This article was first published in Harvard Business Review and is available via subscription.
The traditional rules for designing global manufacturing footprints no longer apply. Geopolitical risks, rising trade barriers, political volatility, and national security pressures are injecting a high degree of uncertainty into executives’ decisions.
To determine how to adapt their manufacturing operations, BCG’s Daniel Kuepper, Nikolaus Lang, and Jan Nordemann recommend that executives ascertain if the expected tariffs will erode their margins, how material the cost penalties are from localization, whether automation and digitization can offset (at least partly) the cost penalties, and if there are any roadblocks or advantages to localization. Only by understanding these factors—and how they intersect—can leaders navigate an ever-evolving geopolitical landscape.