Future of Procurement - Should I Consider Onshoring My Supply Chain in the Long Term?
26 May 2020
Onshoring, or nearshoring, is a topic many organisations may need to consider in the current economic climate, particularly as supply chain ecosystems have been struggling across many sectors because of a reliance on long-distance suppliers.
The decision of where to site a supply chain should be based on a balance of supply chain risk, and continuity of supply, quality and price. Availability of supply is also a factor and buyers may need to work with suppliers to develop new market opportunities. Every sector and company will need to make its own decision, specific to its requirements and circumstances; some sectors, such as construction and some advanced manufacturing, may already have a high level of suppliers based within the same country while others, including food, may be heavily focused on imports. Any supply chain that relies on one critical point of failure is a risk and may need to be reevaluated to consider if onshoring or nearshoring is a better option, or a combination of both in order to spread the risk..
The requirements will differ from contract to contract. Key questions to consider include whether it is necessary, possible and proportionate to restructure a supply chain for the potential benefits (cost savings, innovation, resilience, agility and risk). In-depth risk mapping will be helpful in this respect.
In the short term, it may offset risk to localise a supply chain affected by Covid-19, where impacts on cash flow and supply shortages are expected to trickle downstream. However, firms will need to weigh up the options and the sourcing possibilities for individual components to ensure scale can still be met.
Coronavirus has particularly accelerated a push for the onshoring of supply chains in the UK. The country had resource capacity and capability restraints, with Brexit affecting wider supply chains even prior to Covid-19.
Risk analysis and management techniques (CIPS)