Factory reset: A look at current reindustrialization strategies in Europe and the United States

Geopolitical shifts, tariffs, supply chain vulnerabilities, and environmental challenges are driving reindustrialization. Companies now face critical decisions as they reconfigure their supply chains and strive to build long-term resilience. A recent report by the Capgemini Research Institute takes a look at where organizations stand when it comes to reshoring, nearshoring, and friendshoring, and how they can accelerate and capitalize on their reindustrialization journey.

What’s everyone saying?

• Over recent years, reindustrialization has emerged as a priority for governments and organizations across industries, driven by shifting geopolitical alliances, supply chain risks, climate change, and energy security issues.

• But as the recent tariffs announced by the Trump administration could lead many organizations to act more quickly than they initially thought, what should they focus on in practice?

What do we have to say?

• Our report The resurgence of manufacturing: Reindustrialization strategies in Europe and the US – 2025, based on a January 2025 survey, confirms a shift away from cost-focused offshoring. After decades of globalization, manufacturing organizations in Europe and the United States are intensively remodeling supply chains, bringing bases of production closer to their market, and focusing on local and regional resilience and autonomy.

• Organizations understand that this will be a complex and lengthy process, entailing a rise in upfront capital, domestic labor, raw material, and energy costs. Yet despite these costs, 59% are determined to continue their reindustrialization efforts and investments.

• In fact, 66% of executives say they have a comprehensive reindustrialization strategy already or are developing one, up seven points from 2024. 56% have invested in either nearshoring (i.e., transferring part of production to a nearby or neighboring country) or a combination of nearshoring and reshoring (i.e., bringing part of production back to the domestic market) in 2025, up from 42% in 2024.

• This points to a broader view of reindustrialization. 73% of organizations believe friendshoring (locating production in ally countries) will make up a significant proportion of their sourcing and production going forward. Overall, diversification and investment in domestic manufacturing are viewed as efficient ways to mitigate the impact of tariffs 93% cited this as a source of concern.

• Digitally enabled manufacturing facilities and supply chains are helping organizations cut reindustrialization costs and streamline operations. 54% of organizations have already realized more than 20% cost savings by adopting these technologies, with AI/Gen AI, cloud computing, 5G and edge computing, and digital twins identified as top investment priorities.

• AI, in particular, is emerging as a key driver for business innovation, with Gen AI, agents (autonomous AI systems capable of independently handling end-to-end tasks), and cobots among the top trends organizations are looking at.

• Overall, the shift towards smart manufacturing is set to accelerate. As Swedish bearing manufacturer SKF Group’s Chief Technology Officer and Senior Vice President of Technology Development Annika Ölme ♦️ recently told us, this will mean “more AI, better data governance, and an intensified focus on security, offering advantages in terms of optimizing production schedules, reducing downtime, and driving operational efficiencies.”

• Finally, reindustrialization supports sustainability objectives by allowing organizations to integrate cleaner energy, while enabling shorter supply chains and greater efficiency, thus cutting emissions and waste and boosting resilience. Executives are well aware of these benefits.

• This belief is leading them to embrace a “while you’re at it, do it right” mindset: despite escalating cost pressures, just 15% are reducing their sustainability-tech investments, while 40% have adopted a neutral stance, indicating a cautious or observational approach.

Who’s doing it right?

• Organizations have begun harnessing AI agents, like those designed by German start-up juna.ai, which can run virtual factories and help maximize productivity and quality while cutting energy consumption and carbon emissions.

• In Livonia, Michigan, Ford Motor Company turned to an AI-powered platform to modernize its plant by enhancing the installation of torque converters into transmission cases. The result: optimized efficiency and a 15% improvement of throughput.

• Unexpected demand and market changes meant a multinational conglomerate was experiencing losses due to demand mismanagement in its warehouses. To address the issue, the company partnered with Capgemini to design a generative AI-based chatbot and forecast engine powered by Google Cloud. The result? A more efficient supply chain and maximized margins. Find out more here.

What’s the bottom line?

Our report lays out a roadmap for organizations to follow to accelerate and capitalize on their reindustrialization journey:

• Focus on “rightshoring,” i.e., choose the right model for your organization. This can translate as a strategic mix of reshoring, nearshoring, and friendshoring, supported by a thorough cost-benefit analysis.

• Integrate sustainability, resilience, and agility into your reindustrialization efforts. This entails reassessing supply chain relationships, embracing circular economy principles, and investing in data- and AI-driven solutions.

• Harness technology and data to manage reindustrialization costs. Data analytics, digital twins, artificial machine learning, AI, and advanced manufacturing technologies are key to optimizing operations and enhancing sustainability. Organizations should develop a comprehensive digital manufacturing strategy focusing on digital continuity and IT/OT integration.

• Develop a future-ready talent strategy to tackle labor and skill shortages. This implies establishing internal learning forums, offering incentive schemes and flexible schedules, nurturing cross-generational teams, and harnessing technologies to attract the younger workforce.

Looking for more?

• “In the 2024 edition of our report, we looked at whether the reindustrialization trends and signals we’d observed on the market were myth or reality. This year, we can clearly confirm they are reality.” At HANNOVER MESSE in April, Pierre Bagnon shared his perspective on the resurgence of manufacturing in Europe and the US ⤵️

• Check out two additional perspectives on our report’s main takeaways – one from Vincent Charpiot, emphasizing just how fast reindustrialization is gaining momentum, and the other from William Rozé, zooming in on the role technology can play in this process.

And you, what are you saying?

Has your organization begun exploring reindustrialization strategies in response to recent geopolitical shifts? Are you leveraging AI or digital twins to innovate and optimize your manufacturing operations? Tell us everything in the comments section below!