Why are global supply chains getting shorter

For decades, global supply chains were designed for maximum efficiency, with companies stretching operations across borders to minimize costs. But a series of shocks – from pandemic-related shutdowns to escalating geopolitical tensions, and more recently unpredictable trade barriers – has exposed how fragile these global networks are, and how they can affect a company’s ability to endure supply chain disruptions. The UBS Global Entrepreneur Report 2025 found that both in the mid- and long-term, political uncertainty and major geopolitical conflicts have consistently ranked as the top concerns for business leaders. In response, companies are increasingly rethinking their strategies, pivoting towards shorter, more localized supply chains.

Experts speaking at a recent UBS event for business owners highlighted five key factors that are driving this transformation:

0 key factors
driving supply chain transformation

Businesses are prioritizing “just-in-case” resilience over “just-in-time” efficiency, adjusting inventory strategies to improve oversight, increase flexibility, and reduce reliance on fragile global networks.
The growth in protectionist policies and trade barriers is encouraging companies to increasingly conduct operations onshore and localize production.
The saturation of global trade and an overreliance on a few key regions or suppliers have created bottlenecks and amplified the vulnerabilities of international supply chains.
Global wage gaps continue to narrow, diminishing the advantage of outsourcing to less expensive labor markets abroad.
Advancements in innovative technologies such as automation, robotics, and 3D printing are reducing the costs of onshoring, while boosting quality control and improving business agility. According to the UBS Global Entrepreneur Report 2025, AI, followed closely by automation and robotics offer the biggest commercial opportunity for businesses.

Onshoring takes time: why strategic shifts can’t be rushed

The disruption resulting from the recent trade tensions between major economies has further highlighted the fragility of global supply chains and the real operational risks trade barriers pose to business continuity. While some industries are more exposed to the proposed tariffs than others, the current unpredictability of these trade barriers has added to economic uncertainty, and elevated business risk. Onshoring, however is not a shift that can happen instantly. To successfully transition supply chains closer to home, businesses must navigate a range of challenges including securing a skilled local workforce and reliable suppliers, addressing infrastructure needs, managing cost pressures, aligning with government policies, and leveraging emerging technologies to support the shift.

Transitioning to shorter and more localized supply chains to minimize risk and tariff costs will require that businesses in the automotive industry fundamentally rethink their cost-savings strategies, for example, explained experts at a recent UBS webinar. To manage the increased costs of sourcing and manufacturing vehicle parts locally, companies may need to slow down innovation and adjust vehicle pricing in response to cost pressures. Yet, at the same time, these businesses continue to navigate the broader structural technology shifts the industry is currently experiencing – particularly the transition to electric cars and eventually fully-connected vehicles – adding another layer of complexity to their reshoring transition. Leaders who embrace innovation – not only in operations, but also in strategic and talent development – will shape the resilient supply chains of tomorrow.

Future-proofing supply chains

Strategically future-proofing supply chains will inevitably require leaders to reimagine how their businesses operate within the global business environment. As the supply chain landscape continues to evolve, businesses that are able to balance competitiveness and resilience will be best positioned to thrive amidst the geopolitical and economic uncertainty we are facing now and in the future.

How was your business’s supply chain affected by the geopolitical and economic uncertainties we are facing today?

What do you think are, or will be, the biggest challenges your business will face as it transitions to a shorter supply chain model?