3 reasons to rethink your shoring strategy

Where in the world companies should source, assemble, formulate, produce, or distribute their goods is a topic of much debate. From offshoring to nearshoring to rightshoring, and even so-called nextshoring, today's leaders are scratching their collective heads.

These are clearly confusing times. Global transportation networks have erased borders and brought companies closer to untapped demand and affordable labor. At the same time, shifting global forces make it difficult - if not impossible -to predict where to place business bets. That level of uncertainty is cutting into the shelf lives of supply chain shoring strategies.

Whether the threat of earthquakes, political unrest, or growing healthcare costs are keeping you awake, one thing is certain: It's probably time to rethink your shoring strategy.

1. Avoid autopilot

It's been said that companies should manage their shoring strategies the way people should manage their 401Ks: Regularly monitor progress and adjust for the best possible return.

"Often companies have invested so much into a successful shoring strategy that they resist change until they're forced to," says Rayford Collins, a director in the UPS Customer Solutions group. "Unfortunately, reactionary change usually exacts a higher cost in dollars and efficiency, and ultimately, customer satisfaction. The world is changing so fast that shoring strategies can no longer be a 'set once and done' type of thing."

Recent history reinforces that point. Within just 72 months, the world saw a Middle East uprising, historically low oil prices, a widened Panama Canal, and the rapid increases in Chinese labor costs. Within just 30 days, the people of the United Kingdom voted to leave the EU and the Turkish government was nearly overthrown.

Still, those are but a fraction of the world events that have opened some doors while quickly slamming others. Vigilant monitoring of global change, and then acting on it, not only helps companies avert or mitigate crises, it is often a catalyst for immense growth and cost savings.

2. Catch up with technology

The initial reason for the rise of the offshoring movement was access to affordable and available labor in emerging markets. Does the appeal of offshoring fade with the advancement of automation and robotics? What about Internet of Things and digitization of the supply chain? Are under-developed countries ready to implement leading-edge technologies in a way that pays quick dividends?

The impact of technology on the look and geography of supply chains cannot be overstated. Consider the impact of 3D printing: Medical device manufacturers are subject to strict regulations that often vary by country. With 3D printing, they could theoretically transmit designs to pre-approved vendors in compliance with local standards. That alone could eliminate time spent in inspections and reduce transportation expense.

Big data is another relative unknown due to the growing interconnectedness of people and machines. "Upcoming real-time insights into the true drivers of profit and loss will certainly lead to some major supply chain decisions," UPS' Collins says.

3. Get ready for your future

Let's face it, a business may last forever but business models do not. Netflix had the guts to go up against Blockbuster but they had the vision to leap past them into delivery and video streaming. Simplistically speaking, in 10 years the Netflix supply chain shifted from warehouses and mail order to servers and proprietary programming. Blockbuster's shifted into bankruptcy.

The lesson is that companies need a vision and supply chain that powers them today but can adapt to the operation they will need to become. Of course, getting sign-off on a multimillion dollar supply chain for a business model you may or may not become is a tall order. In those same shoes, many companies tap into a network of suppliers and third-parties to help them adapt quickly with less investment and risk. Here are a few options to consider:

• Supply chain mapping and network optimization. In a mapping session, the entire value chain is evaluated as a series of interconnected steps rather than looking at operations and transportation as distinct measures. That helps to find previously unrealized solutions that may increase expenses in one area but result in a net reduction in overall costs.
• Contract warehousing and logistics. Contract warehousing and distribution enables companies to scale up quickly and reach new global markets without investing in new facilities or staffing. Services range from securing empty warehouse space up through fully-enabled warehouses and end-of-runway service-parts logistics.
• Manufacturing as a service. It's possible to reduce inventory storage costs and improve response times by leveraging 3D printing as a contract solution. Commercial 3D printing can improve response times for out-of-production parts, reduce product weight and complexity, or improve functionality and reliability.

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