KPMG Study: Proximity Emerges as the New Value Driver for U.S. Supply Chains

Business executives are strategically reshaping their supply chains to achieve greater efficiencies, according to a new report — The Proximity Premium — released by KPMG, an audit, tax and advisory firm. Nearly 75% of business executives report that strategic shoring has successfully enhanced supply resilience and operational agility.

The globalized and long supply chains have proven vulnerable to disruption. This vulnerability, coupled with geopolitical and ongoing economic uncertainty, are driving businesses to draw their supply chains closer to the Americas to better serve the U.S. market, according to 76% of the survey respondents. Why? To reduce lead times, diversify supply, maximize access to talent and minimize risk.

Supply chain fragility can weaken the larger business ecosystem and exacerbate global inflationary pressures. With 61% of executives reporting that the volatile global trade environment is forcing their business to refocus on regional and domestic sourcing and distribution, it underscores the urgency to balance critical supply chain needs.

More than half of executives with higher performing supply chains (55%) also recognize the importance of navigating the tax and regulatory landscape, while 53% say regulators and tax officials are significant influences in strategic shoring decision-making. By integrating tax strategies early in the process and scenario plan, businesses can realize cash flow efficiencies and a competitive advantage, ensuring a sound shift in supply chain strategy.

“The Proximity Premium” report from KPMG draws on insights from 250 U.S.-based executives at companies with annual revenues of at least $1 billion and highlights trends and challenges related to strategic shoring.

Additional Findings and Leadership Quotes

Companies are streamlining their supply chains in the Americas.

“Business executives are re-evaluating their supply chain assumptions with a primary focus on regional and domestic sourcing and distribution to mitigate geopolitical and economic uncertainty,” Jean-Pierre Trouillot, partner, deal advisory at KPMG U.S., and Latin America regional advisory leader at KPMG Americas, said. “Companies are seeing strategic shoring as a way to improve supply resilience and operational agility, offering them the benefits of proximity, cost efficiency and access to resources.”

76% of survey respondents are prioritizing immediate strategic shoring actions.

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The Americas’ share of supply chains to the U.S. is expected to rise by 16%, while the average number of locations in a single supply chain is being consolidated for efficiency measures, falling from 2.7 to 2.4 locations over the next three years.

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Strategic shoring bolsters supply chain resilience and optimizes cost efficiency.

“It is important for companies to challenge and reassess the factors and assumptions driving supply chain decisions to strike the right balance between cost efficiency, supply chain flexibility and sustainability,” Mary Rollman, principal, supply chain leader, advisory practice at KPMG U.S., said.

73% of executives say their company has increased their supply chain’s cost efficiency via strategic shoring, enhancing their operational and financial performance.

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While still the primary goal in supply chain strategies, cost as an outcome has declined in importance over the past two years by four percentage points. In contrast, less tangible ambitions, such as speed, flexibility and sustainability, have gained importance by two, three and two percentage points, respectively.

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61% of executives say strategic shoring will help reduce the carbon footprint attached to products, positively impacting their sustainability efforts.

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Tax, data and analytics are the most important capabilities to boost sourcing strategies.

“Companies don’t always consider tax as part of their overall strategic supply chain cost assessment. This could be a big miss,” Doug Zuvich, tax partner at KPMG U.S. and Latin America regional managing partner, tax and legal at KPMG Americas, said. “A tax-first mindset, combined with a data-driven, connected thinking approach, can aid business executives to better understand how different factors interact and impact supply chain decisions.”

Executives report that the current tax environment (23%) and regulatory policies (31%) are among the top five challenges to achieve certain strategic shoring initiatives.

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53% of executives say that regulators and tax officials are significant influences on their strategic shoring decisions — second only to shareholders, at 56%.

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43% of executives identify data and analytics capabilities as most important to advancing sourcing strategies.

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A focused regional supply chain contributes to a more stable and robust macroeconomic environment.

“A disruption in the supply chain bears the risk of increased inflation and consequently a potential rise in interest rates,” Meagan Schoenberger, senior economist at KPMG U.S., said. “That can impact everyone.”