Regionalization of the Supply Chain

In the last 30 years, the technology applied to industrialization has evolved a lot, in this way now we have increasingly better machinery that performs more functions in an automated way.

Automation, artificial intelligence, 3D printing, will transform what until now is a "Manufacturing of a lot Workforce" into "Manufacturing of a lot of Capital".

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This means that it will be increasingly interesting for companies to have a modern factory, with state-of-the-art machinery, instead of having an old-fashioned factory with many workers.

With this theory, the wage factor takes a back seat when deciding "where to locate a factory", since it would be more profitable to establish several factories of regional scope, with fewer human personnel. In this way, logistics costs are considerably reduced, and if the labor is very expensive, then this can be supplied with automation.

Since quality levels would also be increased, cheap labor would no longer be of much interest as having better infrastructure, better raw material suppliers, cheap energy, and workers with a higher technical level to operate the machinery.

All this is going to mean a revolutionary change in the entire world industry and we would be facing a new industrial phenomenon called "Regionalization of the Production Chain". This is just saying that: what is produced in Asia, is sold in Asia. What is produced in America, is sold in America. And what is produced in Europe stays in Europe.

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Conclusions

Although this industrial phenomenon is not something new, it is true that it has been catapulted by the recent policies implemented by the US, creating the famous "Trade War" with China, where the idea of having a factory in China to sell the products terminated in the US, has become meaningless.

With the pandemic generated by Covid-19, this reality was further accentuated.

The world could suffer the effects of not having the distribution of products made in China. Many companies and marketers were affected to the point of going bankrupt due to the lack of electronic components, as well as finished products such as personal computers, laptops, cell phones, etc.

*The Regionalization of the Supply Chain must continue to be implemented. Companies must be less dependent on foreign manufacturers and maximize the use of new technologies to achieve operational self-sustainability.

@juanmolina

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