Nearshoring happening 'faster than expected'

17 January 2023

The rate at which global supply chains are reconfiguring is happening at sharper rates than previously thought, research has found. 

Almost nine in 10 (88%) US small businesses said they intended to nearshore parts of their supply chain, while 45% said they planned to nearshore “all” their suppliers, according to a survey of 300 supply chain professionals by software company Capterra. 

Meanwhile, 37% of respondents said all their suppliers were currently nearshored. 

“The switch to nearshoring is happening faster than was predicted in 2021,” the report said.

“Most industry professionals predicted this change would happen very slowly, over five or more years. But even the 2022 numbers we see in the data were stronger than those predictions, and 2023 will continue to see a rapid shift to nearby suppliers.”

Corporate giants including Apple, General Motors, and Boeing all invested in manufacturing plants in the US and Mexico throughout 2022, it noted. 

Shortened supply routes and trade agreements between the US, Canada and Mexico have attracted North American firms to nearshore supply chains, as firms have looked to bypass the risk increasingly associated with China following the disruptions caused by Covid-19 and global shipping disturbances. 

Established supply chain strategies are no longer fit for purpose, the report said, as firms look to battle competing disruptions.

Two-thirds (65%) of supply chain professionals said inflation was their top concern entering the new year, followed by inventory shortages (43%) and recession (42%).

The report continued: “The supply chain management techniques that dominated the last 30 years are no longer supporting consumer behaviour and logistics and manufacturing capabilities. Decades of globalisation have created an intricate web of the trade of goods. But recent major events have caused possibly irreparable damage.

“From the Covid-19 pandemic to the disastrous effects of climate change to the global social connectivity that has shed light on the human rights violations happening in the countries where we’ve established this intricate web, global supply chains require changes.”

Two in three (67%) said their forecasting techniques had been successful the past six months, with only 14% reporting excess inventory as a top concern going into 2023.

The report further found “cooperative procurement” was increasing, as 64% of respondents said they had joined or planned to join group purchasing organisatsions to help manage procurement costs and challenges.

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