004. Reshoring, nearshoring, and nearsourcing

“Welcome back to another episode of “I LIKE TO MOVE IT” a Rulmeca’s podcast. I’m your host, Mr “R” and today we’re diving into a fascinating topic: reshoring, nearshoring, and nearsourcing. The geography of global logistics is undergoing a significant transformation, as companies strive to contain costs and mitigate the risk of supply chain disruptions. So, let’s explore how businesses are shortening their branches and multiplying their nodes to get even closer to the consumers.

In recent years, we’ve learned a harsh lesson. Long-distance, low-cost labor sourcing, which guided most decisions in the past, has become unsustainable for complex and fragile global supply chains. It’s time to question this model. Enter reshoring, nearshoring, and nearsourcing – the transfer of production or distribution assets closer to the target markets, along with the selection of new sourcing partners near the manufacturing or sales locations.

To gain deeper insights into this trend, Reuters Events, in collaboration with Maersk, conducted a survey involving 368 industry professionals, with more than half of them from Europe. Their findings are compiled in the report titled “A Generational Shift in Sourcing Strategy – A Global and European Deep Dive into Nearsourcing, Nearshoring, and Reshoring in the Post-Pandemic World.” The study confirms that reshoring, nearshoring, and nearsourcing are not just fleeting sensations but widespread and proven trends, with 67% of retailers and manufacturers revising their sourcing choices for raw materials and components, and 37% considering production relocation.

As many as 77% of logistics and technology service providers in the supply chain industry report that their clients have already modified their sourcing strategies due to recent delays and supply suspensions. Retailers and manufacturers worldwide are making nearsourcing and re/nearshoring the focal points of their development strategies for the future, with 58% considering them an absolute priority for business resilience.

The change happening is rapid and profound. Companies worldwide are taking radical actions to reconfigure their supply chains and mitigate the constant risk of disruptions that can have a massive negative impact on their bottom line. Delays in raw materials, components, finished products, and shipments are major concerns, particularly in the Asia-Pacific and North American regions.

The complications arising from shipping delays and closures due to the ongoing COVID-19 situation have challenged the production and delivery schedules. The dependence on Asian suppliers has strained American manufacturing, leading to congestion at Pacific ports and bottlenecks in transportation networks. Furthermore, factors like inflation, labor shortages, and limited shipping capacity add to the challenges faced by businesses.

Europe’s situation is not far different from the global scenario. Despite fewer disruptions in the Asia-Pacific region, European companies have felt the negative effects of shocks like the Suez Canal blockage and the energy crisis triggered by the Ukraine conflict. More than half of the European respondents expect supply chain interruptions to persist for two or more years, with some even believing that logistics turbulence could become a permanent feature.

Faced with these risks and uncertainties, around 65% of European retailers and manufacturers have already begun reconfiguring their supply networks, with 30% considering future production relocations. The trend is towards bringing supply chain processes and operations closer to the final markets, emphasizing flexibility, reduced dependence on single sources, and shorter transit times.

The desire for greater control and risk reduction drives the need for extensive monitoring and more sustainable practices. Sustainability remains a top priority for European companies, with 44% considering it a crucial variable in their supply chain strategies.

The new geographical preferences for European companies reconfiguring their supply chains are stability, socio-economic and political factors, proximity to European markets, and access to skilled labor are some of the key considerations. Eastern Europe, including countries like Poland, Czech Republic, and Hungary, is emerging as a popular nearshoring destination for European companies. These countries offer a combination of proximity to major European markets, relatively lower labor costs compared to Western Europe, and a skilled workforce.

Southern European countries like Spain, Portugal, and Italy are also attracting attention for nearshoring activities. These countries offer competitive advantages such as a well-developed infrastructure, established manufacturing sectors, and access to key markets in Europe and North Africa.

Additionally, some European companies are exploring reshoring options, bringing their production back to their home countries. This trend is driven by the desire to reduce supply chain vulnerabilities and strengthen domestic manufacturing capabilities. Countries like Germany, France, and the United Kingdom are witnessing an increase in reshoring activities, supported by government initiatives and incentives.

Furthermore, companies are diversifying their supplier base by engaging in nearsourcing practices. Nearsourcing involves sourcing from suppliers located in nearby countries or regions, often within the same continent. This strategy allows companies to reduce lead times, transportation costs, and the risk of disruptions. For example, European companies are looking to source from neighboring countries in order to establish more robust and agile supply chains.

Technology and digitalization play a crucial role in enabling these reshoring, nearshoring, and nearsourcing strategies. Advanced technologies such as artificial intelligence, data analytics, and automation help optimize supply chain operations, improve visibility, and enhance decision-making.

In conclusion, reshoring, nearshoring, and nearsourcing have become prominent strategies for European companies aiming to enhance their supply chain resilience, reduce risks, and improve operational efficiency. The changing geography of global logistics reflects a shift towards shorter supply chains, increased regionalization, and a focus on proximity to markets. As companies navigate the challenges of a dynamic global landscape, strategic sourcing decisions are critical for maintaining a competitive edge in the post-pandemic world.

Thank you for your attention and I look forward to seeing you next time to explore together again the most interesting new trends and developments in the world of materials handling.

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Take care and keep being awesome.”