**London**: Original equipment manufacturers are shifting from global sourcing to near-shoring in response to geopolitical tensions, trade complexities, and sustainability. This evolution requires a rethink of strategies, particularly regarding tariff-insulated costs and inventory management such as Just-in-Time practices, by 2025.
In recent years, original equipment manufacturers (OEMs) have seen a significant shift in procurement strategies, transitioning from a global sourcing model, once hailed as the ideal approach, to near-shoring solutions. This change, largely attributed to a range of factors including geopolitical tensions, increased trade complexities, and sustainability considerations, indicates that worldwide sourcing practices are becoming less viable.
As reported by MOTOR Magazine, the situation is set to evolve further by 2025. With protectionist policies on the rise and trade barriers intensifying between major economic regions, procurement leaders in the automotive industry are now compelled to rethink their strategies entirely. The current landscape reveals that even within ‘safe’ trading blocs, there is no guaranteed immunity from the unpredictable nature of tariffs and international trade uncertainty. Consequently, companies are now prioritising what is termed “most tariff-insulated cost” over “best-landed cost” in order to minimise potential financial exposures.
These developments suggest that OEMs must adopt more sophisticated and adaptable procurement strategies that move beyond simple geographic proximity or reliance on established regional trade agreements. Specifically, this is becoming increasingly relevant in North America, where the evolving trade dynamics require a reassessment of previously held beliefs about safe sourcing practices.
Alongside these procurement challenges, the concept of Just-in-Time (JIT) inventory management is also under scrutiny. Traditionally seen as a cornerstone of automotive efficiency, JIT has faced criticism due to the enhancement of risks presented by increasingly frequent Black Swan events—unexpected occurrences that can drastically affect operations. While JIT strategies have previously proved effective in reducing costs and improving efficiencies, the current climate raises questions about their sustainability.
The same report from MOTOR Magazine highlights that by 2025, a confluence of rising tariffs, fragmented trade zones, and unpredictable customs clearance times will compel companies to reconsider the viability of the JIT model. This traditional approach, which relied on seamless cross-border movements and consistent transit times, is fast becoming untenable. As a result, OEMs are likely to maintain more substantial buffer stocks of essential parts to safeguard against potential disruptions in supply chains and to navigate the complexities introduced by tariff-related cost variations and shifting trade policies.
The recalibrated approaches to sourcing and inventory management underscore a significant evolution within the automotive sector, reflecting the dynamic nature of global trade and the necessity for manufacturers to adapt quickly to maintain competitiveness in an ever-changing marketplace.
Source: Noah Wire Services
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