Globalization and the opening of the market observed around two decades ago, characterized by the reduction of trade barriers in the so-called emerging countries, culminated in a phenomenon known as offshoring: transfer of a part of the company's business process from one country to another, with the aim of reducing costs through the use of cheaper labor, lower tax burden and subsidy from local governments, for example. China and India were some of the main destinations for large companies, which saw this change as an opportunity to increase their competitiveness.
In recent years, however, factors such as rising inflation, transport costs and wages, mainly in China, have caused some companies to bring their production process back to their country of origin or to another country closer. , a process known as nearshoring. In addition to the financial factor, other advantages have made large companies such as Caterpillar, GE and Ford move in this direction:
- With factories closer together, it is easier to guarantee the security of information and intellectual capital and avoid cases like the one that occurred in 2011 with Apple, which saw its Ipad 2 design stolen before launch;
- Decrease product launch time and increase the company's responsiveness, bringing production closer to the customer and responding more quickly to their needs;
- Improve production quality through the use of more qualified labor. Furthermore, in countries with cheaper salaries, employee turnover is generally very high, which is a complicating factor for companies;
- Facilitate communication between all areas of the company by reducing the difference between the time zones in which each one operates, which can be more than 12 hours apart between the United States and China, for example;
- In the case of business areas directly linked to the consumer, the nearshoring can bring an important cultural alignment. This was one of the reasons why British telephone operator Vodafone took its call center back to Manchester, England.
In 2014, the American consultancy AlixPartners asked 143 executives from 13 different industries that operated within the United States the main benefits expected by them with the decision to nearshoring. The main factor highlighted was the decrease in the time to launch new products and the lower cost of inventory in transit, as illustrated in Figure 1.
Figure 1 - Main advantages expected with nearshoring
Source: Adapted from AlixPartners – 2014 Reshoring/Nearshoring Executive Survey and Outlook
When asked about the expectation of cost reduction, 51% answered that the company had reduced or expected to reduce more than 6% of total costs, as shown in Figure 2.
Figure 2 - Expectation of cost reduction with nearshoring
Source: Adapted from AlixPartners – 2014 Reshoring/Nearshoring Executive Survey and Outlook
Among the main destinations of American companies that are following the trend of nearshoring, is Mexico, due to the relative low cost, good qualification and loyalty of the Mexican workforce, not to mention the proximity to the United States and use of the same time zone. Canada has also been chosen as a destination for American companies, because in addition to the geographical issue, it also has the advantage of speaking the same language. Ukraine, Czech Republic, Hungary, Slovakia and Poland, on the other hand, have been the countries most benefited from the nearshoring of European companies.
Just as taking part of the supply chain to more distant locations in search of lower costs was a move made by many companies a few years ago, the nearshoring is pointed out as one of the main current trends of Supply Chain. However, this movement must be very well studied and a complete range of costs calculated, since it is a strategic decision and the disregard of a factor can cause irrecoverable impacts and erode all the expected benefits with the nearshoring.
In this context, it is important for Brazilian executives to reflect on Supply Chain about how Brazil can, or should, position itself in this scenario?! How to overcome the immense challenges of legislation, infrastructure and culture to insert the country in international supply chains? We need to be proactive in qualifying our workforce and press government officials to make the necessary changes in legislation and investments so that we can be attractive to international investors, not just those who want to speculate with exchange rates.
References
<http://blogs.wsj.com/experts/2014/06/04/why-nearshoring-is-replacing-outsourcing/>
<http://blog.cargomatic.com/top-7-supply-chain-trends-2016>
<http://www.ittoday.info/Articles/nearshoring.htm>
<https://www.backofficepro.com/blog/is-nearshoring-offering-a-brand-new-direction-to-outsourcing/>
<https://www.elixirr.com/wp-content/uploads/2015/08/the_rise_of_nearshoring.pdf>
Fernanda Monteiro
More than 11 years of experience in training and consultancy projects, focusing on Logistics and Supply Chain. In consultancy, he carried out projects such as Transformational Logistics Plan, Diagnosis of logistics operations, Strategy and Calendarization of Transport Operations, Measuring the Cost of Serving, Market Study, Mapping of Inventory Reduction Opportunities, Review of the S&OP Process, Management Plan Training and Implementation of Commercial Processes in companies such as Nestlé, Raia Drogasil, Ipiranga, Lojas Americanas, B2W, Coca-Cola, Andina, Embraco, Martins Atacado, Loja do Mecânico, Santo Antônio Energia, Ecoporto and Silimed. She is currently one of the teachers of the Inventory Management Course taught every six months by ILOS. She worked on the development and management of Online Courses in Logistics and Supply Chain, Supply Processes, Demand Planning, Inventory Management and Industrial Management. Still in the training area, she was responsible for applying ILOS business games in companies such as Raia Drogasil, Fibria, NEC, Novartis and Moove.
