As you likely already know, an increasing amount of companies are looking to bring their suppliers closer to home, and shorten their supply chains in an effort to decrease enterprise wide costs and not exceed budgets. In a recent article by Air Cargo World, they claim “shorter supply chains resulting from near-shoring could have an impact on future airfreight volumes, if new research from logistics provider BDP International proves to be an accurate indicator.”
The international supply chain survey created by BDP, its Centrx consulting unit and Temple University’s Fox School of Business suggests that companies with international supply chains are not the only ones near-shoring. The survey suggests that historic global trade flows from manufacturers on the East Coast to consumers on West of the Mississippi are seeing never before seen changes. These trade flows are experiencing a gradual shift due to near shoring where companies are shortening their trade routes to intra-regional, seeking to reduce the distance between the production and consumption of their goods.
BDP International surveyed over 200 companies located across the globe, with annual revenues between $100 million to over $10 billion. 87 percent of the supply chain executives surveyed stated that they are considering moving production closer to end markets, or have already started this process.
Arnie Bornstein, BDP’s executive director of marketing and corporate communications says there are three principal reasons for this trend. “First, emerging nations are starting to trade with one another, shortening world trade flows. Second Asia, Latin America and the Middle East have growing middle classes driving demand for consumer goods. And third, it makes both operational and economic sense to have shorter supply chains, where good are produced and consumed within the same part of the world.”
Bornstein also commented on North American companies’ affinity for manufacturing in Mexico and Latin America. “That’s why North American companies are looking to Mexico and Latin America as a manufacturing base; EU companies are looking to Eastern Europe and Turkey; and Asian companies want to sell more of their production to Asian consumers as a hedge against sluggish export markets in the West.”
About 81 percent of larger companies surveyed, with revenues of over $10 billion, reported this intra-regional shift. Surprisingly, an overwhelming 92% of those companies surveyed with revenues between $100-500 million reported this shift.
“The survey suggests small to mid-size enterprises are more aggressively pursuing intra-regional supply chains because they have far less invested in sourcing infrastructure and are newer entrants to the world of international trade,” said Bornstein.
“Companies are seeking to reduce costs and transit times in meeting demand from countries where consumers are becoming more affluent,” he added. “The survey shows that globalization may be moving toward a tipping point, belying the conventional wisdom that it would allow companies to economically produce anything, anywhere for sale everywhere.
“Globalization and traditional East-West trade routes aren’t going away anytime soon, but trade patterns are being transformed to mirror the realities of low to no growth in the West and the rise of the rest of the world.”
What do you think about intra-regional shifts in trade routes? Let us know in the comment section below.