just 12 months. Here is an example of “managerial reshoring”: taking over control of the operational performance of a plant by the parent company, through an Interim Manager who interprets and locally adopts the ethics and best practices of the company.
Another example. An important German pharmaceutical company, as part of an internal project to redefine the global supply chain, has entrusted EIM to develop a new factory in Poland from scratch. Thus a team was formed that also includes three Interim Managers, who contributed to the construction of the industrial infrastructure, to the recruitment of all personnel – from workers to managers – and managed the training and start-up of the plants, up to achievement of expected operational performance. But other projects for the improvement, expansion and transfer of plants are also about to start, such as the reshoring of one supply chain from India to the countries of Central and Eastern Europe.
Support in public opinion
The so-called strategic autonomy conducted at company level, which is the basis of reshoring in its various forms, also finds broad support at the level of public opinion: 46% of those interviewed for a LegaCoop Ipsos survey at the end of 2021 indicated the need to incentivize companies Italians who have relocated abroad to return to produce in Italy. And the trend towards sustainability and local supply chains is growing, to the importance of “Made in” as a synonym of quality.
And, warns a study carried out at the beginning of last year at the request of the European Parliament, a decisive factor for large-scale reshoring in Europe will still be the geopoliticsmore than the economy or digitalisation.
The difficulties brought to companies by long and complex supply chains, even geographically, had already emerged with Covid. In not rare cases, lockdowns and logistical problems had at least led to loss of business opportunities due to a lack of supplies from abroad. In recent weeks, with the war in Ukraine which risks triggering a series of international crises due to the increase in raw material prices, the effect of economic sanctions and political tensions, it is becoming clear that the risks of production relocation have been underestimated. And in the agendas of CEOs, reshoring is rapidly climbing priorities.
For more information connected here: https://www.eim.com/it/reshoring/