Geopolitical disruptions and technological advances are reshaping manufacturing footprints. Although leaders may think of them as separate forces, most companies are experiencing them both simultaneously. Together, they create a powerful imperative—and incentives—for leaders to rethink their strategy.

Companies usually decide on their manufacturing footprint by assessing predictable factors—costs, logistics, trade regimes. That analysis has often resulted in production shifts to low-cost countries. This offshoring-driven model, optimized for global efficiency and scale, offered stability in a world of relatively open trade.

Today, according to not-yet-published BCG research, that equation has changed. A recent BCG Henderson Institute survey of more than 1,000 manufacturing executives shows that geopolitical risk—once a peripheral concern—now ranks among the top five challenges they face. Rising trade barriers, political volatility, and national security pressures are injecting a high degree of uncertainty into footprint decisions.

At the same time, an opportunity is emerging. The long-standing vision of “lights-out” factories, running autonomously without human labor, is moving from aspiration to reality, thanks to falling robotics costs and rapid advances in AI. Already, 62% of manufacturers surveyed have deployed multiple AI applications, challenging the historical labor cost arbitrage that underpinned global offshoring decisions.

Manufacturing leaders now need a more dynamic approach to determine when domestic manufacturing can outperform existing global competitive setups. To do so, they’ll need to understand the impact of tariffs (actual and potential) and of implementing the factory of the future on costs of local production, as well as the external environment in their target country.