Data-led decisions power strategic shoring

New supply chain research from KPMG unpacks the growing “strategic shoring” trend in the Americas, which is defined as the shift in a supply chain’s geographic footprint to encompass more regions and countries closer to the US, such as Latin America and Canada.

South of the border appeal

Mexico offers manufacturing capabilities and competitive labor costs to favorable United States-Mexico-Canada Agreement (USMCA) trade terms. These reasons will help Mexico grow as a supply chain hub.

Latin America also looks pretty attractive. Natural resources, developed hydropower, wind, solar, and other types of renewable and clean energy sources could provide a big tax advantage for organizations. 

For supply chains considering nearshoring, companies should evaluate factors like resource access, sustainability, and tax environments. Before making any decision, leverage data and analytics to better determine short and long-term costs and benefits. 

64 percent of supply chain executives surveyed consider indirect taxes, government grants and incentives, and transfer pricing rules at the outset of their strategic shoring decisions. Leveraging data and analytics to evaluate these factors, along with other critical considerations such as labor costs, transportation networks, and market demand, enables supply chain leaders to develop a comprehensive view of the strategic shoring scene and make data-driven decisions that optimize supply chain performance.

In the high-stakes arena of global supply chain management, strategic shoring has become a vital tactic for gaining a competitive edge. By relocating operations closer to end markets, companies can cut lead times, boost responsiveness, and reduce risks. Informed decisions on strategic shoring depend heavily on data and analytics.

Implementing data-driven strategies for strategic shoring brings its own set of challenges. The KPMG survey identifies several key obstacles, including regulatory hurdles in utilizing free trade agreements and government incentives, actual labor costs, true production expenses, lack of local expertise and talent, cybersecurity incidents, and risks of fraud or intellectual property loss, among others.

To overcome these challenges, supply chain leaders should focus on enhancing the quality of their data and analytics techniques. Activities such as effective planning, building a trusted supplier network, and utilizing analytics enable data-driven supply chain decisions. Strengthening relationships with key suppliers and using metrics and data for collaboration are also important. By evaluating suppliers, including beyond Tier 1, companies can better understand their supply chain network's strengths and weaknesses.

For the successful implementation of data-driven strategies in strategic shoring, organizations should prioritize the following:

• Conduct routine audit exercises to improve data integrity.
• Maintain a clear map of various sources feeding information into the supply chain's data ecosystem.
• Prioritize data quality and perform regular data audits.

By addressing these areas, companies can effectively steer the challenges associated with strategic shoring initiatives.