Businesses are increasingly reconfiguring supply chains around resilience and geopolitical safety, moving away from traditional just-in-time models, as cross-border tensions accelerate a global industrial realignment.
Geopolitical strains are driving a fundamental reordering of where and how goods are produced, with businesses rethinking decades of optimisation for cost and speed in favour of resilience and political safety. At BT Davos 2026, Kiva Allgood, Managing Dire...
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ctor at the World Economic Forum, described the shift in strategic thinking that has companies moving away from lean, just-in-time models toward stockholding and redundancy to manage geopolitical risk. According to the World Economic Forum, supply chains are being reconfigured around new partnerships and competing spheres of influence, a trend that is reshaping investment and policy choices worldwide.
Industry data show this is not theoretical. Design News reports that 85% of global manufacturers are actively restructuring supply chains in response to geopolitical turbulence, and more than half of these firms are reducing dependence on suppliers in high-tariff regions. McKinsey’s analysis adds that such moves are driven by a mix of trade restrictions, industrial policy, labour availability, energy costs and infrastructure differences, all of which force companies to weigh resilience against efficiency when adjusting manufacturing footprints.
Duplicating supply chains for political safety carries a clear price. Reshoring or nearshoring often means higher labour and energy costs, capex for new facilities, and supply‑side inefficiencies until local ecosystems mature. McKinsey warns that the economics of diversification are complex: firms may accept higher unit costs to secure access and avoid the single‑point vulnerabilities that sanctions, tariffs or logistics disruptions can create. Brookings Institution argues policymakers can help by reducing transportation bottlenecks, tackling anti-competitive practices and investing in workforce and infrastructure to lower the hidden costs of localisation.
China’s sheer manufacturing scale presents a particular challenge. Replacing the depth and density of its supplier networks is unlikely to happen quickly; many components and processes remain concentrated there. The World Economic Forum notes that resource nationalism and regulatory fragmentation are accelerating regionalisation, but also that fully replicating China’s ecosystem will require substantial capital, time and policy coordination. As a result, many corporations are pursuing diversification rather than outright replacement of Chinese capacity.
India is frequently cited as a potential beneficiary of this realignment, and speakers at BT Davos explored whether the country can become a true global supply‑chain hub. India’s advantages include a large labour pool, a growing domestic market and active efforts to attract manufacturing investment. However, McKinsey and other analysts caution that labour skill mismatches, infrastructure gaps and regulatory uncertainty must be addressed for India to scale manufacturing at the breadth and depth required by global firms. Brookings’ recommendations on improving logistics, labour policy and competition are directly relevant to policymakers seeking to accelerate that transition.
Shifting production also raises urban and social consequences. Moving factories to new regions can relieve congestion in some urban centres but will place strain on new host cities’ housing, transport and public services unless planning keeps pace. The World Economic Forum has repeatedly highlighted the need to couple industrial relocation with urban transformation strategies so that jobs created by reshoring or nearshoring translate into sustainable livelihoods rather than temporary booms.
Finally, the interplay between automation and mass job creation remains central to the debate. Advanced manufacturing and robotics can reduce unit labour costs and make higher‑cost locations more viable, but they also limit the number of new, low‑skill positions that relocation might otherwise deliver. McKinsey and other observers emphasise workforce reskilling and education as critical policy levers to ensure technological adoption leads to broadly shared gains.
Across industry and policy literature, a consistent set of prescriptions emerges: diversify suppliers intelligently rather than pursuing single‑market replacement; invest in infrastructure and skills to lower the cost of localisation; improve regulatory predictability to attract long‑term capital; and design urban planning to absorb industrial shifts. As companies and governments implement these changes, the balance between resilience and cost-efficiency will determine whether this period of geopolitical realignment produces durable, inclusive industrial renewal or simply higher prices and fractured trade.
Source: Noah Wire Services
