5 Strategic shoring challenges – solved
Discover how relocating supply chain operations closer to end customers can enhance resilience, agility, and stability.
Relocating supply chain operations closer to customers reduces lead times, which can improve resilience, agility, and stability. Strategic shoring moves shipments closer to end customers in the Americas.
Gaining better control over supply chain operations is why you’re considering strategic shoring. Your questions now encompass where to relocate operations, as well as a host of considerations around selecting suppliers, setting up operations, local laws/regulations, existing suppliers, and the tax/tariff climate.
What follows are five strategic shoring challenges, along with proximity planning solutions for solving them.
Challenge 1:
Supplier selection
Before
There are suitable locations for supply chain operations throughout the Americas. Evaluating potential suppliers and classifying them based on a list of attributes requires detailed analysis.
Solution
Supplier Selection Management
After
KPMG LLP (KPMG) offers supplier selection guidance with an approach focused on value. Cost to serve utilizes deep analytics to understand the complexity of a supply chain and the cost of goods shipped. Center of gravity analysis determines the optimal location for operations. It involves analyzing the geographic locations of suppliers, customers, and other factors to identify the optimal location that minimizes transportation costs and maximizes efficiency. By calculating the center of gravity, businesses can make informed decisions about where to locate their facilities to optimize their supply chain operations.
Challenge 2:
Setting up operations
Before
When the supply chain relocates operations, it’s a move into a new ecosystem featuring a different local workforce, new vendors, other companies, and unfamiliar local governments and regulations. The goal is to smoothly migrate operations to a new location while cost-effectively mitigating risks to the supply chain.
Solution
The Connected Enterprise model
After
KPMG advocates the connected enterprise model that integrates technology and information systems, ensuring broad visibility and collaboration, automating supply chain functions and maintaining quality and compliance. In a strategic shoring event where new operations are established, KPMG assists with restructuring the supply chain with an eye on lowering cost structures and improving delivery. There are also opportunities to collaborate across industries or even with competitors to reduce costs. The same opportunities to collaborate exist with local government officials.
Challenge 3:
Local laws and regulations
Before
Moving the supply chain to a new country creates the potential of running into different country-specific laws, regulations, and ESG (environmental, social, and governance) rules.
Solution
Data transparency and traceability
After
Transparency requires collaboration with suppliers while data processing enables traceability. Having both allows for streamlining of disclosures and meeting reporting requirements throughout the supply chain. KPMG provides guidance on designing inputs for suppliers that output data in line with compliance requirements. With any strategic shoring move, new laws can enter the picture that demand reengineering processes to deliver data to meet the requirements of the new laws.
Challenge 4:
Forging greater ties with existing suppliers
Before
Retooling the supply chain to be closer to customers could upset Tier 1 and 2 suppliers, especially if your supply chain diverts business away from existing suppliers to more localized operations. Addressing supplier concerns in this period of change is a must.
Solution
Supplier relationship management
After
The push into a new country or area would benefit from a holistic view of all suppliers. Our goal at KPMG is improving performance and reducing risks. That means strengthening relationships with strategic suppliers to form partnerships to yield faster time to market, improving risk management, and driving financial gains for both the organization and its suppliers. For the organization, it’s wise to diversify risk by transitioning away from single source or high-risk suppliers. For suppliers located near or far, seeing the value from transparency and operational excellence puts suppliers and the organization on the same page.
Challenge 5:
Taxes and Tariffs
Before
Moving operations could have tax and tariff consequences. Tax and trade implications are often overlooked during a strategic shoring move. Supply chains may also be caught in the crosshairs of new tariffs and tariff retaliation impacting key industries.
Solution
Value Chain Management
After
Value chain management (VCM) integrates tax and business planning to infuse a company’s operating model with business imperatives, tax impacts, and operational efficiencies. VCM considers tax implications early in the shoring process to avoid costly errors and maximize tax advantages. VCM deploys tax (direct and indirect), transfer pricing, as well as custom duties strategies to ensure that companies achieve business objectives while maximizing financial results. In scenarios with high tariffs, KPMG analyzes how to navigate with less impact on profit margins and guidance on transfer pricing adjustments.
How KPMG Supply Chain Services can help
Strategic shoring is a major decision that requires careful planning, detailed analysis, and leveraging technology like AI, machine learning, and digital twins. Rely on KPMG Supply Chain Services for your strategic shoring move.
Our proximity planning solutions are tailored to your needs, from supplier selection to tax guidance on prospective locations. Together, we can make the difference wherever you relocate your supply chain operations.
How KPMG Tax Services can help
At KPMG, we believe managing tax effectively means more than just complying with regulations. We can help you meet new challenges by offering experienced professionals, informed insights, and advanced technology to help make the tax function an integral part of your overall strategy.
We bring deep tax experience, industry focus, and advanced technology to deliver results today and opportunities tomorrow.
When clients are faced with evolving customer behaviors, new and unexpected technologies, and shifting regulatory and tax policies, our multidisciplinary service can help create and preserve value through integrated tax and operational efficiencies.
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