As the world’s political and economic foundations grow increasingly unstable, mid-sized European businesses are undergoing a quiet revolution in how they manage global sourcing. No longer able to rely on long-standing supplier networks centred in low-cost regions such as China, these firms are redrawing their supply chain maps. From reshoring manufacturing closer to home, to splitting supplier risk through dual-sourcing and embracing the emerging concept of “friend-shoring,” these strategies mark a decisive shift in procurement thinking.
While large multinational corporations often dominate headlines for moving production or navigating complex geopolitical landscapes, it is the medium-sized firms, those with 50 to 500 employees and a high exposure to international trade, that are often most vulnerable. They lack the scale advantages of global giants, yet face the same logistical, political and commercial risks. In this evolving climate, strategic sourcing is no longer just a cost optimisation exercise; it has become a pillar of corporate survival and competitiveness.
Why Mid-Sized Firms Are Changing Course
The recent reordering of global alliances, trade routes, and regional instabilities has made traditional supplier strategies unsustainable for many SMEs. The over-reliance on Chinese manufacturing, once seen as a symbol of smart cost leadership, is now frequently flagged as a strategic liability. China’s manufacturing sector is still efficient and dominant, but concerns over rising labour costs, government-imposed export restrictions on key materials, and the broader geopolitical tensions with the West are creating hesitancy. The EU’s growing economic decoupling, coupled with the US’s protectionist tariff regimes under both Trump and Biden administrations, has reinforced the perception that China-centric sourcing is increasingly fragile.
Meanwhile, regional conflicts like the war in Ukraine have shown how quickly raw materials, transport routes, and supplier capacity can be disrupted. The Black Sea blockade, sanctions on Russian energy, and political volatility across Eastern Europe have highlighted the systemic risks for firms operating with lean, single-region supply chains.
Strategic Responses: From Tactics to Transformation
a) Nearshoring: Proximity as a Shield
Nearshoring, the practice of relocating suppliers closer to home, has gained significant traction among mid-sized manufacturers. European firms are increasingly sourcing from Eastern European countries such as Poland, Romania, and Hungary, where industrial capability meets EU regulatory alignment. Southern Europe and the Maghreb (notably Morocco and Tunisia) are also emerging as alternatives offering shorter lead times and cultural compatibility. The benefits are multifaceted. Shorter supply routes reduce exposure to maritime disruptions and high freight costs. Cultural and time-zone alignment improves collaboration, especially in iterative design or quality-sensitive manufacturing. Additionally, lower language and legal barriers simplify contract enforcement and dispute resolution.
However, nearshoring is not a silver bullet. While it improves agility and visibility, it does not always deliver comparable cost savings. Labour and energy prices in the EU neighbourhood are higher than those in Asia, and capacity may be limited for complex or large-volume orders. SMEs must carefully assess whether the benefits in speed and control outweigh the financial trade-offs.
b) Reshoring: Bringing Production Home
Some SMEs, particularly those in specialised sectors like medical devices, high-precision machining, or defence, have gone one step further and reshored production entirely. In Germany and France, state-backed initiatives under the EU’s industrial strategy and France 2030 plan are supporting firms in repatriating manufacturing capabilities. Tax incentives, automation grants, and R&D credits are making local production more viable, especially when paired with investments in smart factories and robotics.
For example, a UK-based medical supplier recently moved its entire production line from China back to the North of England. The switch led to a 70% reduction in lead times, improved product traceability, and allowed the company to market itself as a “Made in Britain” healthcare brand, winning new public sector contracts in the process. Nonetheless, the upfront costs of reshoring can be prohibitive. Capital investment in facilities, machinery, and training is significant. Moreover, scaling up production locally may expose firms to domestic labour shortages and higher wages. Reshoring works best when paired with automation and when the product value justifies the capital expenditure.
c) Dual-Sourcing and Friend-Shoring: Risk Spreading in Practice
Perhaps the most pragmatic shift among SMEs is the move toward dual-sourcing strategies, splitting supply across geographically and politically diverse vendors. This approach allows businesses to maintain relationships with low-cost suppliers while establishing secondary, more stable sources closer to home. It creates redundancy in the system, so if one source is disrupted, due to a tariff, pandemic, or shipping crisis, the other can absorb the demand. A complementary concept gaining traction is friend-shoring. Coined by policy-makers, it refers to building supply chains among countries with shared political values and stable alliances. For instance, sourcing from Vietnam, Mexico, or EU-aligned Balkan states offers low-cost production with greater geopolitical alignment compared to China or Russia.
