Nearshoring on the rise

by MM&D Staff

When assessing where to locate production facilities, international companies are considering the effects of new technologies in making their decision making. This is the primary finding of “Nearshoring and Onshoring as a Competitive Advantage”, a study recently released by supply chain consultancy Miebach.

The study revealed that 51 percent of companies already use nearshoring as a location strategy for their production processes. This high share is expected to increase further as 26 percent of study participants believe to a high or even a very high degree that nearshoring is a future trend. Europe, in particular, will see a significant increase in nearshoring, while an increase in onshoring can be expected for North America.

Automation and digitization

Production methods will affect location decisions. More than half of those questioned believe that automated production, in particular, is a trend that will influence production in future.

However, the use of new IT technologies, one-piece flows, automated assembly, robots and the digital factory 4.0 are also important trends for future production processes. These changes will significantly reduce the percentage of personnel costs required for production, so that nearshoring will become more attractive in future.

Further fueling the nearshoring trend is the shift in buying power in some previous offshore locations. Parts of Asia, for example, that began as attractive offshore havens have morphed into nearshore locations for the growing markets they exist in. Production sites do not need to be relocated or offshoring production capacities reduced, instead market developments are changing the proximity of production facilities.

A competitive advantage

The report illustrates that companies identify their strengths to include the quality standards, availability of technical systems, short-term flexibility and the ability to adapt to new market requirements. Near- and onshoring help to further develop these advantages.

The labour market and availability of workers, as well as the complexity of the supply chain are seen as “threats”.
The results of the study illustrate that nearshoring is a competitive success factor and that a complex supply chain must be established to meet market requirements.

In all, 127 companies from various sectors and sales categories took part in the study. Around two thirds of participants were from Europe and the remaining third were from North and South America.