Feb 05, 2021
According to a new survey, 65 percent of retailers established or expanded their local and domestic manufacturing sources in order to gain better control of their supply chain during the pandemic.
The research from Blue Yonder and Coresight Research from a survey of nearly 300 senior executives in manufacturing, retail and apparel taken in January found 41 percent expanded and 24 percent established local operations.
Asked what they hoped to achieve with a nearshoring strategy, the top answer was better quality control, cited by 34 percent, followed by shorter lead times (23 percent), better inventory management (22 percent) and matching product to local demand (14 percent).
In a statement, JoAnn Martin, VP, industry strategy and market development, Blue Yonder, said sourcing had been trending in this direction for years in recognition of America’s overreliance on offshore manufacturing. The pandemic, however, accelerated the need for more onshoring strategies to address future crises.
“Even before the pandemic, our customers were balancing their desire to deliver speed to market versus cost when establishing a presence in the U.S.,” said Ms. Martin. “This has largely been driven by e-commerce giants like Amazon, the advent of online shopping and the need for readily available choices, product assortment and inventory.”
Ms. Martin said last week at a webinar, a “lack of synchronization” caused supply chain disruption during the pandemic and increased the appeal of securing production “closer to the customer.” The benefits include being closer to just-in-time manufacturing, being able to react more quickly to trends, and reducing order sizes, eliminating inventory and markdown exposure.
Other reasons supporting a nearshoring strategy were found to be demand for American-made products and establishing a more environmentally sustainable business model. An accompanying survey found that, at least during the pandemic, only a small minority of consumers were making purchases based on U.S. production or sustainability.
A USA Today story from December detailed how manufacturers battling the U.S./China trade war in recent years and COVID-19 supply chain disruptions have sought to bring production back from overseas to Mexico or the U.S.
Tony Uphoff, president and CEO of Thomasnet.com, sourcing and supplier platform, told the paper, “The pandemic created a heightened awareness of supply chain risk.”
DISCUSSION QUESTIONS: Will the pandemic provide a long-term or a temporary boost to onshoring or nearshoring? Has the crisis offered any insights into the promised benefits and potential drawbacks of local production?
“Even beyond the pandemic, one can build a strong economic case for goods sourced on or near shore.”
