Nearshoring tilts focus of procurement leaders
Bringing production and sourcing back to the United States (onshoring/reshoring) or to a country in close proximity (nearshoring) have always been goals for companies that want to gain better control over their supply chains. And while labor rates and availability have long been drivers of offshoring, the pandemic shined a spotlight on the risks of this common practice. Among the more visible issues was the great toilet paper shortage—followed by subsequent outages and disruptions—all of which forced organizations to rethink their supply chain setups.
For procurement leaders, these disruptions can lead to shutdowns of manufacturing and supply chains. As a result, more companies have been thinking about onshoring, reshoring, and nearshoring. They’re also putting more thought into their longer-term strategies and exploring opportunities in countries that may not have previously considered, including places like Malaysia, Guatemala, India, El Salvador and Argentina. Last year, for example, Whirlpool set up a new washing machine factory in Buenos Aires due to the “challenges associated with producing in faraway countries during the COVID-19 pandemic,” Bloomberg reports.
To be clear, the nearshoring/reshoring trend is changing procurement, if no other reason than it is complicating the job with more suppliers in more locations. Quantifying the current onshoring/nearshoring trend, though, isn’t an exact science, mainly because no “official” agency is capturing the data so different groups size up the trend in different ways. MIT Sloan Management Review says companies are constructing new U.S. manufacturing facilities at a pace “not seen in decades.” The Reshoring Initiative reports that 360,000 jobs were either reshored or a result of foreign direct investment (FDI) in 2022 (up 53% over the previous year) and as the year closed out the group was expecting a total of 300,000 jobs to be reshored in 2023.
