You are head of European strategy at a manufacturer headquartered in Madrid. The single market lets you specialize: one factory serves the whole bloc, just-in-time, without borders. Optimizing it to the max is the most efficient path. But blocs aren't eternal: Brexit reimposed borders overnight and stranded supply chains built for a frictionless market. Integration is a double-edged bet.
The situation
Regional integration —the European single market, NAFTA— enlarges the effective market and enables specialization: one factory for the whole bloc, just-in-time chains that cross borders without tariffs or controls. The more you commit your operating model to that frictionless market, the more efficient you are… if integration holds. NAFTA turned Mexico into a manufacturing platform for North America precisely this way.
Here's the trap. Integration invites you to optimize to the limit, but blocs can break: Brexit reimposed borders, tariffs, and customs controls, and the chains built for a frictionless market —minimal inventory, a single plant, cross-border just-in-time suppliers— were left stranded. The more optimized your model was, the harder reversal hit you. The answer isn't to ignore the bloc (you give up specialization and scale) or to optimize it 100% (reversal devastates you), but to commit enough to capture integration while keeping reversal insurance: backup inventory, dual sourcing, a somewhat more flexible footprint.