Manufacturers try ‘near-shoring’ to mitigate supply chain risk

15 June 2012

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17 June 2012 | Kamalpreet Badasha

More than a third (37 per cent) of European manufacturers are focusing on the challenges presented by supply chain risks and turning to ‘near-shoring’ as a potential mitigation method.

According to KPMG’s report The 2012 Global Manufacturing Outlook: Fostering Growth through Innovation, manufacturers are most concerned about risk, reliability and flexibility in their supply chains.

Near-shoring, where manufacturers transfer facilities to a territory closer to the final market, is a growing trend in a bid to reduce supply chain risks. The survey found 43 per cent of respondents felt this was an effective solution with a further 18 per cent describing it as a ‘highly effective’ way to improve risk management. Near-shoring will continue as a trend over the next two years according to 46 per cent of those surveyed.

“Supply chain risk management continues to be a key issue at board level for manufacturing companies and this survey confirms that many see and are already using near-shoring as a strategy to manage aspects of that risk,” said David Higginson, risk consulting director at KPMG in a statement. “Regulatory risk in the supply chain is a key focus for many organisations in the manufacturing sector: with the implementation of the UK Bribery Act, companies are focusing on the importance of assessing third parties for bribery and reputational risk.”

When questioned about the biggest challenges facing manufacturers, 45 per cent cited uncertainty of demand. Some 37 per cent said the price volatility of key input costs was a challenge. And intense competition and pressure on prices was also selected as a concern by 37 per cent.

The report also discovered 72 per cent believed innovation was taking place within manufacturing. It found three quarters of those surveyed felt optimistic about their business outlook over the next 12-24 months.

The research surveyed 241 senior manufacturing executives worldwide from the aerospace and defence, metals, engineering and industrial products sectors in February 2012.

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