The end of the Far East factory: From China to Eastern Europe – This is how top companies are radically rewiring their supply chains

The end of naivety: How geopolitics and robots are radically transforming Europe's supply chains

For decades, the business logic of global supply chains seemed immutable: production was cost-effective in the Far East, and delivery to Europe was precise, down to the minute, via just-in-time. But an unprecedented series of global shocks—from blocked sea lanes to escalating trade conflicts—has abruptly ended this era. Europe is currently experiencing one of the greatest economic and physical upheavals in recent history. Under the paradigm of nearshoring, reshoring, and friendshoring, companies are radically rebuilding their production and logistics networks with billions of euros in investments. But the media narrative of an industrial return to Germany or France is misleading: the true winners of this new world order are Poland, Romania, and Morocco. This geographical shift is accompanied by a profound technological revolution. Because supply chain risks have become the new normal, Europe's warehouses are transforming from unpopular asset graveyards into the economy's most important life insurance—driven by hybrid inventory strategies and a massive wave of automation.

Nearshoring and regional hubs: Europe's quiet farewell to the Far East factory

Why the return from Asia actually ends in Burgas, Warsaw, Bucharest and Casablanca, and not in Duisburg or Dortmund

The global economy is reorganizing, and with it, the physical landscape of entire regions in Eastern and Southern Europe is changing. For decades, a simple business formula was considered virtually irrefutable: production migrates to where labor is cheapest, usually to Asia. However, a series of unprecedented global upheavals, from the pandemic and the blockade of the Suez Canal to the attacks on merchant ships in the Red Sea and the trade conflicts between the US, China, and the EU, has fundamentally challenged this assumption. Under the headings of nearshoring, reshoring, and friendshoring, European companies are now beginning to relocate their manufacturing and logistics closer to their own sales markets. Along new corridors, from the Polish industrial centers across the Balkans to the ports of Morocco, a vast, state-of-the-art infrastructure is currently being built, tying up billions in investment and reorganizing the continent's physical flows of goods.

When efficiency thinking suddenly becomes risk management

Anyone who has traveled through Silesia, the area surrounding Bucharest, or the region around Debrecen in recent years has likely seen it, without immediately recognizing it: enormous new warehouse complexes, freshly paved access roads, construction cranes towering over half-finished logistics parks, and convoys of trucks waiting at unfinished loading docks. What is being built there is far more than ordinary warehouse infrastructure: it is the physical manifestation of one of the most significant economic transformations of the last two decades. The gradual restructuring of global production and supply chains is moving away from extremely long, purely cost-optimized routes through Asia toward shorter, more robust, and regionally anchored networks within and around Europe. This development is commonly summarized under the terms nearshoring and reshoring, although the two concepts are related but by no means identical and, in practice, follow different economic logics.

A confusing terminology with a system: Reshoring, nearshoring and friendshoring explained in plain English

For decades, offshoring was considered the only viable business model. Companies relocated production steps to where labor was cheapest, usually to China, Vietnam, or Bangladesh, accepting transport routes of tens of thousands of kilometers. This strategy worked as long as ports functioned reliably, freight rates remained low, and geopolitical disruptions were rare. Reshoring refers to the complete relocation of production, supply bases, or services back to a company's home country, while nearshoring involves relocating to a neighboring country within the same region or economic area, thereby shortening supply routes without sacrificing the full cost advantages of relocating. A third, increasingly important variant is friendshoring, in which production is relocated to countries considered politically reliable partners, regardless of geographical proximity. Recent surveys show that European companies rely particularly heavily on friendshoring, at around 64 percent, significantly more than American or British companies, which points to the specific geopolitical vulnerability of the continent between the US and China blocs.

