ECONOMIC EVALUATION OF LOGISTICS SOLUTIONS UNDER IMPORT SUBSTITUTION

ABSTRACT

This article examines logistics strategies employed during the transition from external to internal supply sources, with a particular focus on their economic evaluation. The study analyzes models of full and partial localization, vertical integration, nearshoring, and contract logistics from the standpoint of capital and operational expenditures, resilience, and adaptability. Special attention is given to quantitative assessment methods that enable comparison of logistics solutions based on a combination of cost-related and structural parameters. The article presents comparative characteristics of strategies considering supply chain flexibility, responsiveness to external shocks, and potential for technological modernization. The findings demonstrate that the selection of a logistics strategy should be based on a balance between costs, resilience, and investment feasibility.

АННОТАЦИЯ

В статье рассматриваются логистические стратегии, применяемые в условиях перехода от внешних к внутренним поставкам, с акцентом на их экономическую оценку. Анализируются модели полной и частичной локализации, вертикальной интеграции, сближения и контрактной логистики с позиции капитальных и операционных затрат, устойчивости и адаптивности. Особое внимание уделено методам количественной оценки, позволяющим сопоставить логистические решения по совокупности стоимостных и структурных параметров. Представлены сравнительные характеристики стратегий с учетом гибкости цепочек поставок, реакции на внешние шоки и потенциала технологической модернизации. Работа демонстрирует, что выбор логистической стратегии должен основываться на балансе издержек, устойчивости и инвестиционной целесообразности.

Keywords: import substitution, logistics, economic assessment, adaptability, resilience, localization.

Ключевые слова: импортозамещение, логистика, экономическая оценка, адаптивность, устойчивость, локализация.

Introduction

Innovations in the global economic and trade framework are increasingly being accompanied by changes in global production and supply chain relationships. In response to evolving global tariff arrangements, logistical constraints, and institutional decisions, countries are taking steps to strengthen local production and reduce excessive foreign reliance. This shift not only impacts strategic sectors but also logistics as a whole, setting a new paradigm for organizing the flow of goods.

The relevance of analyzing logistic solutions during the process of shifting from international to domestic supply chains lies in the necessity to assess the effectiveness of such changes. The abandonment of conventional international logistics routes and the adoption of localized systems involve redistribution of resources, contract strategy redesign, and technical modernization of logistic infrastructure. This, in turn, influences cost structures, operational risks, and flexibility of supply chains.

The aim of the research is to carry out economic analysis for logistics projects realized in the conditions of the shift from external sourcing to domestic. The paper focuses on the comparison of costs, the level of operation resilience, and logistical flexibility throughout supply arrangement alteration. Such an approach provides the possibility to evaluate the economic efficiency of the decisions made in logistics from both managerial and economic perspectives.

This work examines modern methods for analyzing the efficiency of logistics systems, including total cost of ownership (TCO) assessment, activity-based costing (ABC) structural analysis, as well as metrics for resilience and flexibility of logistics processes.

Methods. Transformation of logistics strategies under import substitution

Amid the growing fragmentation of the global trade system, there is a persistent trend toward revising established logistics models that have long been based on global specialization and the distribution of production capacities [1]. The essence of logistics strategy transformation under import substitution lies in the reorientation of supply chains from external to domestic sources in order to enhance the resilience, autonomy, and adaptability of the national economy in the face of external economic constraints (fig. 1).

Figure 1. Transformation of logistics strategies

One of the key drivers behind the restructuring of global supply chains has been the introduction of economic sanctions and tariff restrictions, which have disrupted the stability of cross-border logistics. A notable example is the U.S., where since 2018, tariff reforms have aimed to protect the domestic market from foreign competition. Increased duties on steel, aluminum, and Chinese goods prompted U.S. companies to reduce reliance on external suppliers, leading to a shift in logistics flows and a focus on reshoring.

In 2025, a second phase of tariff policy expanded duties on electronics, components, and heavy industry goods to further boost domestic production and strengthen national supply chains. According to Maersk, U.S.–China container shipments dropped by 30–40% in April 2025 following tariff hikes on Chinese goods of up to 145%.

In response, companies have begun diversifying supply chains toward national or regional markets. This gradual shift starts with reduced imports from high-risk regions, followed by the development of local production and partnerships with domestic suppliers. The approach not only mitigates risks of global disruptions but also enhances control over supply chain operations.

