Marcus Carmont, TMX Transform CCO, advises US multinationals on how to navigate global disruption. He outlines key considerations for supply chain diversification and onshoring in the era of tariffs and geopolitical instability.
Anyone claiming they know exactly what’s coming next in global trade policy hasn’t come to terms with how the world works right now.
Sudden tariff changes are forcing businesses to reassess their supply chain and manufacturing strategies – what was previously not financially viable, may now be a possibility, or obsolete again by next week.
Australia has been operating in a high-cost, complex environment for decades, due to its isolation from the rest of the world. Businesses were forced into early adoption of technologies and cases for automation and efficiency improvements were easier to justify because baseline costs were higher – often two to four times more expensive than other markets. That experience is exactly what Fortune 500 companies are now seeking: lessons learned from navigating these challenges when survival depended on getting it right.
The realities of onshoring vs diversification
Supply chain resilience has shifted from nice-to-have to table stakes. Every strategy now needs to contemplate the next major disruption, driven by the reality that businesses unprepared for the last crisis didn’t survive or were not ‘match fit’ to exploit market conditions with the pace of others. Resilience now means building flexibility into supply chains so they can withstand shocks, rather than assuming goods will flow freely and cheaply across borders in a predicable fashion.
Tariff volatility has made onshoring appealing as businesses look to bypass the chaos, generate greater control, and improve local economy. Diversification on the other hand, reduces reliance on one region, potentially improving resilience. There are, however, certain realities businesses need to grasp when considering these strategies – and both take time to get right, backed by an informed investment thesis.
Reality #1 – Infrastructure
Much of the infrastructure needed to establish domestic manufacturing comes from the places businesses are trying to reduce dependence on. The state-of-the-art automated production lines that can help mitigate the high cost of labor are manufactured in the very countries subject to the tariffs.
Tariffs on steel and fabricated products mean higher prices and lower availability of automation equipment, impacting manufacturing. This presents a knock-on effect for consumers, with higher prices, operational inefficiencies, and slower fulfilment. Simply moving a factory closer to home does not remove those dependencies.
For diversification, new manufacturing locations may lack the necessary infrastructure, leading to bottlenecks and higher costs. Therefore, considering adequate transport, roads and rail, is necessary, as is the investment in utilities and connectivity to essential resources and high-speed data.
Reality #2 – The simple fact
Supply chains that have been built over decades can’t be unwound, or created, in six months. Building automated facilities takes time, so long term, strategic planning is required. Therefore, an ongoing reliance on places like China, remains – and will in the near term
Ultimately, the labor arbitrage available in lower-cost countries makes the economics of moving to a high-cost country for mainstream manufacturing challenging. This makes diversification appealing, spreading risk across a region, rather than full-scale exit or wholesale moves to onshore manufacturing.
These regional diversifications maintain access to lower costs within an established supply chain ecosystem. This allows for greater long-term planning, while enhancing resilience against disruptions and market shifts, avoiding single-point failures, and fostering innovation for broader access to new technologies and competitive sourcing in line with growth.
Reality #3 – Funding
While an onshore manufacturing strategy can strengthen local economies, shorten supply chains, and enhance quality control, the conversation eventually comes back to the same question: who pays for it? The business or the consumer? These costs cannot erode underlying earnings, but must be funded through operational efficiencies, economies of scale, or process improvements.
Businesses need to find efficiencies to support transformation while funding these shifts. Without productivity gains or cost-sharing mechanisms, higher domestic production costs eventually flow to the consumer. This is not ideal when trying to remain competitive in an already hyper-competitive global marketplace
When considering this option, businesses should lean on strategic operations and investment. This can include a phased approach to onshore expansion, strategic partnerships where collaboration with companies across the supply chain is possible, and diversifying the funding mix.
Reality #4 – Strategy, strategy, strategy!
Everything starts with developing a fit-for-purpose strategy that reflects business requirements and contemplates multiple scenarios.
Strategic decisions demand big questions, some grounded in today’s reality, others might seem implausible. But every scenario must be considered. It’s not just about financial capacity or growth potential. It’s about designing operations that can pivot quickly, scale, and respond to shifting market dynamics. Businesses must consider not only where they produce, but how quickly they can adapt to changing landscapes, and whether their structure allows for it.
No two strategies are identical because every business has different intents, different mandates, different requirements, and different financial metrics.
Businesses should no longer accept simple financial outputs. They want to understand different permutations of a network in real-time, challenge the status quo, and test what future states might look like.
Simulation technology allows businesses to model scenarios in an iterative environment, providing strong levels of confidence in the proposal. Rather than relying on static spreadsheets, these tools create a dynamic picture of supply chains, testing “what if” scenarios such as sudden tariff shifts, labor shortages, or transport bottlenecks, so leaders can see in advance how their network would respond. This ability to replicate what may or may not be known has become essential for supply chain planning in real time.
The bottom line
To overcome instability, businesses need to keep moving forward while maintaining flexibility to pivot as conditions change. Everyone’s playing on the same field – no one has an information advantage when it comes to predicting geopolitical shifts. The winners are those that can cope with uncertainty pragmatically rather than waiting for clarity that isn’t coming.
Australia developed these capabilities out of necessity, operating for decades in conditions that are only now becoming the global norm. The battle scars from navigating high costs, complex geography, and volatile conditions are exactly what multinational businesses now need. Sometimes the most valuable insight isn’t what to do – it’s understanding what doesn’t work and why many approaches to rapid supply chain transformation aren’t grounded in operational reality.
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