Dual- and friend-shoring come with their own challenges. Managing multiple suppliers increases complexity, especially for smaller firms with limited procurement staff. Quality control, harmonisation of specifications, and coordination across different time zones require investment in supplier management systems. Still, these approaches offer a compelling balance between resilience and cost.
Cost, Risk, and Resilience: The New Procurement Trinity
The decisions made by procurement leaders are no longer driven solely by price. Instead, three interlocking priorities, cost efficiency, supply continuity, and geopolitical risk management, must now be considered in tandem. Reducing unit cost may no longer be worth the risk of relying on a single offshore supplier. The 2021–22 container crisis, in which freight rates from Asia to Europe soared above $10,000 per container, demonstrated how global sourcing savings can be wiped out overnight. Firms with diversified sourcing portfolios fared far better. Risk management now includes scenario modelling for sanctions, regulatory divergence, export controls, and even military conflict. Firms are mapping supply chain exposure as thoroughly as they once analysed working capital or gross margins.
Finally, resilience, once an abstract term, is now measured in weeks of buffer inventory, alternative sourcing plans, and supply lead time volatility. It has become a competitive differentiator for SMEs bidding for public or private contracts where continuity of supply is a requirement.
Real-World Examples from Across Europe
A Czech automotive component manufacturer, previously reliant on suppliers in Shandong and Jiangsu, now dual-sources plastic parts from a Polish firm. While the unit price increased by 12%, the firm avoided delivery delays during COVID and was able to maintain JIT production for its Tier 1 client in Germany. In France, a family-owned electronics firm near Lyon shifted from Chinese PCB suppliers to Tunisian manufacturers. The change reduced customs paperwork, improved time-to-market by 20%, and strengthened the company’s ESG credentials, key for winning new B2B contracts in the EU.
In the UK, a wound-care SME reshored manufacturing from Guangdong to Lancashire. The firm invested in semi-automated production lines, supported by an Innovate UK grant. It gained tighter quality control, improved responsiveness, and benefited from NHS procurement policies favouring local suppliers.
Key Enablers and Challenges for Strategic Buyers
For Scope 3 reporting to be truly reliable, suppliers must become active participants in the carbon accounting process. Yet, studies show that less than 20% of suppliers globally are currently able to provide high-quality emissions data. Many rely on average emission factors or lack visibility into their own operations.
This has prompted some large buyers to invest in supplier enablement initiatives: offering training on carbon accounting, subsidising life cycle assessments, or introducing digital onboarding tools that capture emissions-related KPIs from the outset. Some organisations are also introducing “carbon clauses” in procurement contracts, tying supplier bonuses or penalties to decarbonisation targets. Others are leveraging preferred supplier status to incentivise low-carbon performance.
Nonetheless, balancing transparency with feasibility remains a key challenge, especially in complex, global supply chains where supplier turnover, data inconsistencies, and confidentiality concerns are common.
The Road Ahead: From Compliance to Competitive Advantage
While the regulatory impetus is clear, the strategic opportunity for procurement leaders lies in going beyond compliance. Those who proactively build carbon-conscious supply chains stand to benefit from improved investor confidence, customer loyalty, and operational resilience. By embedding carbon data into supplier scorecards, integrating it into procurement performance reviews, and linking it with broader ESG goals, companies can position themselves as front runners in sustainable business. Procurement, once a transactional function, is now becoming a cornerstone of corporate climate strategy. But to fully realise this potential, procurement teams must be empowered with the right tools, cross-functional support, and supplier engagement frameworks.
Scope 3 transparency is no longer a nice-to-have, it is an imperative. As regulations tighten and stakeholder expectations rise, procurement departments must adapt swiftly. Those that do will not only ensure compliance but will help steer their organisations towards genuine climate leadership. The question is no longer whether procurement will rise to the challenge, but how fast, and how far.
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