Drive supply chain resilience with strategic shoring
Learn why supply chain leaders are reorienting their supply chains to be closer to customers.
Increase resilience and get closer to customers.
Reorient your supply chain with strategic shoring and achieve greater resilience.
Strengthening organizational resilience
Geopolitical events and disruptions have exposed the vulnerabilities of global supply chains. Supply chain leaders are responding to these unprecedented challenges. To ensure resilience and agility, supply chain leaders are increasingly turning to strategic shoring—relocating operations closer to end markets to mitigate risks, enhance adaptability, and become more resilient.
A recent KPMG survey of 250 US executives reveals that 81 percent expect the majority of their US-serving supply chains to be based in the Americas once their current shifts are complete.1 Proximity in building resilient supply networks is increasingly important.
Strategic shoring has the potential to revolutionize supply chain management.
Supply chain leaders can unlock a range of benefits, including:
- Greater agility/resilience
- Faster time to market
- Better access to necessary skills/talent
- Reduction in geopolitical risk
- Easier access to capital
In this environment, companies need to be more deliberate about what they are managing, what they are outsourcing and what they are insourcing.
Brian Higgins
Partner, KPMG US Consulting Leader, Industrial Manufacturing
With market volatility on the rise across global supply chains, strategic shoring has become a long-term play that delivers agility and speed. However, the strategy requires a capital infusion. While cost should be factored in, the decision for or against strategic shoring should be carefully weighed. It may be an instance of amortizing the cost and performing break-even analysis with savings achieved in future years. The added benefits of agility and speed can outweigh the investment cost.
80 acres farms
80 Acres Farms, an Ohio-based vertical farming company, has adopted strategic shoring to enhance supply chain resilience and agility. By locating production closer to consumers in the US, the company aims to simplify its global supply chain from 17 steps to just two or three, ensuring fresher produce.
By strategically positioning their facilities, 80 Acres Farms reduced complexity, shortened distances, and improved produce quality.
Mapping shoring risks and strategies
While strategic shoring offers numerous benefits for building resilient supply chains, companies must map various challenges, including regulatory difficulties, true cost of labor, actual cost of production, and lack of local skills and talent.
To successfully navigate these challenges, companies should be aware of six shoring risks and how to address them:
1
Getting your cost-to-serve wrong
- Continuously reassess factors driving supply chain decisions for a balance between cost, flexibility, and sustainability.
- Leverage data and analytics to better understand supply-demand dynamics, ensuring strategies align with business goals.
2
Failure to factor tax into the bigger picture
- Consider tax implications early in the shoring process to avoid costly errors and maximize benefits.
- Also, make indirect tax implications such as VAT and customs duties part of the broader tax discussion as they tend to come up in strategic shoring.
3
Factoring in talent too late
- As supply chains rely more on robotics and automation, elevate workers’ digital skills while also enhancing their soft skills. A strategic shoring move doesn’t slow the need to create a workforce that is human-centric and empowered by digital tools.
4
Lack of supplier diversification
- Strategic shoring is the perfect opportunity to develop a supplier diversity strategy that supports environmental, social, and governance (ESG) initiatives. It’s best practice to closely align supplier diversity programs with corporate and ESG strategies.
5
Failure to include suppliers in strategic discussions
- Collaborate closely with suppliers, partners, and customers to build strong relationships and co-create value.
- Combine strong supplier relationships with strategic shoring for a shared benefits model that utilizes local expertise.
6
Lack of innovation in following the herd
- Foster a culture of continuous improvement and innovation. Also, invest in robust data and analytics for real-time visibility and informed decisions that support differentiation.
With a shoring strategy implemented, your supply chain is less at risk of supply chain disruptions, a trend forecasted by the KPMG Stability Index. The index shows that a change in an assumption or variable, such as freight costs or on time in full (OTIF) penalties, can drastically affect the viability of a strategic shoring decision. The impact of a miscalculation could equate to millions of dollars.
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How KPMG Supply Chain Services can help
Strategic sourcing can transform your supply chain. But it’s a big decision to switch suppliers and potentially set up hubs in different countries. KPMG Supply Chain Services can help. Our reshoring experts have expertise that’s backed by technology. We also offer an AI portfolio, a set of algorithms that support supply chain operations. Let KPMG guide, accelerate, and de-risk your supply chain.
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