Re-Regionalizing supply chains

Why go further abroad?

Home is where the heart is. During the coronavirus pandemic, this realization hasn’t just dawned on the tourism industry, but also on many procurement and supply chain managers. Completely re-regionalizing your supply chain is often not a possibility, but most businesses that want to move back to more local suppliers have opportunities to diversify.

The advantages of a mainly regional supply chain are obvious: within the European Union there are no trade barriers, plenty of partner countries share the same currency, and some share the same language or culture. Personal collaboration is all the easier to organize, the nearer your suppliers are based. And it’s better for the environment if you don’t have to ship goods halfway around the world. Plus, the shorter the journey, the lower the risk of disruption. In turn, this brings more flexibility through faster lead times and lower inventory levels.

One significant factor tipped the scales in shifting procurement more and more towards Asia over the last 15 years: costs. Production is quite simply cheaper in east Asia than it is in Europe. Unlike in the early days of globalization, the quality is appropriate; Asian suppliers have adapted to Western customers’ requirements, and transport is cheap and efficient.

Well-established connections called into question during COVID-19

But the coronavirus pandemic has seen well-established structures to be questioned within just a few weeks. Many food products and consumer goods,in particular, are now labeled “Made in China”. The fact that procurement from eastern Asia has been cheaper and increasingly simplified means that there are hardly any manufacturing facilities for many primary products in Europe. The European continent has parted with a great deal of knowledge and value creation, no longer seen as necessary in the face of advancing globalization.

For a long time, consumers had not been interested in where and under what conditions products were being made either. But in view of climate change, environmental destruction, and reports of exploitative working conditions, there has been a shift in perception, although there are still many people for whom price is the most important purchasing factor – though often not voluntarily, of course. The origins of ingredients or primary products are also not always clear to customers. But a growing proportion of consumers are interested in their goods being produced fairly and sustainably.

Over the last few years, with trade disputes increasing and calls to take climate change seriously becoming ever louder, there have been initial discussions over whether at least some areas of production ought to be brought back to Europe. The coronavirus pandemic has given this change in awareness an extra boost. As a result, many buyers and supply chain managers are now looking for genuine solutions.

Personal collaboration is all the easier to organize, the nearer your suppliers are based.

Re-regionalization is difficult in some areas


From chips right through to battery cells, none of the basic materials for electrical goods are manufactured in Europe. The EU wants to find an alternative, but it will still be a few years before production is established here.

So, it’s no surprise that items such as smartphones, computers, gaming consoles, and TVs – all containing these components – don’t generally come from Europe.


In Europe, there is hardly any capacity for freeze-drying. So, fruit is sent to China to be freeze-dried before going to Europe to be mixed in with breakfast cereals. This could also be the case for granola or for honey-coated cereal.

Personal bodycare

The individual ingredients for shower gels, bath foam, and shampoos are produced in the Far East, then blended and bottled as finished products in Europe.

Consumer Goods

Laundry and cleaning products are also manufactured according to the same division of labor: ingredients from Asia, blended in Europe.  80% of all the shoes worn in Europe are manufactured in China or other Asian countries, and an enormous amount of our clothes originate from there. Bikes and other sports equipment items are often designed and assembled in Europe, but the components come from east Asia.

Europe: lack of production capacity and higher costs

The fact is, though, that production capacity in Europe is sadly lacking. In many cases, businesses that are serious about re-regionalizing their supply chains have to first support the construction of manufacturing facilities, before they can procure on a large scale from their own continent.

As well as the advantages of a regional supplier relationship already mentioned, there is also the boost in European value creation and new jobs that an increase in European production would bring. In the current recession which may well lead to more unemployment yet, supply chain re-regionalization could create new opportunities.

We should remember, though, that while manufacturing in Europe is known for its high quality, it usually costs more than in Asia; as a result, products manufactured in Europe are usually more expensive. This is not something that every consumer wants, or is able to afford. And so there will remain an integral Made in China element in many companies’ supply chains.

To justify a higher price, businesses should create transparency for consumers: for example, it is not currently obligatory to declare the origin of individual ingredients or primary products in processed foods. So, consumers are not aware that the almonds in their muesli come from California, the honey comes from Chile, and the dried strawberries come from China. Yet the finished product can still be labeled Made in Europe. If you want to charge more for products that are more local, you need to raise awareness of this first. The success of locally grown fruit and vegetables that are snapped up in supermarkets is proof that this can work.

Bringing it home

The best place for companies seeking to diversify their supply chain and make it more regional is with market research: what primary products are procured or produced in Europe? What capacity is available? Are there components that have previously been bought from elsewhere that might be worth setting up production for (make or buy analysis)?

If regional production is available, it is possible to forge a strategic partnership to develop quality standards and innovations together with the supplier. This relationship also gives suppliers the security to make investments themselves and expand production if required.

In order to set up production from scratch, it is reasonable to work together with universities and other scientific or academic institutions. They can build up the skills necessary for this evolution: knowledge that might have been lost or was simply never there.

For single primary products, it can be a sensible move to collaborate with other businesses that have similar requirements when it comes to procurement. This collaboration would create revenue opportunities for aspiring European entrepreneurs and investors, and can warrant setting up new or expanding capacity.



The aim of supply chain regionalization is not necessarily a move away from the successful model of globalization. It is more a matter of ensuring your company can diversify through regional procurement within at least part of your supply chain: to remain able to carry on trading during a crisis and to reduce your environmental footprint and open up new opportunities for innovative new companies. If it works, it wouldn’t mean the end of an international division of labor, rather the start of a new chapter.


Rudolf Trettenbrein

is the Managing Director at INVERTO in Vienna and advises customers on supply chain re-regionalization, as well as cost optimization in procurement and supply chain management. He has extensive experience in retail and in the consumer goods industry, within the European and international market.