Nearshoring Adds Security to Your Supply Chain

I was very happy to see this recent article in Industry Week on moving sourcing closer to home because I’m not a big fan of global sourcing just because someone in the C-suite wants to say “me too” on the golf course. You source globally when it makes economic sense from a total cost of operations perspective. Even though labor might be cheaper, by the time you add transportation, import tariffs and fees, export tariffs and fees, value added taxes, extra inventory carrying costs, expediting fees, losses from stock-outs, the real savings are usually a lot less than you think they are. You need to remember yin-yang of the business universe and your international procurement skills, do your homework, and make the right decision.

Chosen properly, appropriate nearshore locations can bring increased cost competitiveness, more lead-time security, and a balanced geographic portfolio that reduces the risks associated with overly aggressive low-cost country sourcing strategies (which can include stock-outs when you don’t realize shipments never shipped until three weeks after the fact, costly currency fluctuations, unstable economic environments, and even nationalization). So be sure to consider near-source locations in your global sourcing strategy, even if they appear to cost a little more. The reduction in risk associated with producing just some of your product closer to home might be worth it in the long run.

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