Strategic shoring: Boosting supply chain resilience

Companies are increasingly focusing on strategic shoring to enhance supply chain resilience. Amid global disruptions and economic uncertainties, organizations are reconfiguring their operations to achieve greater agility and mitigate risks. Strategic sourcing options like near-shoring are often the preferred result of these reconfigurations.

This webcast discussed the importance of addressing supply chain challenges with strategic shoring, the different considerations, and how organizations can get started.

The macroeconomic implications of near-shoring are substantial and multifaceted. The uncertainty surrounding international trade has become a critical factor in economic forecasts. Supply chain disruptions, particularly exacerbated by the pandemic, can lead to inflationary pressures, especially when they are large and persistent.

Trade policy uncertainty, including the potential for higher tariffs, can also lead to tighter credit conditions, particularly for firms more exposed to trade policy. This uncertainty can cause delays in investment and project initiation. However, near-shoring can help mitigate these risks by providing a buffer against supply chain disruptions. By shortening supply chains and relocating them closer to the US, companies can achieve greater responsiveness to market changes, reduce lead times, and minimize the risks associated with longer supply chains.

This increased flexibility is critical for adapting quickly to disruptions and changes in demand. Additionally, near-shoring helps build more resilient supply chains by reducing vulnerability to geopolitical risks, lowering transportation costs, and decreasing environmental impacts. The current climate calls for it. Companies that prioritize building more resilient and agile supply chains will be better at navigating ongoing economic and geopolitical uncertainties.

Challenges and considerations 

Despite the numerous benefits, near-shoring also presents several challenges and considerations that companies must address. Here are six:

• Getting your cost to serve wrong - Determining the true cost of structuring a supply chain requires more than a simple gross margin analysis. Companies must thoroughly evaluate all associated costs, including logistics, labor, and inventory management.
• Failure to factor tax into the bigger picture - In advanced manufacturing, considering tax implications from the start is crucial. Overlooking tax considerations can result in missed savings and unexpected penalties.
• Factoring in talent too late - Talent availability should be a primary concern in site selection decisions. Companies must assess if the region has the skilled labor necessary to support operations, and this should happen early to mitigate workforce-related risks.
• Lack of supplier diversification - Relying heavily on a single country for sourcing is risky, particularly given geopolitical changes. Companies should diversify their supply chains by establishing robust supply hubs in regions like Mexico to reduce overdependence.
• Excluding suppliers from strategic discussions - Effective supply chain strategies require assessing each component, including supplier inputs. Identifying strategic suppliers and understanding the impacts of changes on them are essential to ensure a seamless supply chain.
• Following the herd without customization - Being a fast follower in strategic shoring offers limited value. Companies need customized strategies tailored to their unique business needs and customer base.