In the 60s and 70s companies started shifting their factories to far flung developing countries to cut costs. Stuff was made way over there, and shipped in every direction. But with trade wars, crazy tariffs, natural disasters and shipping bottlenecks giving this model what for, businesses are investigating new ways to build resilience in the face of global instability.
Enter: nearshoring. Nearshoring is like the Goldilocks of supply chain configuration; not too long, not too short, juuuust right. In contrast to offshoring (sending production away away), and onshoring (bringing it completely home), nearshoring finds the middle ground for cost-effective, high-quality and shock-hardy manufacturing.
This might look like setting up factories in countries or cities in the same time zone, with a skilled labour force, favourable trade agreements, quality infrastructure and proximity to end users.
The benefits of nearshoring don’t end there. It is also a way for businesses to align with their social and environmental goals by shortening supply chains and supporting communities in their region.
For example, many US manufacturers are nearshoring to Mexico to sidestep tensions with China and beef up local economies and infrastructure.
In Australia, businesses might consider smaller, industrial cities in the country like Newcastle (check out this piece on Newcastle as the ‘engine room’ for Australian manufacturing) or look to neighbours like Vietnam, Indonesia and Thailand as competitive alternatives to China.
“Australia's strategic location at the crossroads of the Indo-Pacific region puts it in a unique position to strengthen trade alliances and mitigate the impact of US tariff policies.” ~ Professor Maggie Dong
So how about that? We’re beginning to see significant changes to business as usual; once a race to the bottom, now a more thoughtful return to the quality, values and resilience that home (or close-enough-to) represents.
👉🏾What are your thoughts? Are we in for a radical transition from globalisation to relocalisation, or is it just another phase in the ongoing evolution of business?