Nearshoring, or bringing sources of supply closer to home, has resurfaced in 2024 as means to gain some control over supply chain risks.
Identified as one of the major trends in 2024 in our recent blog and the subject of our new whitepaper: “Considering nearshoring? Here’s what you need to know”, nearshoring is garnering interest as supply manager seek to minimize hazards such as currency fluctuations, trade wars and tariff hikes, natural disasters, accidents and conflicts that block major global transportation routes. Done right, nearshoring affords companies a chance to save time and costs by creating a shorter supply chain.
The typical nearshoring scenario sees a shift away from distant, potentially difficult sources of supply to ones closer to home. So, for North American producers, the logical shift is from China to Mexico. China has lost favour in recent years as its labour costs escalate and trade disputes with the United States and others intensify. Plus, breaks in the transportation chain, such as were caused by the pandemic with ports closing down in China due to labour shortages, increase the attractiveness of a completely land-based route from Mexico to the U.S.
“From materials to end products, Chinese suppliers are not only major producers of consumer goods and electronics, but China also dominates the solar panels, batteries, and 5G infrastructure industries,” says a recent study by analytics provider GlobalData.
“Strong economic growth and other developments have changed some of the factors that first made China an attractive manufacturing destination, namely: China no longer has the scale of cheap labour it once had; China has a shrinking population; and China is a major target of decoupling efforts.”
However, the study also points out that weaning a supply chain completely from China is virtually impossible for many companies. As the world’s manufacturing hub, China controls many global supply chains. Given the country’s massive investments in digital and clean energy technologies, a complete decoupling from China is virtually impossible, the GlobalData study found.
With or without China
Whether it is possible to completely sever ties with Chinese suppliers or not, there are other actions besides nearshoring that supply chain managers can take to reshape and de-risk their supply lines. GlobalData identifies nearshoring, diversifying the supply chain, digitizing networks, and adopting a circular economy model as these options.
Nearshoring, diversification and circular economy sourcing are all opportunities that require a sophisticated strategy and deep pockets to implement. Nearshoring takes a great deal of research and number crunching to prove its ROI. Likewise, diversifying your supplier base carries inherent risk, as new suppliers are unknowns and the due diligence required to vet them can be time consuming and costly. Last, circular economy models, which entail sourcing materials that are reclaimed, repurposed or recycled are a relatively new supply chain strategy. Finding enough supply within a circular economy model at present is difficult for all but the smallest, niche manufacturers.
But from our perspective, digitizing is one of the most critical and effective means to build efficiency into your supply chain operations. It affords cost savings at the same time and can be an integral part of your plans to nearshore your supply base.
Take a look at our nearshoring whitepaper for more details on how technology solutions like C3 Reservations dock scheduling software and our yard management system, C3 Yard, can help integrate a new sourcing strategy.
Automated dock scheduling, can help with numerous facets of the new processes by streamlining increased truck traffic, and managing a greater number of loads with ease and without paper. It can also help avoid demurrage charges and has the added benefit of not requiring additional personnel. Gate security is another benefit, as every driver who arrives at your property is expected to be there.
C3 Yard, on the yard management side, can assist with managing on-site inventory as well as security. Trailer seals and up-to-the-minute asset location are immensely useful in an environment where theft may be more common. It also gives you the ability to easily expand your capacity to include inventory held in trailers when the need arises.
Used together, and in conjunction with C3 Reservation and C3 Yard systems in place at your home base, you’ll have complete visibility across your logistics operations and inventory both at home and in the nearshore location. It’s a powerful combination that will afford you greater productivity and the certainty that operations both at home and in your remote locations are running smoothly and efficiently.
If you’d like to know more about our digital solutions, please call us and we can schedule a demo.
