Reshoring and Reindustrialization: Trends and Outlook in Europe and the US
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- Published: Monday, 22 April 2024 11:46
A new report by the Paris-based Capgemini Research Institute reveals that forty-seven per cent of large European and US organizations have already invested in reshoring their manufacturing production, with 72 per cent currently developing strategies for reindustrialization or already having one in place.
Initiated largely within the past two years, these strategies are aimed at enhancing resilience against disruptions, with investments in reshoring, nearshoring, and domestic manufacturing on the rise.
The report highlights that the majority of this funding is directed towards domestic market initiatives, comprising 54 per cent of cumulative investment in the last three years. However, hurdles such as skill shortages and scarcity of raw materials may lead to increased short-term investments outside the domestic market, mainly through nearshoring and 'friendshoring'.
Key drivers of reindustrialization include supply chain resilience, sustainability, geopolitical tensions, and legislation and incentives. Nearly 70 per cent of organizations surveyed view the imperative to promote supply chain resilience as a leading driver.
Moreover, reindustrialization is seen as a means to meet climate goals, with an expected carbon reduction of 13.6 per cent on average in the next three years. Additionally, 55 per cent of organizations are optimistic that reindustrialization will help reduce their Scope 3 greenhouse gas emissions.
Investments in technologies to enhance sustainability, such as giga factories, are seen as crucial in the journey towards sustainable reindustrialization. Sixty-two per cent of organizations are investing in such technologies, with 68 per cent expressing confidence in their potential to drive innovation and technological advancement, particularly through 5G/edge, generative artificial intelligence, and digital twins in the next three years.
Reindustrialization is also expected to drive job growth domestically across various sectors. However, meeting this demand will require a skilled manufacturing workforce, with the share of the manufacturing workforce with advanced digital skills projected to rise from 31 per cent today to 53 per cent in the next three years.