UPS Study: More High-Tech Manufacturers Turning To Nearshoring
A new study provides more evidence of growing high-tech company interest in nearshoring of manufacturing operations, although a large majority of businesses surveyed across the globe don’t plan to shift to factories closer to home.
Interest in nearshoring among high-tech companies has roughly tripled since 2010, according to the 4th annual global UPS Change in the (Supply Chain) survey, conducted by IDC Manufacturing Insights. Many supply chain executives want to move production closer to customers and to achieve more control over quality and intellectual property, UPS said.
Twenty-seven percent of supply chain executives around the world are planning to adopt nearshoring as a means of improving customer service, according to the survey of supply chain and logistics decision makers at 337 high-tech manufacturers. That compares to 10 percent a few years ago.
Executives cited other reasons as well for shifting to near-shore plants, including diversification of manufacturing sites to reduce natural and socio-economic risks; the cost benefit of China or low-manufacturing-expense countries no longer being compelling; and skills or technology limitations in existing manufacturing locations.
The surveyed showed that 44 percent of executives in Latin America planned to adopt nearshoring, compared with 26 percent in Europe, 24 percent in Asia and 19 percent in North America. The smallest and largest companies are leading the nearshoring move, probably because the small companies are nimble and the largest have the resources, the survey stated.
This isn’t to say that most manufacturers are changing their supply-chain approaches. Many executives, including 82 percent in the United States, are sticking with their existing supply chain strategies rather than shifting to nearshore locations, the survey showed.
The report, released Nov. 19, also showed that 41 percent of executives expect export growth to accelerate in the next two years, while 39 percent predict exports to grow at the same rate.
In addition, high-tech companies are shifting their supply chain focus to customer-centeredness from a product-quality orientation, with many planning reductions in lead times and improvements in planning, fulfillment and post-sale returns capability, the survey showed.
“Shifting market dynamics such as end-consumer demand, emerging market growth and increased global competition are having significant implications for high-tech supply chains at every stage of the product lifecycle,” Ken Rankin, high-tech marketing director at UPS, said.
“It’s critical for high-tech companies to align their supply chain strategies to broader business goals and build competencies around each stage of the product lifecycle to achieve greater customer centricity while also improving operational efficiencies and driving growth in new markets,” he said.
Among other survey findings, nearly half of the executives indicated that a company’s ability to execute a high-profile, global product launch is becoming more important.
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