These 7 factors are reshaping the global manufacturing landscape

Over 2 billion voters cast ballots across 50 countries in elections this year, resulting in significant shifts away from incumbent parties, driven by a mix of economic challenges and post-pandemic dissatisfaction. This trend was accompanied by promises to accelerate a sweeping range of policies aimed at resetting global trade through tariffs and export controls, putting the onus on supply chain leaders to adapt. At the same time, with escalating global conflicts in regions like Europe and the Middle East, shifting sustainability priorities and the rapid adoption of transformative technologies like AI, manufacturing leaders must grapple with an increasingly complex landscape as they assess how to optimize their value chains.

Trade patterns are also shifting dramatically. In 2023, nearly 3,000 trade-restricting measures were imposed – almost triple the number in 2019. This dynamic is illustrated by the shake-up in import sources for the United States; in 2023, Mexico passed China as the top exporter to the United States, a shift that aligns with broader trends in global foreign direct investment (FDI) flows – increasingly marked by growing geopolitical rivalries.

This increase in the intensity and frequency of global disruption is coupled with the gap that manufacturing organizations across the value chain face between strategic intent toward the reconfiguration of value chains and operational delivery, the reality of implementation.

What is it, at a country level, that manufacturers are looking for? Company-centric strategies and collaborations with suppliers can go far; however, a multistakeholder approach along the journey to rewire value chains requires alignment and partnership with the public sector. As manufacturers reassess their footprints and network strategies, the trend of making location decisions based on cost is evolving into a more complex decision-making process, factoring a country’s readiness to provide an environment that aligns with strategic priorities.

A survey by the World Economic Forum and Kearney involving over 300 global operations executives and 60 consultations (captured in From Disruption to Opportunity: Strategies from Rewiring Global Value Chains), highlights that the gap between intent and operational execution is stark across five trends. These trends include: a shift to more regionalized hubs; a transition to a digital-first model of operations; the adoption of more innovative approaches to sustainability; a deeper focus on skills; and customer value.

Building on this, a recent report by the World Economic Forum in collaboration with Kearney highlights seven key country-level readiness factors, which global industrial companies are closely scrutinizing when making capital allocation decisions for the future of manufacturing and supply chain operations:

Arobust infrastructure is a cornerstone of industrial growth, requiring a balanced focus on both the physical kind, such as transportation and logistics networks, and intelligent infrastructure, including digital and technological connectivity. An integrated approach to developing both is becoming a critical priority for countries aiming to attract global investments. Malaysia's New Industrial Master Plan 2030 integrates physical and intelligent infrastructure through initiatives like the National Semiconductor Strategy (NSS). The NSS has pledged $5.3 billion to construct new industrial parks, invest in technology training and create partnerships with industrial players like Nvidia and Intel to position the nation as a manufacturing destination.

With finite natural resources, industrial organizations are increasingly prioritizing countries that demonstrate a commitment to diversifying their energy mix. This includes adopting renewable energy sources, promoting energy efficiency and embracing circular economic principles to enhance long-term sustainability. Nations like Singapore have taken a proactive leadership role in partnering with industrial organizations by committing to supply renewable energy to supplement what facilities cannot produce independently, such as from solar sources. This strategy supports both national and private sector climate goals and ensures a reliable path toward achieving net-zero emissions.

As a driver of global competitiveness, technology is a key consideration for firms. Companies are closely examining the strength of a country’s innovation ecosystem, the pace of technology adoption across industries – including small- and medium-sized enterprises – and the robustness of intellectual property protections to ensure fair and secure growth. For example, Israel has established itself as a leader in advanced technology by investing over $50 billion in Intel to develop cutting-edge R&D and fabrication facilities. This partnership has positioned the company as the country's largest private-sector employer, providing jobs for around 11,700 individuals and driving 1.75% of the country’s GDP.

Workforce agility is paramount in an era of rapid technological advancement. This includes evaluating workforce skill levels, the flexibility and retention of labour, and the availability and cost of skilled talent. Countries that prioritize continuous upskilling and talent development are increasingly favoured by global investors. Tamil Nadu, India has effectively expanded its manufacturing workforce by partnering with the private sector to increase female employment. These efforts go beyond offering educational and skill development opportunities, incorporating support such as childcare facilities, secure transportation and affordable housing near industrial parks. This comprehensive approach has made manufacturing more accessible and inclusive, resulting in Tamil Nadu hosting over 40% of India’s female manufacturing workforce.

Amid rising global volatility, including tariffs, protectionist policies and inflationary pressures, manufacturers are prioritizing countries with transparent and predictable fiscal and regulatory frameworks. Clear tax policies, streamlined regulations and access to capital are key to enabling sustainable growth and mitigating trade disruptions. Mexico's streamlined regulatory frameworks and tax incentives played a pivotal role in securing Audi’s investment to build the San José Chiapa plant. This partnership has led to the creation of over 5,300 jobs and the production of nearly 200,000 vehicles last year.

Countries that effectively balance national interests with global collaboration are becoming more attractive to industrial organizations. Key considerations include the stability of trade policies, the impact of political developments, and the strength of international relations, including alliances and partnerships. The EU-Vietnam Free Trade Agreement (FTA) has successfully balanced national interests with global integration, leading to a 50% growth in Vietnamese exports to the EU. This trade deal has not only expanded market access but also diversified value chain partners, adding resilience through global trade.

Long-term economic resilience increasingly depends on sustainable practices. Companies are scrutinizing countries’ commitment to net-zero goals, social responsibility initiatives, and adherence to strong governance norms to ensure alignment with evolving ESG priorities. At the national level, the Netherlands' 2016 Circular Economy policy aims to reduce primary material use by 50% by 2030. This target is supported by substantial investments in industry and the promotion of circular practices among businesses and consumers. By strengthening standards and incentivizing sustainable production, the Netherlands is positioning itself to hit long-term climate goals.

The importance of these factors varies depending on the company, industry and position along the value chain. While they help create a favourable environment, they are not the sole determinants of a country’s attractiveness as a manufacturing destination. Additional considerations – such as cost competitiveness, market access and political priorities – also play a significant role in shaping investment decisions.

As industrial organizations continue to work towards balancing cost, resilience, sustainability and performance along their rewiring journeys, public and private sector leaders have an imperative to work together in shaping the conditions and policies that enable manufacturing’s responsible growth for societal, economic and environmental prosperity. Centered on the pillars of people, prosperity, and planet, these seven readiness factors are the building blocks for an equitable future across value chains and developed and developing countries.