Nearshoring is the practice of moving manufacturing or assembly operations closer to the final customer. This can be done to reduce supply chain disruptions, improve delivery times, and increase flexibility.
The idea that OEMs can easily fix these problems is just a dream, but it’s certainly possible to bring production closer to the home markets. In the 80s American appliance manufacturer, Whirlpool, moved to Mexico. The Mexican facility exported 80% of the machines (like refrigerators, washing machines, compact refrigerators, and stoves) to the USA and Canada. After Whirlpool, other electronics companies like Samsung and LG also successfully established nearshoring manufacturing units in Mexico.
According to SDC (Supply & Demand Executive) there are three key factors to consider when redesigning your supply chain for nearshoring.
- Ingrain flexibility in sourcing locations. Not all products are suitable for nearshoring, so you will need to have a flexible supply chain that can accommodate both nearshored and offshored products.
- Leverage small, efficient distribution centers (DCs). Smaller DCs can be more agile and responsive to changes in demand. They can also be located closer to customers, which can reduce delivery times.
- Customize distribution node inventory. You will need to customize the inventory levels at your distribution nodes to account for the different lead times and risks associated with nearshored and offshored products.
By following these factors, you can redesign your supply chain for nearshoring in a way that protects your flexibility and efficiency.
Some of the benefits of nearshoring:
- Reduced supply chain disruptions: Nearshoring can help to reduce the risk of supply chain disruptions by bringing manufacturing or assembly operations closer to the final customer. This can help to mitigate the impact of things like natural disasters, political instability, and trade wars.
- Improved delivery times: Nearshoring can help to improve delivery times by reducing the distance that products need to travel. This can be a major benefit for customers who demand fast delivery.
- Increased flexibility: Nearshoring can help to increase flexibility by giving businesses more control over their supply chains. This can be helpful in responding to changes in demand or disruptions in the supply chain.
Some of the challenges:
- Increased costs: Nearshoring can sometimes increase costs due to higher labor or transportation costs. However, these costs can often be offset by the benefits of reduced disruptions and improved delivery times.
- Lack of skilled labor: Some countries may not have the skilled labor force that is needed for certain manufacturing or assembly operations. This can be a challenge, but it can be overcome by investing in training or by partnering with local companies.
- Regulatory challenges: There may be regulatory challenges associated with nearshoring, such as different safety or environmental standards. These challenges can be overcome by working with local experts or by seeking government approvals.
Overall, nearshoring can be a beneficial strategy for businesses that are looking to improve their supply chain performance. However, it is important to carefully consider the benefits and challenges before making the decision to nearshore.
To avoid electronics supply-chain disruptions, you may also wish to consult an expert in electronics component supply. With more than three decades of supply-chain expertise, Astute Electronics is ideally placed to work with you on your daily component requirements.
For more help with looking at supply chain options, contact Astute Electronics