Businesses are looking more toward sourcing locations that are closer to the U.S. Nearshoring is becoming a strategy to reduce costs and has been utilized by more companies who want to have great control over their supply chain and possibly mitigate risks and disruptions.
For many companies, nearshoring rather than offshoring can be beneficial for keeping customers satisfied, and reducing inventory and transportation costs. Nearshoring can help to protect a supply chain from unexpected disruptions. A detailed strategy can help to properly align your supply chain with operational changes. It should be designed to accommodate tight cycle times while still remaining effective at utilizing imported goods when needed.
Why Switch to Nearshoring
Many find the advantages of switching to nearshoring to be beneficial to their organization, allowing them to save on costs and find resources for tasks that are not handled well in-house. There are several factors that indicate when supply chain managers should consider nearshoring for their operations:
- – Inability to handle unexpected events
- – Long cycle times
- – High inventory carry-over costs
- – Unable to meet delivery requirements
- – High minimum order quantities
Advantages of Nearshoring
Nearshoring allows a company to delegate projects to other workers at a lower cost. This comes with high responsiveness and choosing a location that is nearby with a team that understands the market.
The following are the benefits of nearshoring:
- Cost Savings. One of the main benefits is that nearshoring can help to cut costs in transportation, manufacturing, and other areas. The ability for instant communication with locations that are closer saves money compared to offshoring as decisions can be made quicker when necessary. Transportation among neighboring countries also saves money on costs.
- Supply Chain Stability. Supply chains can experience disruptions for a variety of reasons, including weather events, geopolitical activity, and other unexpected blocks to the supply chain. Many supply chain managers are looking to source in countries that are closer such as Mexico or Canada because it offers a more stable solution. Being able to mitigate disruptions creates a stronger supply chain.
- Customer expectations for delivery times have gotten more demanding over the last few years. In order to meet the demand, supply chain managers have to be able to get the product to the customer faster. Nearshoring becomes an effective way to reduce cycle times because the shipping distance is shortened. The on-time delivery that nearshoring provides creates a positive experience for the customer.
- Nearshoring can provide a better level of control over inventory levels. The improvement in fulfillment cycle times improves forecasting for a better level of inventory. Slower moving inventory can be held at nearshore locations to decrease operating costs and inventory risks.
- Geographical Proximity. Nearshoring allows for a close, dedicated team, which enables better control over project management flow and better communication among the team. For example, Mexico or Canada are excellent choices for companies in the U.S. since time zones are similar. This maximizes the amount of time you can effectively communicate throughout the workday.
Making the Switch the Nearshoring
A move to nearshoring cannot be accomplished quickly and will require a strategy. It is not enough to just transplant the existing supply chain to the new location. This will be a costly endeavor and will not produce successful results. The supply chain will become shorter which requires a redesign. Some costs, such as manufacturing, could be higher so it is critical to redesign the supply chain to make up for those increases.
Nearshoring allows for the souring of locations that are not far from the final selling point, which makes for a flexible and agile supply chain. Smaller distribution centers enable better forecast accuracy.
Your Trusted Partner
The benefits of nearshoring include optimizing the supply chain while reducing costs and unexpected risks. The advantages of nearshoring can make for a smart business decision for your company. Red Arrow Logistics can help you formulate a nearshoring strategy that makes sense for your business.
Red Arrow offers the scale and scope of services including air, ocean, and ground transportation to meet the budget and schedule requirements of the largest and smallest companies alike. If we can be of assistance, please email us at [email protected] or give us a call at 425-747-7914.
