Supply Chains Exposed

The shape of supply seems to be changing in every conceivable way. It’s becoming less chain-like and more network-based, as businesses seek the sophistication needed to thrive in an uncertain world. Supply chains themselves are also shrinking, with organisations beginning to move away from the cheap-labour strategies that have fuelled the manufacturing boom and rapid industrialisation in South East Asia for the past 40 years.

But those days seem to be drawing to a close, because supply chains that span the globe are too vulnerable to disruption in today’s volatile, uncertain world. Increasingly, firms are looking to reshore and nearshore both manufacturing and sourcing to reduce their exposure to risk.

A recent Reuters Events whitepaper shows just how strong the reshoring trend has become. Produced in conjunction with A.P. Moller-Maersk, the giant Danish shipping company, the paper – called ‘A generational shift in sourcing strategy’ – is a global deep-dive into near-sourcing, nearshoring and reshoring in the post-pandemic world. It looks at how companies across the world are looking to rebalance their supply chains, reduce risk, increase visibility and improve sustainability.

The paper shows that the countries with the two largest manufacturing workforces, Germany and Poland, are the most attractive sourcing and reshoring locations. But the authors also add that there’s a “broad-based commitment” among businesses to source more from within both East and West Europe to reduce the distance to end-market and meet the increasing need to draw on pools of skilled labour.

Protecting customer-value

In the foreword to the paper, Mikkel Søndergaard Rasmussen, Regional Head of Logistics and Services, Europe A.P. MollerMaersk recounts the chaos and disruption of the past two years, including the pandemic and war in Ukraine. “Global markets have been fragmented and this has left supply chains exposed,” he says, adding: “Little wonder, then, that companies hold supply chain resilience in increasingly high regard, because the ability to deliver products reliably and on time is increasingly important to their customer-value propositions.”

Rasmussen observes that this has seen sourcing strategies “come under the microscope for many” as the bid for resilience gathers pace. He says: “Resilience doesn’t come without its costs but when set up correctly, logistics can be seen as a business enabler and potential source of competitive advantage, instead of being a financial hindrance.” The paper concludes: “Future supply chain logistics will undoubtedly look different from today’s offerings, as supply chains start to move closer to the end consumer, with fewer intermediate parts traded over long distances.”