Nearshoring is Finally in Vogue

A recent brief on noted that, according to a quarterly report on supply chain risk from AMR Research, buyers are continuing to increase near-shoring as a risk management strategy. Specifically, AMR Research found that buyers will increase their nearshore sourcing and manufacturing activities by a ration of 5 to 1 (with Mexico, Canada, and Brazil in the lead).

Hear, hear! I’ve always been for nearshore sourcing and home country sourcing not only because it decreases risks, but because it increases competitive advantage manufacturing flexibility while decreasing transportation costs and pollution. Where you see a labor cost savings opportunity, I see an opportunity for innovation. Given that the cost of raw materials and equipment is about the same globally these days, and that transportation costs go through the roof in times of high demand, there’s no reason you shouldn’t be able to make it affordably locally, or at least on the same side of the ocean. And if you say “the labor cost is too high” I say “there’s an opportunity for innovation and automation” … and if you’re the first to find it, think of the huge competitive advantage you’ll have.

When it comes right down to it, the only times it makes sense to source globally are when you have a (relatively) rare raw material that can only be obtained from a few locations, when you need to source out-of-season food that can’t be produced affordably (in both financial and environmental terms) in green-houses, or a good that requires proprietary IP to manufacture that is only held by a small number of suppliers in a certain location. Otherwise, find a way to affordably source it nearshore and you’ll win in the long run.