The numbers behind the trend: When reshoring overtakes the once-starred nearshoring

The latest data paints a nuanced, and in some cases surprising, picture. A recent study on the reindustrialization of Europe and the USA shows that 73 percent of large industrial companies on both sides of the Atlantic have already implemented, or are currently implementing, a corresponding strategy. Within Europe, the balance between the two strategies has shifted noticeably within a year. The proportion of companies actively engaged in reshoring rose from 34 to 42 percent, while the share of nearshoring activities fell from 55 to 39 percent. This may appear at first glance to be a retreat from the nearshoring approach, but on closer inspection, it is more accurately described as a maturation phase in which companies are acting more selectively, cost-consciously, and on a case-by-case basis, rather than indiscriminately relocating entire supply chains.

In parallel, forecasts for the next three years show a clear structural shift in production shares. The share of production that European companies have manufactured in their own domestic markets is expected to rise from the current 41 percent to 48 percent, the nearshore share is projected to increase slightly from 22 percent to 24 percent, while the offshore share is expected to fall from 37 percent to 28 percent. This shift of around nine percentage points within just a few years is considerable for an economy the size of the EU, as it entails investments in the tens of billions of euros in new factories, supply chains, and the logistics properties that represent the most visible manifestation of this relocation. At the same time, critical voices from the consulting industry warn against overstating this trend. It is documented that planned reindustrialization expenditures at some large consulting firms were revised downwards from $4.7 trillion to $2.5 trillion within twelve months, while at the same time reshoring attractiveness indices declined significantly. This discrepancy between media narrative and actual investment reality is crucial for a sober understanding of the situation, because production is indeed shifting, but predominantly to Morocco, Hungary or Portugal – and not back to Germany, France or Great Britain to the extent hoped for.

The geographical map of the winners: From Silesia to Tangier

The geographical distribution of nearshoring activity follows a clear pattern with two main clusters. The first and by far most significant focus is in Central and Eastern Europe. Poland has become the undisputed anchor point of the region, boasting over 36 million square meters of modern warehouse space and around 2,000 service centers employing approximately half a million people, effectively making it the fifth-largest logistics market in Europe. The Czech Republic regularly scores highly in nearshoring attractiveness indices thanks to its established industrial base, particularly in the high-tech and automotive sectors. Romania and Hungary, in turn, are increasingly attracting investment from the automotive and battery industries, facilitated by lower labor costs and a rapidly developing transportation infrastructure.

For the logistics sector, this trend manifests itself in specific geographical concentrations. New factory capacities are clustering around well-known hubs such as Silesia and central Poland, the industrial belt between Prague, Brno, and Ostrava, the western Romanian region around Timișoara and Arad, and the corridor between Budapest and Győr. The second significant cluster lies in the Mediterranean region. Spain and Portugal, as well as the neighboring North African locations of Morocco and Turkey, benefit from their geographical proximity to the major Western European consumer markets. The rapid rise of Morocco is particularly noteworthy, where, for example, the automotive group Stellantis, with its plant in Kenitra, is considered a much-cited prime example of successful nearshoring. Ports such as Tangier Med and Koper in Slovenia are consequently experiencing noticeably increasing cargo volumes, which is driving additional investments in port logistics and hinterland connections.

From ocean liner to semi-trailer truck: How the flow of goods is being physically rewired

The logistical consequences of this shift in location are significant and affect not only the location of goods storage but the entire transport pattern. Where intercontinental container flows via a few major ports like Rotterdam, Hamburg, or Antwerp once dominated, today dense, high-frequency regional transport networks are emerging between production sites, suppliers, and distribution centers within Europe. For freight forwarders and carriers, this means that the volume is shifting from long sea routes to medium distances by road and rail, evident in a noticeable increase in both full truckload (FTL) and less-than-truckload (LTL) shipments on the East-West corridors between Central and Eastern Europe and the core Western European markets.

This shift has repercussions for virtually every element of transport infrastructure. Border crossings between Poland and Germany, between Hungary and Austria, and between Romania and Hungary are experiencing significantly higher utilization, which in some cases is already leading to capacity bottlenecks in customs clearance and road infrastructure. At the same time, rail freight and multimodal transport solutions are gaining in importance because they offer a cost-effective alternative to pure road transport and also align with the EU's decarbonization agenda. Investments in new terminals, transshipment stations, and inland ports along these corridors are therefore considered logical and are viewed by numerous investors as structurally undervalued.

