RELOCATING FACTORIES IS HARD—BUT REWIRING LOGISTICS IS EVEN HARDER

As companies strategize to relocate production in response to recent tariff changes, a critical challenge emerges: redesigning the intricate logistics networks that underpin supply chains. At CEL, our experience with manufacturers undergoing these transitions reveals that while securing new production facilities is a priority, reconfiguring the associated logistics infrastructure is an equally formidable task.​

THE ICEBERG BELOW THE SURFACE

Relocating production is merely the visible tip of a much larger transformation iceberg. For every factory that shifts location, an entire logistics network—including warehouses, distribution centers, transportation routes, customs relationships, and compliance protocols—must be reimagined.​

• Relocating production involves equipment transfers, labor retraining, site compliance, and long ramp-up times—often taking 12 to 24 months to stabilize operations.

• Redesigning a logistics network is an ongoing strategic process rather than a one-time project. Best practices suggest that companies should reevaluate their network design every 3 to 5 years to adapt to changing demands, growth, and market conditions.  This periodic assessment ensures the logistics network remains efficient and aligned with business objectives.​

• Customs Clearance Time on New Routes Can Be 60–120% LongerNew trade lanes often face bottlenecks due to unfamiliarity with local customs protocols and lack of digital documentation tools.

THE HIDDEN COSTS OF LOGISTICS NETWORK REDESIGN

Our work with multinational companies across Southeast Asia has identified several consistent challenges that arise when reconfiguring logistics networks:​

1. Lead Time Volatility: New transportation routes often lack the operational stability of established corridors, leading to increased variability in delivery schedules.​

2. Compliance Learning Curves: Each new border crossing and regulatory regime introduces unique documentation requirements and inspection protocols, increasing the risk of compliance delays.​

3. Infrastructure Limitations: Emerging manufacturing locations may lack the sophisticated port facilities, intermodal connections, and digital infrastructure that have been developed over decades in traditional hubs.​

4. Service Provider Capability Gaps: The availability and expertise of logistics service providers can vary significantly by region, affecting the efficiency of specialized services such as temperature-controlled shipping or hazardous materials handling.​

QUANTIFYING THE IMPACT

The cumulative effect of these challenges contributes to what we at CEL term "network latency cost"—the hidden financial and operational burdens that arise during logistics network reconfiguration. This cost manifests in several ways:​

• Extended Cash-to-Cash Cycles: Companies shifting production to new regions may experience significant increases in inventory-in-transit during the initial phases of relocation.​

• Reduced Schedule Reliability: On-time delivery performance often declines during network transitions, with recovery periods extending over several months.​

• Increased Safety Stock Requirements: To buffer against greater variability, companies may need to increase inventory holdings, tying up working capital and warehouse capacity.​

• Freight Cost Premiums: New or lower-volume shipping routes generally command higher rates per container than established high-volume corridors.​

BUILDING RESILIENT LOGISTICS NETWORKS

Forward-thinking organizations are adopting strategic approaches to mitigate these challenges:

1. Phased Network Evolution: Implementing carefully sequenced transitions that maintain operational stability while gradually building capabilities in new regions.​

2. Dual Logistics Networks: Temporarily maintaining parallel logistics networks allows new pathways to mature before decommissioning established routes.​

3. Strategic Buffer Positioning: Intelligently positioning inventory buffers at critical network nodes to absorb variability while new logistics partnerships stabilize.​

4. Advanced Network Modeling: Leveraging digital twins and scenario planning tools to test different network configurations before committing capital and resources.​

REGIONAL REALITIES: THE ASEAN ADVANTAGE

Companies with an established presence across multiple ASEAN countries hold a significant advantage in this transition.The logistics connections between Vietnam, Thailand, Malaysia, and Indonesia have deepened considerably over the past decade, creating natural corridors for intra-regional network adjustments.​

THE LONG VIEW: NETWORK CAPABILITIES AS STRATEGIC ASSETS

Organizations that recognize logistics networks as strategic assets requiring deliberate development will emerge strongest from this period of transition. Elevating logistics network design to the executive agenda and addressing it concurrently with production planning enables faster stabilization and lower transition costs.​

LOOKING FORWARD

As your organization navigates supply chain reconfiguration, the crucial question is not simply where to relocate production, but how to reimagine the entire flow of materials and finished goods. Have you fully accounted for the hidden network latency costs in your relocation planning? Are you allocating sufficient time and resources for logistics capabilities to mature in new regions?

The true measure of supply chain resilience lies not only in managing production shifts, but in rebuilding the complex logistics ecosystems that connect suppliers to end customers.

At CEL, we combine strategic expertise with data-driven modeling to help organizations take a proactive approach. Using our advanced simulation platform www.simcel.io, businesses can visualize different "what-if" scenarios, test logistics pathways, and stress-test network configurations—before making irreversible commitments.

🔗 Learn more at www.cel-consulting.com🔍 Explore simulations at www.simcel.io to future-proof your supply chain decisions.