We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • ::COVID-19 COVERAGE::
  • INDUSTRY PRESS ROOM
  • SUBMISSIONS
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
Home » High-tech interest in nearshoring grows, but some skepticism remains
Forward Thinking

High-tech interest in nearshoring grows, but some skepticism remains

December 16, 2013
Supply Chain Quarterly Staff
No Comments

High-tech companies are becoming increasingly interested in nearshoring as a way to bring production closer to where products are sold and consumed, according to the fourth annual global UPS Change in the (Supply) Chain survey conducted by IDC Manufacturing Insights. Nearshoring involves the relocation of factories to countries near a major consuming market. The interest in nearshoring marks a shift away from the dominant manufacturing strategy of the past three decades, which focused on putting plants in the country with the lowest costs.

According to this year's survey, interest in nearshoring among supply chain chiefs has tripled in comparison to the 2010 survey. Twenty-seven percent of the survey takers said they were embracing nearshoring as a strategy.

Of those interested in nearshoring, 77 percent said the main factor was a desire to improve service levels by bringing production closer to demand. Another 55 percent said nearshoring improved control over quality and intellectual property.

Despite the uptick in interest in nearshored production, 73 percent of respondents said they had no plans to adopt this supply chain strategy. When asked why, 50 percent in that group said the cost benefit of manufacturing in low-cost countries like China remained compelling. Another 46 percent said the location of key suppliers remained a barrier to nearshoring.

To gather the results, IDC surveyed 337 senior supply chain executives at high-tech manufacturers in North America, Europe, Asia Pacific, and Latin America. The survey results represented a cross-section of companies with revenues over $5 million; 47 percent of the responses came from companies with annual revenues in excess of $1 billion. Another 22 percent came from companies with annual revenues between $250 million and $1 billion, and 31 percent hailed from enterprises with revenue between $5 million and $250 million. Interestingly, the study found that the companies most interested in nearshoring were either very large (companies with sales over $1 billion) or very small (companies with sales between $5 million and $250 million).

The survey also looked at three other key issues in supply chain management: the role of customer service, product lifecycle management, and serving emerging markets.

Customer service: The study found that many companies are shifting the primary focus of their supply chains from the product to customer service. The researchers call these types of supply chains "customer-centric." Thirty-nine percent of surveyed executives said their supply chains are built to be primarily customer-centric. Companies refocusing their supply chains on customer service cited a number of reasons for doing so: reducing lead times, improving planning, improving fulfillment, and improving post-sale and return capabilities.

Product lifecycle management: While nearly 60 percent of high-tech supply chain executives ranked their companies as "market leaders" in product innovation, they had less confidence in their capabilities to manage the entire product lifecycle. Only 34 percent of respondents described themselves as market leaders in reverse logistics, and 40 percent said they were leaders in product retirement.

Emerging markets: Emerging markets remain a supply chain priority for high-tech executives. Nearly two-thirds of those responding to the survey said they had already established a presence in emerging markets or expect to do so within a year. North American companies are the most aggressive in this area, with 80 percent saying that their companies are in emerging markets or plan to be in a year.

To nearshore or not to nearshore
Although a recent UPS Change in the (Supply) Chain survey found a noticeable uptick in interest in nearshoring, three out of four responders are still doubters. Here are the top five reasons why some companies are thinking of relocating of their production facilities, and five reasons why other companies are staying put.

Five top reasons for nearshoring

1. Improving service levels by bringing production closer to demand 77 percent
2. Improving control over quality and intellectual property 55 percent
3. Diversification of manufacturing due to natural and socio-economic risks 43 percent
4. Cost benefit of China or low-cost manufacturing countries no longer compelling 37 percent
5. Skills or technology limitations 35 percent

Five top reasons for not nearshoring

1. The cost benefit of outsourcing to China or low-cost manufacturing countries remains compelling 50 percent
2. Location of key suppliers 46 percent
3. Fixed infrastructure is not moveable 40 percent
4. China or low-cost manufacturing countries are our default manufacturing location 33 percent
5. China or low-cost manufacturing countries' growing consumer market 32 percent

Source: UPS Change in the (Supply) Chain Survey, 4th Edition (2013)

  • Related Articles

    Interest in nearshoring remains strong, but trend may be slowing

    Some tech hype will miss the mark in 2020, ABI says

    GXO, Abercrombie & Fitch to open high-tech DC in Arizona

Recent Articles by Supply Chain Quarterly Staff

Hyundai teams with pharmacy startup to build autonomous prescription delivery

EDGE Conference is heading to Nashville

Newest podcast series focuses on supply chain technologies

You must login or register in order to post a comment.

Report Abusive Comment

Most Popular Articles

  • Is it time to blow up S&OP?

  • How to build a supplier diversity program that will drive long-term impact

  • Logistics pros warn of business impact from Russia-Ukraine war

  • Supply chain’s miracle workers

  • Container prices continue to drop

Featured Video

Cccb7d13 710a 4473 8132 da8b6cc286f1

The Sportsman's Guide Case study: Increasing Accuracy & Productivity

Viewer Contributed
Thanks to the Lucas Warehouse Optimization Suite, The Sportsman's Guide has increased productivity, reduced training time, and experienced a boost in accuracy for both full-time staff and seasonal employees. Want to learn how Lucas can help your DC be more efficient, accurate, and safe while reducing labor costs?...

FEATURED WHITE PAPERS

  • Omnitracs One – Last Mile Solutions

  • The enterprise shipper's guide to building a smarter truckload RFP

  • Fixed vs. Flexible Automation: Which Option is Better for 3PLs?

  • Enhancing Relationships in Logistics through Data & Collaboration

View More

Subscribe to Supply Chain Quarterly

Get Your Subscription
  • SUBSCRIBE
  • E-NEWSLETTERS
  • ADVERTISING
  • CUSTOMER CARE
  • CONTACT
  • ABOUT
  • STAFF
  • PRIVACY POLICY

Copyright ©2022. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing