Let's say you're a company that has been manufacturing its goods in China for the past 20 years. Back when you moved your operations offshore, it made sense; labor was cheap, and customer expectations were relatively simple. Well, things have changed. Not only has the cost of labor in smaller markets risen considerably, but now your customers have greater expectations than ever before. They want more flexibility, more customization, and faster shipping.
While it may not make sense for your company to move manufacturing back on shore, you'd like to find a good middle ground; somewhere where you can keep costs in check, but be closer to your point-of-sale, able to swiftly respond to the changing demands of your customers. If you want to capitalize on global growth opportunities, improve efficiencies, maintain supply chain agility, and remain customer-centric, you are going to have to make hard choices about ever-evolving shoring strategies.
What’s the optimal shoring strategy for businesses to succeed in today’s on-demand, digital landscape? There is no one answer. It’s up to each company to properly identify their needs and find the shoring strategy that will best fit.
Companies should understand the variety of factors that go into making the right shoring decision. Company size, customer demand, and individual product specifications are just some of the things companies have to take into consideration. Maintaining flexibility in shoring is a key to staying viable today’s demanding marketplace.
Near-shoring—the movement of manufacturing and/or assembly closer to the location of demand—is an increasingly-popular option for many companies. What’s driven this shift? Over the past few years, companies have found near-shoring as a way to improve the service level, as well as control over their quality and intellectual property. In fact, about seven in 10 companies stated “improving service levels” as the main driver of their decision to near-shore. And in addition to closing the distance between operations and sales, many companies are also looking to add assembly and manufacturing locations.
More companies in recent years have opted for a right-shoring strategy. What’s “right”, of course, differs for each company. Generally, a right-shoring strategy optimizes the supply chain, taking advantage of cost, skills, and infrastructure, to find the best overall performance and customer satisfaction. If a company saves money by being offshore, but finds that it has a negative impact on their level of customer service, it’s probably not the best option.
Though many businesses have opted for near or right-shoring strategies, that doesn’t mean that offshoring is no longer viable. It can still be the best option for a given company, provided they have the resources to effectively deal with the unique challenges it provides—like international regulatory requirements and having a good grasp on free-trade agreements. But only companies which can maintain high service levels, along with better margins, should consider a full offshore approach.
Every company must choose their shoring strategy carefully, looking for the one that most helps them maintain a flexible, agile, supply chain that is able to serve the demands of their customers. And as we know, the demands of modern customers are changing rapidly. Being open to all strategies allows companies to stay on the ball.
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