The concrete boom as a thermometer of reindustrialization

Few sectors benefit more directly from the nearshoring trend than the European logistics real estate market. Investment volumes in European logistics properties are at a level of over €35 billion annually, with around €16 billion invested in the first half of a recent reporting year alone – an increase of approximately six percent compared to the same period of the previous year. Forecasts predict that the European warehouse real estate market could grow to a volume of around €661 billion by 2034, which would correspond to an average annual growth rate of over seven percent.

What is remarkable about this growth is the regional shift. While core Western European markets such as the greater Paris area, London, and the Randstad region continue to dominate the headlines, the real growth dynamic is increasingly taking place further east. Investments in logistics properties in Central and Eastern Europe rose by around 32 percent within a year, led by Poland, Romania, and Hungary. This development is further fueled by stricter ESG building regulations, which are making older, energy-inefficient warehouses in Western Europe increasingly unattractive or even unleasable, thereby diverting capital towards newly built, energy-efficient facilities in eastern and southern regions. Solar panels on warehouse roofs, which can offer significant operating cost advantages in regions with high electricity prices, are becoming an increasingly relevant differentiating factor when choosing the location for new logistics properties.

At the same time, a seemingly paradoxical development is emerging in some key Western European markets, such as Germany. Despite an overall weak economy and increasing unused inventory in older warehouses, new space is being secured through nearshoring and friendshoring strategies, but due to the lengthy relocation processes, it is not yet fully occupied. Furthermore, improved AI-supported forecasting tools are significantly reducing the necessary safety stock levels in warehouses, creating additional free capacity in the short term, which should not be misinterpreted as a decline in demand.

Geopolitics instead of labor costs: The real drivers behind the great relocation

A key misconception in the public debate is to interpret nearshoring and reshoring primarily as a reaction to rising labor costs in Asia. In reality, the driving factors are far more complex. First and foremost is geopolitical uncertainty, exacerbated by trade conflicts, export controls on critical raw materials and technologies, and the real-world experience of multiple disruptions to global transport routes in recent years. Companies no longer want to be dependent on a single, distant source, but rather spread their risk across multiple suppliers and regions – an approach that is increasingly becoming standard practice under the terms dual- or multi-sourcing.

A second important driver is the desire for shorter delivery times and greater responsiveness to volatile demand. Particularly in industries with short product cycles or seasonal fluctuations, production that takes several weeks to arrive by ship is proving increasingly risky from a business perspective. Thirdly, European regulation is playing a growing role, as requirements for supply chain due diligence, carbon border adjustment mechanisms, and stricter environmental and social standards increase the administrative and financial burden on distant, difficult-to-monitor supply chains, while regional suppliers are easier to audit and legally accountable.

Interestingly, recent surveys also show that the narrative of a general withdrawal from Asia is too simplistic. Despite all diversification efforts, global supply chains remain remarkably resilient, and nearshoring and reshoring still only account for a comparatively small, albeit growing, share of total EU procurement – ​​most recently around 14 percent, a record figure that, however, puts the continued dominance of Asian suppliers in numerous product groups into perspective. China remains a key sourcing partner for many product categories, such as toys or electronics, while at the same time Southeast Asian locations like Vietnam, Thailand, and Cambodia are experiencing significantly faster growth in inspection and testing contracts than the European nearshore market. This illustrates that nearshoring in Europe is more of a complementary than a replacement strategy for traditional offshore procurement.

East beats West: Who really benefits and who just watches?

Not every region benefits equally from the reorganization of trade flows, and the distribution of gains follows clear structural lines. Countries with a combination of moderate labor costs, reliable rule of law, a sufficiently skilled workforce, and good transport links to Western European markets benefit disproportionately. Poland, the Czech Republic, Romania, and Hungary meet these criteria particularly well and have invested heavily in education and infrastructure. Slovakia also benefits from its close ties with the German and Czech automotive industries.

