Enterprise decisions on reshoring and friendshoring are influenced by geopolitical considerations
In the face of intensified global tensions, trade uncertainties, and technological disruptions, internationalized companies worldwide, including those in Lombardy, are adapting to the changing landscape by embracing reshoring and friendshoring practices.
According to recent studies, 30.5% of the companies have increased the centrality of internationalization activities, with 7 out of 10 companies modifying their strategies due to geopolitical factors. The key drivers behind this shift are the complexities arising from the US-China rivalry, shifting alliances, trade war threats, and regional instability. These factors have complicated trade dynamics and foreign direct investment flows, creating a cautious business environment that restrains expansive overseas investments and international operations.
Lombardy, as a leading industrial and export-oriented region in Italy, is likely impacted by these global trends, given its exposure to international markets and complex supply networks. Firms in the region are reassessing their supply chain strategies to reduce dependence on geopolitically sensitive regions, shorten supply chains, and improve control over critical components.
In 2024, Lombardy companies exported 164 billion euros to 21 countries, with Germany, France, the United States, and Spain being the top four destinations. Interestingly, 15.6% of the companies had already replaced foreign suppliers prior to last year, and 51.1% of those who changed their supply networks have replaced a foreign partner with one located in Europe, Italy, or Lombardy.
Technological evolution is the second most influential factor, affecting 26% of the surveyed companies, while accessibility to critical raw materials is the third most influential factor, affecting 18.1% of the companies. Other significant factors include a focus on better product quality (23.1%), managing legal and customs aspects with greater attention (13.2%), and prioritizing flexibility factors (22%).
In the face of these challenges, Lombardy-based companies are not only adapting but also innovating. They are accelerating digital transformation to navigate economic headwinds and geopolitical uncertainties. Moreover, 28.1% of the companies are evaluating counterparties more carefully, and 26.1% of the companies are managing procurement more carefully.
Looking ahead, 61% of the companies surveyed are focusing on cost containment, while 6.8% of the sample plan to change their supply chains in the near future. In total, 30% of the sample have had to review their supply chains, and 25% of the companies are reviewing their budgets more frequently.
In summary, the current geopolitical landscape is driving internationalized companies to increase supply chain resilience by reshoring and friendshoring. Lombardy-based companies, as part of the global industrial fabric, are adapting to these challenges through strategic recalibration focused on mitigating geopolitical and economic risks while fostering innovation and sustainability.
- Given the intricate international trade dynamics and foreign direct investment flows, many Lombardy-based companies, being part of the global industrial fabric, are reassessing their supply chain strategies to foster reshoring and friendshoring practices.
- In line with the changing global business environment influenced by geopolitical factors, Lombardy firms are moving their focus towards enhancing supply chain resilience, thereby integrating international finance with domestic business strategies.
