We’re intimately familiar with off-shoring as manufacturers have been moving production to cheaper cost bases in the east for decades. We then experienced near-shoring when fuel and labour costs meant that production was often more sensible closer to home. However, next-shoring promises to be an exciting new trend.
Next-shoring focuses on marrying supply and demand by exploiting proximity to emerging markets, innovation and consumers. With minimum wage laws recently introduced in China, businesses realise that they need to take a more flexible approach in their supply chain management to accommodate a more global customer base precipitated by rises in purchasing power.
As well as shifts in demand, we’re also seeing shifts in skillsets. China is no longer just a factory floor – it’s an innovation powerhouse. Thanks to communication technology, and efficient transport systems provided by companies like Fedex, this devolved business model is increasingly viable. Companies can have multiple, collaborative innovation centres whilst maintaining production centres in close proximity to specific markets. This international outlook also provides a more flexible solution to varying cultural and market trends. Ultimately this will increase accuracy and reduce lead times.
The days of simply assessing cheap versus expensive costs have long gone. China might offer economies of scale and a large labour force, such as being a leading producer and marketplace for the auto industry but countries such as Mexico and the UK also offer the advantage of skilled labour in this sector. The Nissan plants in Aguascalientes in Mexico and Sunderland in the UK are good examples of why manufacturing won't always conform to the same global criteria when choosing locations.
For most companies, next-shoring won't be just one thing to consider, but many. Modern manufacturers want variety and flexibility in their supply chains, which in turn require multiple and cost-efficient connections to the diverse, demanding and truly global customers now being served.