In contrast, traditional Western European industrial centers like Germany, France, and Great Britain are experiencing significantly lower reshoring gains than is often suggested by politicians. High energy prices, increased labor costs, moderate productivity growth, and a regulatory environment perceived as overly complex are explicitly cited as reasons why European companies tend to rely on friendshoring in neighboring regions rather than bringing production back entirely to their home countries. The much-discussed reindustrialization of Germany is therefore taking place, but to a considerable extent not within its own borders, but rather in geographical and cultural proximity: in Poland, the Czech Republic, or Hungary.

A similar dynamic is emerging in the Mediterranean. Morocco, through targeted industrial policy, favorable free trade agreements with the EU, and significant investments in ports like Tangier Med, has become one of the most attractive nearshoring locations, with inspection demand in the Mediterranean growing by around 25 percent within a year. Portugal benefits from its membership in the Eurozone, a comparatively stable political situation, and lower labor costs than in core Europe, while Turkey continues to expand its traditional role as a bridge between Europe and Asia, albeit with greater political uncertainty.

New jobs, new problems: The growing pains of boom regions

This development presents significant economic opportunities for the benefiting regions, extending far beyond the logistics sector itself. New industrial and logistics centers typically attract an entire ecosystem of suppliers, service providers, and skilled jobs. In Poland, for example, several hundred thousand people already work in logistics-related service centers, a similar employment effect seen in Romania and Hungary. These jobs range from basic warehousing and order picking to technical maintenance and highly skilled positions in logistics management, IT, and engineering, contributing to the diversification and enhancement of local labor markets.

For municipalities and regions themselves, the influx of investment in the form of business tax revenue, improved infrastructure, and increased attractiveness to skilled workers also represents a noticeable economic boost. At the same time, however, challenges arise, such as rising land prices, localized shortages of skilled workers, and increasing strain on local transport infrastructure, which cannot always keep pace with rapid growth. The long-term viability of this model therefore depends significantly on whether the countries concerned continue their investments in education, transport infrastructure, and energy infrastructure at the same pace as the establishment of new industrial and logistics capacities.

Not all that glitters is gold: The underestimated risks of reindustrialization

Despite the overall positive growth narrative, there are good reasons to be cautious when assessing the nearshoring boom. First, several recent analyses show that actual investments often fall significantly short of the originally announced plans. The aforementioned drastic reduction in planned reindustrialization spending within a single year is a clear warning sign that while many companies are issuing strategic declarations of intent, their implementation is being considerably delayed or reduced in scope due to high capital costs, uncertain interest rate developments, and complex approval processes.

Secondly, it remains questionable whether the newly emerging locations are truly as resilient as the marketing language of many location brochures suggests. Morocco, for example, is geographically close to Europe, but is itself not free from political and climatic risks. The supposed diversification of supply chains can, in certain cases, prove to be merely a shift from one risk factor to another, without significantly reducing the underlying vulnerability. Furthermore, the reopening of important shipping routes and improved reliability ratings of major shipping alliances partially undermine the economic justification for nearshoring, as the cost advantages of reshoring diminish once traditional sea routes are functioning smoothly again.

Thirdly, it should be considered that a significant portion of the investments celebrated as European nearshoring are actually financed by non-European, particularly Chinese, capital, for example in the area of ​​battery production. What at first glance appears to strengthen European sovereignty can, upon closer inspection, represent a shift in dependence from the raw material and commodity level to the capital and technology level. This nuance is often given insufficient consideration in the political and media debate surrounding reindustrialization.

