The Nearshoring question

One of the main topics of discussion I’ve enjoyed with Noatum Logistics clients this year (besides Brexit and the ongoing ocean crisis!) has been NEARSHORING; either as a notion, a consideration or an actual firm commitment. In most situations, this would mean moving some of the manufacturing base from China to anywhere closer to home, not least SW Asia, North Africa, the Balkans, Eastern and Central Europe, Turkey or Portugal. 

Certainly, this time last year supply chain bottlenecks caused by the extended China shutdown followed by the Global pandemic brought into question established one-dimensional Far East-UK supply chains where, as the adage goes, there were “too many eggs in one basket”. All of a sudden, as soon as the main tap was turned off, many importers faced stock shortages with car parts, apparel, toys and games, bicycles and, of course, medical/healthcare items all amongst those products affected. The need for those importers who were lacking contingencies to seek additional suppliers that were within grasp and on a different trade route became inevitable.

More recently, the inflated ocean freight rates on the Far East westbound trade, which could well be a permanent feature rather than a flash in the pan, have given business leaders even more reason to consider changing sourcing strategies. 

So improved supply-chain flexibility and reduced shipping costs are two apparently obvious benefits of nearshoring, but there are compelling additional reasons.

For instance, in a changing retail sphere where B2C e-commerce is growing rapidly, the ability to get product to market quickly and at short notice will be an advantage. A road or short-sea transit time of only a few days, rather than 4 to 5 weeks or more from China will be a far more palatable consideration for many, especially for those younger e-commerce companies who are upscaling quickly and want to grab every growth opportunity they can. Stock availability in the face of demand surges will be key.

Having easier access to suppliers, in terms of physical distances and time-zones, is an obvious practical bonus, not to mention the possible likelihood of more manageable cultural and language obstacles.

Many would argue that nearshoring would allow for improved protection of intellectual property and, as importers start to give serious thought to sustainability, nearshoring could admittedly support carbon footprint initiatives.

Now, of course there will be arguments against, and cost and development hurdles to overcome, but I have no doubt that the trend towards nearshoring (including domestic sourcing) will grow apace especially as local skill levels are boosted, labour markets are developed and mobilized, and where trade and industry incentives are available.

As businesses strive to remain competitive and fight for market-share in difficult economic conditions, sourcing models will remain a hot topic.