Near-shoring gains prominence.
This month’s McKinsey Quarterly article by Katy George is titled Near-shoring: A CEO’s Guide and provides some good thinking about trends in manufacturing, many of which will have an influence on the future structure of supply chains and operations of logistics and logistics services.
Near-shoring is another term for considering your business as a set of regional (rather than country) based activities that most likely includes manufacturing and will certainly include logistics. Whereas off-shoring had its initial emphasis on taking advantage of low labour costs, near-shoring is more about effective servicing of demand within a geographical area, based on the defined needs of known demographic groups.
The author states that successful regional location requires an agile manufacturing capability to support the varied demands of demographic groups, a local supplier network, especially in fabricated metals, rubber and plastics and a workforce with good technical skills – near-shoring is not about low wages.
Its been said before
Something similar has been said before. In 1995, Kenichi Ohmae, a former senior partner at McKinsey & Co, wrote his book The End Of The Nation State – The Rise of Regional Economies. He identified the four ‘I’ required to make possible viable economic units in any part of the world, which he called ‘Region States’:
- Investment of private capital wherever opportunities are attractive
- Industry ability to move where there is a need to serve attractive markets. When they move, enterprises bring with them working capital, technology and managerial know-how
- Information technology capability resides in the network that can be accessed, virtually anywhere, as needed.
- Individual consumers with access to information about lifestyles and trends are more interested in the brand, product capability and price, without reference to where the product comes from.
Twenty years later another McKinsey associate has written about the same elements, but pulls them together under the title of Near-shoring rather than Region States. This indicates how long it takes from initial development of a concept to it actually happening on a large enough scale so as to be accepted as ‘the way things are done’.
Speed of change in business is relative, so you have time to plan future logistics, but be quick!