Just-in-time is dead: Why Europe's warehouses are becoming the most expensive insurance for businesses

Parallel to the geographical reorganization of supply chains, an equally profound transformation of inventory strategies is taking place. The just-in-time dogma, cultivated over decades and preaching minimal inventory levels and maximum capital efficiency, has given way to a significantly more differentiated inventory management approach. Companies today explicitly distinguish between safety stocks for critical parts and strategic reserves for raw materials with increased price and availability risks. However, since inventory ties up capital, close coordination with liquidity planning is essential, as a resilience strategy that ultimately jeopardizes a company's solvency would be a disastrous trade-off.

The first step in any serious resilience program is creating transparency across all stages of the value chain, starting with an ABC analysis of purchasing volume, followed by a criticality assessment, and culminating in the identification of critical individual sources of supply. A good rule of thumb is the replenishment time in the event of a disruption: inventory should be sufficient to sustain production until a replacement supplier can realistically deliver, which, depending on the component, can range from a few weeks to several months. The precise dimensions of these buffers must be determined jointly by purchasing, production, and financial planning, because every additional pallet space ultimately ties up liquidity that is then lacking elsewhere in the company.

The best approach is hybrid: Why companies cannot completely forgo either the Far East or safety stocks

A network of regional hubs inevitably changes the logic of inventory management itself. Where previously a single, enormous central warehouse on one continent was responsible for all distribution, today several smaller inventory nodes are located closer to the sales markets. While these require more tied-up capital overall, they offer significantly shorter response times and greater reliability. The most frequently recommended approach in practice is explicitly a hybrid model: A portion of the volume continues to come from global, cost-effective suppliers, while a growing share originates from regional producers who, although more expensive, guarantee security and flexibility. Dual- and multi-sourcing strategies with two to four suppliers per critical material complement this model and systematically distribute the risk of disruption across multiple locations and regions.

A three-stage approach has proven effective. First, transparency is established. Then, concrete measures are defined for the ten to twenty most critical items – from screening secondary suppliers to establishing a defined safety stock with a clear replenishment logic. Finally, responsibility is permanently anchored within the company by making supply chain risks a regular part of management reporting, rather than a one-off project presentation. In this way, a purely crisis-driven response becomes a permanent component of corporate governance that remains in place even during calmer market periods.

From shelving units to robotic warehouses: The silent automation revolution in existing buildings

Parallel to the strategic realignment of inventory, a technological revolution is taking place within the warehouses themselves, going far beyond simple digitization. The majority of existing storage capacity in the DACH region is already in place, mostly as classic shelving systems with manual order picking, meaning new construction remains the exception and automation within existing facilities is becoming the norm. Automated small parts warehouses (AS/RS) operate with stacker cranes in narrow aisles and, with sufficient ceiling height, achieve a remarkably high storage density. However, classic AS/RS and shuttle architectures are proving only partially suitable for automation during ongoing operations, while mobile goods-to-person systems—autonomous robots that bring the shelves to the employees instead of the other way around—have now established themselves as an independent and significantly more retrofit-friendly category.

Automated storage and retrieval systems (AS/RS) are in particularly high demand where product variety is growing rapidly while order quantities per order are simultaneously decreasing – a pattern that is especially evident in the automotive industry, mechanical engineering, and the wholesale trade of C-parts. The trend toward batch-size-one production, where virtually every product is individually configured, further intensifies this need, as traditional pallet warehouses with their large, homogeneous load units are unsuitable for this fine-grained approach. In practice, many modern warehouses therefore combine several technologies in parallel, such as an automated pallet warehouse for bulk inventory management with a downstream AS/RS for fine-grained order picking, supplemented by zones for manual order picking in special cases. A current practical example is provided by a screw and fastener wholesaler who, in a new building, combined a three-aisle AS/RS with approximately 40,000 storage locations and a manual pallet warehouse for about 4,000 pallets to simultaneously handle both growing product variety and high delivery capacity.

