When it’s Time to Come Home – Reshoring and Supply Chain Planning

The implications of reshoring and supply chain planning have been high on many people’s lists for a while. So, when the container ship Ever Given became stuck in the Suez Canal in March of 2021, it was more than just an exciting news story.

With ships backed up for weeks, the plight of the Ever Given became a siren call to supply chain planning professionals who have witnessed a string of disruptions over the last few years. Aside from the Ever Given, global supply chains had already withstood interruptions caused by COVID-19 in 2020 and trade and tariff restrictions starting in 2016.

The result of such events has had a significant impact on the planning strategy for supply chains. Before 2016, the “global economy” had matured to the point that it left many with a false sense of security. Many were looking toward implementing lean supply chain planning as supply lines were becoming more and more stable. With this latest series of disruptions, companies are looking to act strategically and enact agile supply chains instead.

From Ripple to Wave

While disruptions in the second half of the last decade highlighted and accelerated considerations, the question of whether to reshore or nearshore had been rippling through supply chain strategies for some time. As the quality of life brought by new prosperity in distant countries improved, labor costs were already rising. Because of this and other reasons, final assembly for many classes of goods had been reshoring or nearshoring for several years already. Instead, as companies struggled with the scale of new disturbances, a sense of urgency and a focus on strategy emerged. Many struggled with whether to reshore, nearshore, or maintain existing supply chains. And others questioned which pieces of the supply chain to bring home or closer to home if a hybrid model made sense. As 2020 closed, those ripples had become waves.

Planning Ahead

For supply chain professionals, deciding what to reshore, if anything, depends on the company’s resources and their ability to innovate into a more resilient and agile supply chain strategy. Toward that end, whether they should look for companies that would help them shift their planning models to achieve this.

1. Rapid Digitization: The ability to be agile in the face of disruption means that companies already on a digitization journey will accelerate their current process. This means faster adoption of best-in-class demand and supply chain planning. This would allow them to utilize near real-time data in building accurate forecasts and the ability to enable “what-if” strategies that give leaders time to react.
2. Operational Costs: Due to the rising labor costs abroad, many companies have begun to look at total operational costs to inform their supply chain decision-making. It’s no longer simply the lowest unit cost that drives decisions for those looking to nearshore in Mexico and South America. Cost, overhead, and logistics are considered alongside the potential for disruption to offer potentially lower prices for nearshored goods.
3. Trade-offs: Many businesses have spent millions in building supply chain infrastructure in places such as China. It isn’t practical or affordable to assume these companies will lock the doors and return home. Instead, linking these suppliers with demand and supply software will help them manage supply chains more accurately alongside other elements such as final assembly.

When to Come Home

The complex decisions required to implement nearshoring or reshoring will not result in an either/or response. Of course, critical classes of goods such as Personal Protective Equipment (PPE) and pharmaceuticals may see mass moves to return to US shores entirely as a matter of national interest. But the balance of manufacturing will adopt strategies that look at the above considerations. This will enable these companies to plot a course that will see some hybrid nearshore/reshore models based on what data tells them is optimal.

To reach that optimal balance, companies can look to agile supply chain planning software from Plex DemandCaster. As recent events have proven many times over, end-to-end visibility is more critical than ever. Demand and Supply Planning software from Plex DemandCaster offers that visibility to deliver highly accurate plans and forecasts.

By identifying demand trends and optimizing inventory strategy based on data, complex but accurate forecasts can enable companies to navigate disruptions. With accurate data, advanced algorithms, and superior analytical skills, companies can use these forecasts and trends to decide whether reshoring or nearshoring makes sense for them as a whole or as part of an intricate strategy to stay ahead of the competition.

Discover more about Plex DemandCaster’s supply chain software and what we can do for your business here.