Soaring labor rates in China, strong “buy American” sentiment in this country, and the need for flexibility and quick response to changes in demand patterns are causing increasing numbers of manufacturers to rethink sourcing decisions, according to surveys cited in Inbound Logistics.
Increased awareness of Total Landed Costs, or TLC, giving full weight to factors including logistics, has led companies from Nissan to NCR, and Embraer to Electrolux, to open new facilities stateside. Recent reshoring and nearshoring moves by large firms suggest that, while there may not be a groundswell toward reshoring production to the United States, companies are rebalancing their supply to get closer to customer demand.
Over the next three years, nearshoring is likely to continue. The direction manufacturers take will depend both on their customers' requirements and on the product itself. More customized products, and those with less stable or difficult-to-predict demand patterns, will require carefully matching supply to demand location.
A myriad of factors must be considered to reach the best sourcing decision for a given product and producer. Cost variables including taxes, duties, country regulations, political disruptions, customer service, quality, inventory and other supply chain costs, human capital, and currency rates all enter into the tipping point equation.
While no one has all the answers, experienced supply chain professionals can help by asking the right questions.