From capital graveyard to service fee: How the financing of automation is changing

An equally important shift concerns the financing logic of warehouse automation itself. Traditional automation projects tie up capital for many years, often in the tens of millions, and must be designed from day one for absolute peak load, even though this peak load is often only actually used for a few weeks a year. Usage-based models systematically reverse this logic: Payment is made per actual service, such as per picking operation, instead of per installed, often unused capacity. Such pay-per-use models with zero upfront investment, ongoing billing, and included maintenance significantly lower the barrier to entry for small and medium-sized enterprises (SMEs) and allow for a much more flexible response to fluctuating demand, without tying up capital in oversized technology for years.

Closely related to this is another trend: human-robot parallel operation, which has clearly prevailed in practice over the original vision of a fully automated, unmanned warehouse. Those who consistently design their automation for peak load statistically pay for eleven months of the year for capacity that simply remains unused. This is why hybrid systems, in which robots and humans share the same aisles and workstations, are significantly more economically viable than complete but oversized automation. For operators of older existing buildings with limited ceiling height or irregular floor plans, this is also the only practical option, because a classic automated storage and retrieval system (AS/RS) with stacker cranes requires a certain minimum ceiling height and depth, while modular goods-to-person (G2P) systems can be integrated into almost any existing building with considerably more flexibility.

The break-even point: When does an automated small parts warehouse actually become worthwhile?

Despite all the enthusiasm for technology, the question of economic viability remains crucial, and it cannot be answered in general terms. Analysts and system providers largely agree that an automated small parts warehouse can be worthwhile from around 1,000 storage locations, especially if the system is integrated into existing building structures, while larger, stand-alone storage aisles often only reach their full economic viability from 3,000 to 5,000 storage locations. Key factors include the usable floor space, the product structure and quantity, personnel costs, ergonomic requirements for order picking, and the required speed of goods access. The more demanding these parameters are, the more justifiable the use of an automated system becomes compared to traditional, manual order picking in shelving units.

At the same time, combining pallet and small parts storage within the same location demonstrates a pragmatic middle ground that can be observed in many current projects. While the pallet warehouse handles the coarse, homogeneous storage of large quantities, the downstream automated small parts warehouse (AS/RS) ensures the fine-grained, high-frequency picking of small and medium-sized containers, which increases both space efficiency and throughput overall. For companies establishing new distribution centers in Poland, Romania, or Hungary as part of nearshoring strategies, the question regularly arises whether to invest immediately in fully automated systems or whether a phased automation approach, starting with simpler automated storage and retrieval (AS/RS) solutions and later expanding with AS/RS modules, represents the more economically robust strategy. Given the uncertainty described above regarding the actual pace of reindustrialization, the second, more flexible option is likely to gain importance in the coming years, as it allows companies to gradually adapt their inventory infrastructure to actual demand development instead of relying on a potentially excessive growth scenario from the outset.

Regionalization as the new normal, not as a state of emergency

What will truly remain of reindustrialization once the hype has died down?

Everything indicates that the realignment of European trade flows is not a temporary phenomenon, but rather a structural adaptation to a world with greater geopolitical uncertainty, stricter regulatory requirements, and more volatile energy prices. Companies are unlikely to completely abandon global sourcing, but instead will establish a hybrid model that intelligently combines local, regional, and global value chain stages. For Europe, this means, in the medium term, a further consolidation of the industrial and logistics landscape in Central and Eastern Europe and the Western Mediterranean, while traditional Western European core markets are likely to focus more on high-value, capital-intensive manufacturing, research and development, and last-mile distribution.

For investors, site developers, and policymakers, this results in a clear strategic imperative. Those who invest today in modern, energy-efficient logistics properties at well-connected hubs, while simultaneously focusing on flexible, modular automation of existing facilities, are positioning themselves for a decade of structural demand driven less by short-term economic cycles than by a long-term geo-economic realignment. At the same time, it remains crucial to have realistic expectations regarding the pace of this transformation, because reindustrialization and regional diversification are not one-off events, but rather a multi-year, volatile process that will be repeatedly interrupted and readjusted by geopolitical setbacks, technological upheavals, and economic cycles.

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