The implementation of import substitution logistics strategies requires a comprehensive set of institutional, technological, and infrastructural conditions that ensure a sustainable reorientation of supply toward domestic resources [2]. On the institutional level, government support in the form of subsidies, tax incentives, as well as a well-designed tariff and trade policy that creates a stable regulatory environment and reduces barriers to localization is crucial. Technological conditions involve access to modern production solutions and digital logistics platforms (WMS, TMS, ERP), enabling efficient management of domestic supply chains. Infrastructure provision – an already built transportation infrastructure, warehouse spaces, and reliable communications – serves as a prerequisite to lowering delivery time and logistical risk. Human capital is critical: access to high-quality specialists and logistics expertise at the enterprise level raises the supply chain adaptation rate. Finally, financial and economic environment includes investing and financing infrastructure, providing access to enhanced productive capacity and local logistics infrastructure construction.

The compatibility of these variables forms the foundation from which to orchestrate a sustainable transition from internationalized logistic models to domestic or regionalized supply systems. Economic evaluation of the choice to be made calls for a holistic approach that unites cost analysis, operational performance, and responsiveness of logistics systems under the umbrella of structural economic transformation.

Results

Approaches to economic evaluation of logistics solutions

The economic evaluation of logistics solutions in the context of import substitution requires a comprehensive approach that considers not only direct financial indicators but also parameters reflecting the resilience and flexibility of the logistics system. Modern approaches to assessing logistics efficiency can be conventionally divided into three groups: cost-based, operational-structural, and integrative (table 1).

Table 1.

Methods for quantitative evaluation of logistics solutions [3, 4]

Among the most widely used cost-based criteria is the TCO method. It is calculated by summing all direct and indirect expenses associated with owning a logistics solution or an element of the supply chain throughout its entire lifecycle. The calculation includes costs related to procurement, transportation, storage, maintenance, insurance, potential disruption risks, and subsequent expenses for disposal or replacement.

Moreover, ABC and XYZ analyses are applied to analyze the distribution of the costs and cost structure of the cost of logistics to identify the most expensive items that make up the core cost flows. ABC relies on classifying the costs of logistics according to their impact on the total cost: category A comprises the biggest expenses, B has average expenses, and C comprises the smallest expenses. The XYZ analysis complements this by providing resource apportionment based on the predictability and stability of consumption, allowing better inventory and material flow control in response to fluctuating demand.

Regarding operational resilience, an important instrument is fault tolerance and logistics operation reliability analysis. By using disruption resilience techniques in assessment, calculations of the Service Level coefficient, and safety stocks at critical points, these are applied. The measure of Service Level performance reflects the proportion of orders fulfilled on time and to full, as a logistics reliability measure. Safety stock analysis determines what buffer stock is needed at minimum to prevent downtime in the event of volatile supply or increased demand. These techniques allow for quantitative measurement of the logistics system's ability to maintain continuity of operations in situations of uncertainty. Operational resilience metrics quantify how effective the logistics system is under unstable exterior circumstances and changing supply.

The adaptability of a logistics system is defined by its ability to rapidly reconfigure in response to changing input parameters such as suppliers, routes, order volumes, and seasonal fluctuations. The assessment of adaptability can be based on scenario analysis models as well as the application of Data Envelopment Analysis (DEA) – a method for comparative efficiency evaluation of logistics units based on multiple inputs and outputs.

For quantitative analysis of total logistics planning, discounted cash flow methods are also employed, e.g., Net Present Value (NPV) and Internal Rate of Return (IRR) calculations. These enable the determination of whether or not a logistics solution represents an investment prospect in terms of, for example, production repositioning, warehouse infrastructure enhancement, or supply route adjustments.

Thus, modern methods of the economic evaluation of logistics solutions form an extensive methodological paradigm allowing to carry out in-depth analysis of import substitution policy efficiency.

Comparative analysis of the effectiveness of logistics solutions

Under import substitution, firms need to choose between several logistics policies, each of which carries with it some economic implications. Some of the solutions that are most prevalent are localization of warehouses and factories, substitution of external foreign suppliers with internal ones, creation of local logistics centers, vertical integration, and use of contract logistics on the internal market.

One of the costliest yet strategically sustainable solutions is the complete localization of logistics infrastructure, including warehousing, transportation, and production components (table 2).

Table 2.

Comparison of economic characteristics of localized and externally oriented logistics infrastructure

This table highlights that localized logistics, despite higher initial investments, provides reduced ongoing costs, enhanced resilience, and lower operational risks compared to an externally oriented model.

For example, in 2025, Carrier Global announced a $1 billion investment over five years to expand its U.S. manufacturing capacity. The move is a reaction to policies aimed at boosting domestic production. The investments will be used to expand existing plants as well as the construction of a new plant that will be dedicated to the production of heat pump components and battery assemblies. This initiative will create 4,000 new positions, including the hiring of 1,000 service technicians in America, in addition to arming over 100,000 climate solutions professionals.

