Offshore manufacturing loses its shine

19 May 2011

Manufacturing close to home

19 May 2011 | Lindsay Clark

Manufacturers are looking to source components nearer to consumers as they seek to become more flexible in meeting demand and get products to market more quickly.

In a survey of contract manufacturers, Gartner found that while 44 respondents were seeking to expand their sourcing into the traditional low-cost markets of Brazil, Russia, India and China, the number looking to expand within the US or western Europe was nearly equal, at 43.

The move was in part because manufacturing buyers were trying to become more flexible in response to changing demand in their home markets.

Speaking ahead of the Gartner Supply Chain Executive Conference, Barry Blake, Gartner research analyst said: “This expansion is occurring into the more established market, which we thought it was moving away from.”

Time to market was one key factor in this trend, he said. “Speed in certain industries is absolutely critical. By offering regional manufacturing capability you allow yourself speedier access to a market.”

It also gave companies the ability to react to changing demand more rapidly, Blake said. “If you are receiving fairly frequent demand changes, then perhaps it’s easier to meet those demand changes when you are closer to the end consumer.”

Meanwhile, rising costs of labour, fuel and transportation were also causing manufacturers to rethink their offshore sourcing strategies, he said. “There is no getting away from the increase in cost. If you use Asia as a one-stop shop, then those costs are going to get you, so in response to those increases companies are re-evaluating their strategies.”

The Gartner Supply Chain Executive Conference is due to take place on 1-3 June, in Arizona.

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