Near-shoring boosted by supply chain disruption

The post-COVID environment, geopolitical uncertainty, protectionism, climate-change events and now the Red Sea crisis have all put pressure on global supply chains and as we discovered at TPM, companies are increasingly considering the evolution of their global supply chains to minimise risk and security of supply.

In response to geopolitical risks highlighted by the Israeli-Hamas war, Russia’s war against Ukraine and by China’s threats against Taiwan, supplier diversification may add resilience, while near-shoring brings production closer to the point of supply, to shorten lead and delivery times, which potentially means lower levels of inventory and further reduces carbon emissions.

The trend towards diversification is clearly good news for emerging manufacturing power-houses like India, Vietnam, Turkey, Egypt and Mexico.

Over 5% of the UK’s importers are already trading with India and the number is likely to increase as more companies look to diversify their supply chains. 

There is no doubt that production moving away from China has benefited many countries around Asia, including India, Thailand and Cambodia, but there is still a huge proportion of the global supply chain reliant on China.

And research from the IMF suggests that there is no structural retreat from globalisation and that since the global impacts experienced during the COVID-19 pandemic have subsided international trade as a share of GDP has rebounded strongly, despite the fears of geo-economic fragmentation.

What this may mean is that companies could opt for supply chain diversification and resilience over efficiency, especially when security concerns gain greater weight in commercial considerations.

Many European fashion retailers have already sought to avoid long lead times and increased carrier costs by moving parts of their supply chains out of China and into EMEA countries including Turkey, Egypt and Morocco.

Zara’s parent company, Inditex, announced that a switch to near-shoring had helped them reduce waste by keeping a leaner inventory, boost low-order volumes and get clothes into stores in as little as two weeks, boosting profits by 80%.

As the threat of supply chain disruption persists and as competition grows, diversification and near-shoring could become a standard component in retail supply chains, building resilience and adaptability into operations.

For over 40 years Metro has helped customers open up new export markets and diversify sourcing across Asia and EMEA.

Metro’s integrated transport networks are designed to support JIT manufacturing requirements across Asia and within the EU, sub-Saharan Africa and Turkey and are ideally positioned to support the new sourcing requirements that de-risk supply chain operations.

We see diversification and near-shoring as a simple extension of a client’s sourcing strategy, so that if there is disruption in one area, inherent flexibility means the supply chain will continue to flow. 

Our global partner network, strategic carrier alliances and MVT supply chain platforms are all geared towards supporting the widest spectrum of supply chains. 

If you would like to learn how we can boost your ability to source from alternative global manufacturing regions, EMAIL our Chief Commercial Officer, Andrew Smith, to arrange a consultation and scoping discussion.