An alternative approach is partial replacement of external suppliers with domestic counterparts while maintaining the overall supply chain architecture. Comparative analysis shows that this model reduces dependence on external risks, provided that internal logistics capabilities are developed, but it may be accompanied by increased variable costs (table 3).

Table 3.

Comparison of partial localization with the traditional import model

For example, the American company Reckitt Benckiser implemented a partial localization strategy for its supply chain while maintaining the overall architecture of its logistics network. The company invested $200 million to acquire a plant in Wilson, North Carolina, previously owned by Sandoz Group. This move enabled the relocation of the production of over-the-counter medicines, such as Mucinex, from Mexico and the United Kingdom to the U.S.

Another practically significant solution within the economic evaluation of logistics decisions under import substitution is the vertical integration of logistics processes. This approach involves the creation of in-house transportation, warehousing, and production facilities, allowing for maximum control over the entire supply chain and reducing dependence on external contractors [5].

Economically, vertical integration is marked by significant CAPEX on asset acquisition, constructing infrastructures, establishing IT systems, and hiring trained staff. However, these costs are partly offset by reducing OPEX in the long term. Vertical integration is most justified in strategic business or capital-intensive industries. For instance, in 2025, an American pharmaceuticals maker, Eli Lilly, publicly announced the construction of a new facility for producing active pharmaceutical ingredients (API) in Concord, North Carolina, at a price of $2,5 billion. It is one of a series of vertical integration plans designed to control the supply of key components more closely and reduce dependence on foreign suppliers. According to comments from the company's management, the undertaking will create 350 permanent jobs and significantly enhance the stability of the company's supply chain in the U.S.

Regional logistics hubs development and nearshoring represent a middle ground between global mode and localization [6]. The model reduces transportation as well as currency risks, provides flexibility to the supply, and at the same time makes it feasible to leverage the lower labor as well as infrastructure prices of the neighboring countries. Economical gain is realized in the form of optimal routes of transportation, minimized delivery time, as well as increased system flexibility.

Ford Motor Company adopted a nearshoring policy by simplifying its logistics supply chain between Mexico and the U.S. The company began exporting vehicles from its Hermosillo factory to South America, including Chile, through the Sonora state's Guaymas port. Cars were previously shipped about 2,000 kilometers to the Lázaro Cárdenas port in Michoacán state. It reduced logistics costs by 30% and delivery times by a significant amount by switching to Guaymas. This was made possible due to the modernization of the port with the Sonora Plan infrastructure plan that features a 1 GW solar park for energy independence. Ford's strategy centers on regional economics of logistics hubs and nearshoring for increased supply chain flexibility and resilience.

Another example of a logistics solution in the context of import substitution is contract logistics, implemented at the national or regional level [7]. This approach serves as an alternative to vertical integration and is based on outsourcing logistics functions to specialized external providers (3PL/4PL). Economically, contract logistics helps reduce fixed costs since the enterprise does not bear expenses for establishing its own logistics infrastructure, including transportation, warehousing, and IT systems. Instead, variable costs are incurred, which directly depend on the volume of logistics operations.

Assessment of logistics adaptability in the context of import substitution

Adaptability of a logistics system under import substitution is decided by how well it can adapt to fluctuations in external as well as internal environments, provide stability of supply in the face of market agitations, and meanwhile also serve as a foundation for technology growth. In situations where supply chains are being reconfigured under the threat of trade bans, sanctions, tariff walls, and changes in demand, logistics adaptability becomes one of the major catalysts for business resilience. Different import substitution strategies exhibit varying levels of adaptability (table 4).

Table 4.

 Comparative assessment of logistics adaptability of strategies under import substitution [8]

The choice of strategy should consider not only current costs but also the logistics system’s ability to reconfigure under uncertainty, which is especially relevant in the context of long supply cycles, seasonal fluctuations, and an unstable external environment.

Conclusion

In the context of import substitution, the economic evaluation of logistics solutions acquires strategic importance, enabling informed decisions among various supply chain adaptation formats – from full localization to hybrid and contract models. The conducted analysis demonstrates that effective logistics rethinking requires consideration not only of direct and indirect costs but also of operational resilience, flexibility, and the potential for technological modernization. Each strategy has its own economic rationale and level of adaptability, and successful implementation depends on institutional support, infrastructural readiness, and a developed domestic logistics market. Thus, the transition from external to internal goods flows must be accompanied by comprehensive analytics capable of addressing not only short-term expenses but also the long-term sustainability of the logistics system.

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