Near-shoring on shippers' radar
But despite the potential benefits of moving manufacturing and sourcing closer to home, our survey reveals that only one-third of shippers are currently considering the move.
By Jeff Berman, Group News Editor -- Logistics Management, 9/1/2008
With transportation and logistics costs on the rise, shippers as well as transportation and logistics services providers have most certainly sharpened their focus on expenses. That said, the concept of near-shoring—bringing manufacturing and sourcing operations closer to customers—in an effort to drive down costs continues to gain momentum.
The fact that fuel costs have nearly doubled in the last year alone has many industry experts claiming that the concept of near-shoring will be more than just talk in the near future. “Near-shoring is real, but it's a long, slow process to bring processes and products back and find the required skills and knowledge to execute when things have been off-shore for some time,” said Art Van Bodegraven, a partner at The Progress Group, a logistics and supply chain consultancy based in Alpharetta, Ga.
But even with rising transportation costs being identified as the main catalyst for the recent banter revolving around near-shoring, Van Bodegraven maintains that there's more to it. One major factor playing into this development, he said, is rising wages in low-cost producing countries combined with the decline of the American dollar compared to international currencies.
“A lot of people are talking about this because it's becoming economically attractive to bring [sourcing and manufacturing] back; but there are some real obstacles to immediate action,” said Van Bodegraven. “One major obstacle is the availability of skilled and experienced workers. The longer things have been off-shored, let alone outsourced, the longer companies no longer have skills they need within their own four walls.”
The obstacles Van Bodegraven raises are reflected in a recent Logistics Management survey of 148 shippers that found that only 35 percent are currently considering implementing near-shore sourcing and manufacturing options to combat rising transportation costs. Despite this somewhat low percentage, some shippers told LM that they are giving near-shoring more thought and consideration than they have in the past.
“Transportation costs are definitely a big part,” said Mark Stephens, director of logistics at Faultless Starch, a division of consumer cleaning product manufacturer Bon Ami. “The length of the supply chain is really a concern in addition to the costs that continue to rise from shipping from overseas, particularly in the Asia-Pacific area. We source from China and Taiwan, and we really need to consider trying to source closer to home and get the timing of our products to match up better for future shipments.”
Stephens added that Faultless is now actively seeking companies that produce closer to home even if the cost of goods might be slightly higher than the costs of goods and transportation expenses. “If total delivery costs are less it becomes an attractive alternative,” said Stephens. “With products made closer to home having a shorter lead time makes it easier to react to shifts in customer demand and order timelines.”
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