How a Cleveland 3PL Warehouse Can Help With Onshoring & Nearshoring
Reducing risk and improving resiliency of supply chains is always a priority for many companies. This was true even before the pandemic, but pressure from numerous high-profile wars, inflation costs, and natural disaster disruptions has companies placing supply chain streamlining at the top of the list. Increasingly, doing so includes strategies like “onshoring,” “nearshoring,” “reshoring,” and “friendshoring” – all things an established Cleveland 3PL warehouse can help with.
Defining Shifting Supply Chain Strategies
To understand why businesses are increasingly shifting their supply chain strategies, we first need to know what each of those different strategies entail.
Onshoring is when a business – or elements of the business operation – are positioned in one’s home country in order to reduce costs.
Although companies choose to offshore certain aspects of their operations for a number of reasons (mainly, cost), offshoring also involves a fair amount of risk. In general, the farther away your manufacturers and other supply chain partners, the higher the chance that there will be some disruption that could lead to delays, lost product, etc.
Motivations for onshoring include incentive to support local economies, better quality control, lower lead times, and enhanced communication/collaboration.
Similar to onshoring is “reshoring.” This involves relocating certain aspects of your supply chain back to your home country from another.
Nearshoring involves relocating certain aspects of one’s business operations to a closer or neighboring country from one that’s farther away. The general idea is that closer geographical proximity is better in the long-run to minimize logistical challenges, such as language barriers and different time zones.
Similar to onshoring, nearshoring can reduce transportation cost, minimize lead times, and improve coordination between supply chain partners.
This term/practice isn’t as widely used as onshoring and nearshoring, but it’s basically the practice of partnering with suppliers, service providers, and others with a strong reputation for reliability and trustworthiness. A dedicated Cleveland 3PL warehouse can help you achieve this, whether your supply chain partners are across the sea or down the street.
The Shift Toward Onshoring, Nearshoring, Reshoring, and Friendshoring
As noted in a recent analysis by Supply Chain Dive, there are a number of catalysts that have been U.S. supply chain trends in the direction of these strategies.
- New cost perspectives. It’s no longer about the cheapest place to produce goods. An optimal supply chain is also one that considers the financial impact of things like inflated commodity prices, soaring international freight rates, climbing wages (particularly in popular offshore hubs like Mexico and China), and global trade wars. There’s also a growing awareness of the brand risk of environmental and human rights impacts of some offshore partnerships.
- Subsidies and tariffs. Companies may face certain financial penalties for offshoring aspects of their supply chain (tariffs). Conversely, they may be rewarded for onshoring them (subsidies). These can factor into the overall costs associated with a supply chain. In recent years, both have featured prominently in trade wars with China, in particular. Lots of companies initially took a “wait-and-see” approach, but now are starting to act. Many who were partnered with corporations in Asia are now opting for nearshoring and friendshoring in places like Canada, Mexico, Ireland, and Switzerland.
- Geopolitical tensions. The tariffs are one example of geopolitical risk. But it also includes things like war (Russia/Ukraine, Israel/Palestine, etc.), extended local lockdowns, etc. Increasingly, businesses – and their insurers – are taking a careful look at the risk level of working with partners in certain regions or countries. The higher likelihood of extended interruptions have resulted in many opting to reshore. There may be some higher costs associated with it, but overall, it’s a safer bet.
- A look at lead times, dexterity. Turnaround time for shipments was always important, but the pandemic shifted it to the highest of priorities. Customers increasingly expect next-day and same-day deliveries. That can be trickier to achieve with lots of far away moving parts – particularly if your goods need to move through busy ports and warehouses. Moving these operations closer to home can provide shorter lead times and greater dexterity.
How Cleveland 3PL Warehouse Helps Clients Strengthen Supply Chains
In general, there is a great deal of supply chain risk mitigation in working with trusted local partners, such as those at our Cleveland 3PL warehouse. You minimize the potential for global disruptions and geopolitical uncertainties causing major delays or damage for your deliveries.
A local 3PL warehouse is going to have your products stored closer to points of distribution, which can substantially lower your transportation costs – and the potential for problems during transit. It’s also going to improve your ability to be responsive to market fluctuations. Overall this leads to better delivery times and higher customer satisfaction.
A warehouse with 3PL services provides additional supply chain management support. Clients not only leverage our connections and technologies, but economies of scale to fit your changing needs.
For information on Consolidation Warehousing, Inventory Management, Fulfillment, Distribution, and Trucking Services in Cleveland, Contact On Time Delivery & Warehouse by calling (440) 826-4630 or send us an email.
The 5 Ws of reshoring supply chains, July 13, 2020, By Shefali Kapadia, Supply Chain Dive
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