We Need to Hasten Onshoring and Nearshoring — the Drivers Will Pound Those Who Don’t Into the Ground! Part 2

In Part 1 we noted how it was great to see a recent article on Supply Chain Dive on 6 reasons why global supply chains are shifting because the unending list of disruptions, cost pressures, and geopolitical tensions are only going to get worse.

As per the article, six major factors were influencing the decision — landed costs, tariffs and subsidies, geopolitical risk, existing supply networks, agility, and ESG goals — but these are, frankly, only half of the reasons that you should be shifting back. (And again, read the article for a detailed explanation of each factor, it is extremely well written and Part 1 only described the factors at a high level.) Today, with that article as a preamble, we are going to dive deeper into why the global outsourcing craze (thatthe doctor has been rallying against and complaining about for over 15 years, since he saw the business case begin to crumble in the late 2000s) was, and is, fundamentally wrong.

Collaboration

Yes, this would is overused, misused, and abused, but if you truly want to work with your supplier, it’s much easier to work with a nearby supplier than a far-flung supplier.

First of all, they are on a similar timezone, so at least half of a normal workday should overlap. No more 7 pm / 7am meetings in the best case (or 7 am / 3 pm / 11 pm meetings in the worst cases when you also have to dial in a partner organization in a multi-tier assembly operation).

Secondly, if you need to go on site, even if air traffic is grounded (terrorist risk, volcanic eruption, dangerous solar flares, etc.), you can get in a vehicle and drive to an on-shore site and many near-shore sites. And even in the North America / South America situation, while we still don’t have a complete Pan-American highway (as we still have the Darien Gap), we do have complete connectivity in North America and in South America, and if trade were to increase, it would make a ferry service from Panama to Colombia financially viable, and trucks could be ferried from Port Panama City to Santa Marta (and cars as well, although there is already a weekly service from Col√≥n to Cartagena that could be expanded to operate more frequently). This means that you could get goods from any country county in South America into the US mostly by land in 2-3 weeks, or get to a supplier site by land in the same time. However, suitable partner selection could get you, or your goods, anywhere mostly by land in less than a week! (So, during normal times, imagine how fast and easy air travel will be — without racking up huge, unnecessary, overseas travel miles.)

Cultural Understanding

Most countries have a better understanding of their neighbours (unless it’s a communist/dictatorship with completely closed borders) than they do of countries half a world away, which usually makes collaborative working relationships naturally easier.

Complexity Reduction

The further away the good, the more complex the sourcing. There’s enough complexity to deal with in modern business. Why increase it? Especially since there is NO Big Red Easy Button (and Gen-AI definitely WILL NOT deliver one)!

Back to Basics

And, finally, when you onshore home-source or near-source, you’re getting back to basics. If you look at the history of trade, which was always long, risky, and costly, you traded for what you did not have locally, not what you had.

Convincing you that off-shoring was a good business decision that would save you money was one of the biggest cons, if not the biggest con, that the Big X Consultancies ever pulled off, since, in the long term, the only organizations that will make any money in the end are them*.

These Big X Consultancies charged you a lot of money to help you off-shore (which involved identifying suppliers, managing global supply networks, redesigning processes, updating inventory management, dealing with more defects and quality issues, etc.), which took you years to recoup before you started making money … which you have to give them again so they can help you re-shore, which requires identifying new suppliers (because even if your systems have data from pre-offshoring times, chances are those suppliers are out of business), redesign your supply networks (as you need different carriers, new warehouses, new partners, and new regulations to adhere to), updating inventory management, and temporarily dealing with defects and quality issues as the new suppliers evolve to support you. After all, any staff who knew how to deal with near-shoring (as well as handle trade in a time where there were few recriprocal agreements, tariffs were everywhere, logistics was a nightmare, etc. … i.e. pre 2000s, retired during / post COVID when they decided they had enough as a result of your “temporary” furloughs, forced office returns, and/or headcount rationalization in favour of new “AI” systems that don’t work.

If you had just stuck to the basics, and instead of going half a world away for a quick win, invested in process, product (design for cost/reuse/etc.), manufacturing, inventory, and logistics optimization, chances are you’d be far ahead now while the rest of the world scrambles to catch up.

*Today’s soundtrack: Bullet with Butterly Wings