Executive Briefings

Where Is All the Near Sourcing That We Have Heard So Much About?

During the past few years much has been reported about the transfer of manufacturing from Asia to countries located closer to western markets, but much of it appears to be hype over substance.

Whilst many importers claim that near sourcing is increasing, the evidence seen by Drewry suggests that it is unlikely to affect deep-sea container cargo volumes significantly in the near future.

The result is surprising as all the anecdotal evidence points to a significant increase in near sourcing. Many shippers to whom Drewry have spoken say that the trend is escalating for reasons that are easy to understand. Retailers need to offer more "made to measure" goods that can be delivered to market a lot faster than from Asia. For example, a car or computer with a limited range of options doesn't sell as well as models that can be sourced from closer to home with a wider range of cheap extras.

Whilst the problem can be overcome by increasing stock levels locally, it doesn't deal with the faster trend cycles now confronting retailers. Stocking up on green shoes when the current fashion is for red boots is a sure way to lose money, as prices then have to be heavily discounted to keep the goods moving. Moreover, keeping more stocks in developed markets, where labour and rents are more expensive, is a costly business.

Ocean carriers have not helped matters by slowing vessels on headhaul routes from Asia to save fuel. This highlights another problem - as the cost of fuel rises to allow for green taxes, so will the expense of "off shoring". Moreover, minimising carbon footprints is becoming increasingly desirable.

The way that the proportion of North Europe's and America's imports from Asia have flat-lined over the past couple of years also suggests that importers have been having second thoughts over the benefits "off shoring". It explains why the usual "multipliers" of GDP growth used by analysts to forecast trade growth have been falling.

Source: Drewry Maritime Research


Keywords: transportation management, container vessel transportation, near-shore sourcing, near-shore manufacturing, near sourcing strategies

Whilst many importers claim that near sourcing is increasing, the evidence seen by Drewry suggests that it is unlikely to affect deep-sea container cargo volumes significantly in the near future.

The result is surprising as all the anecdotal evidence points to a significant increase in near sourcing. Many shippers to whom Drewry have spoken say that the trend is escalating for reasons that are easy to understand. Retailers need to offer more "made to measure" goods that can be delivered to market a lot faster than from Asia. For example, a car or computer with a limited range of options doesn't sell as well as models that can be sourced from closer to home with a wider range of cheap extras.

Whilst the problem can be overcome by increasing stock levels locally, it doesn't deal with the faster trend cycles now confronting retailers. Stocking up on green shoes when the current fashion is for red boots is a sure way to lose money, as prices then have to be heavily discounted to keep the goods moving. Moreover, keeping more stocks in developed markets, where labour and rents are more expensive, is a costly business.

Ocean carriers have not helped matters by slowing vessels on headhaul routes from Asia to save fuel. This highlights another problem - as the cost of fuel rises to allow for green taxes, so will the expense of "off shoring". Moreover, minimising carbon footprints is becoming increasingly desirable.

The way that the proportion of North Europe's and America's imports from Asia have flat-lined over the past couple of years also suggests that importers have been having second thoughts over the benefits "off shoring". It explains why the usual "multipliers" of GDP growth used by analysts to forecast trade growth have been falling.

Source: Drewry Maritime Research


Keywords: transportation management, container vessel transportation, near-shore sourcing, near-shore manufacturing, near sourcing strategies