The recent history of supply chain disruption has put nearshoring firmly on the agenda for tech companies in Europe, and across the globe. Many have already started the process and more still are investigating the best ways to adapt their shoring strategies and reduce risk. In our recent whitepaper in collaboration with Reuters – A Generational Shift in Sourcing Strategy – we explore the trends, challenges and opportunities for businesses looking to bring key elements of the supply chain closer to home.
One of the key findings is the importance of businesses finding the right partners – governments, trade bodies and logistics partners – to ensure their strategy works. In this blog, we’ll delve deeper, exploring what great partners look like and how they can help drive results.
1. Political stability
A stable geopolitical system is key when selecting countries or regions as it directly impacts business continuity, vital for robust supply chains.
Political stability provides a predictable and secure environment that fosters investor confidence, protects assets and enables long-term planning.
For example, in the first six months after the start of the Russia-Ukraine war, natural gas prices rose by 120-130%, and coal prices rose by 95-97% globally.
Despite this enormous market disruption, Europe has proven to be a stable and attractive nearshoring location, responding quickly and enforcing regulations to help secure lower gas prices and support continuity.
2. Skilled workforce
Labour shortages have accounted for 47.8% of regional manufacturers' and retailers’ supply chain disruptions. Recruitment and retention of skilled employees is an increasing challenge across the supply chain where expertise is vital.
Any change in shoring strategy needs to ensure that target countries have a talent-rich environment helping them stay robust in the immediate future and longer term.
On this front, India is a great example of a partner that has invested heavily in skilled workers, has shown strong growth in many verticals – including electronics – and has already well-established chemical and pharmaceutical industries.
3. Production capacity
Stable businesses with strong workforces are great, but if they can’t meet the production requirements of the business, you need to look elsewhere.
A good example is Vietnam, which has a strong history of friendly operations but doesn’t have the capacity to handle a lot of big players at once.
It’s crucial for manufacturers to conduct robust internal analysis into the exact capacity levels they need before selecting a sourcing hub.
Businesses should focus their attention on locations where there’s already a high proportion of workers in the manufacturing sector to help them scale where necessary.
4. Transport infrastructure
The variety of transportation options available and well-developed logistics infrastructure ensure a seamless movement of goods and materials, reducing lead times and enhancing overall responsiveness.
With reliable transport networks, businesses can adapt to changing market demands and efficiently manage inventory levels whilst having the agility to explore new markets and diversify distribution channels.
Government investment plays a key role in understanding how ongoing advancements in transport infrastructure to the region will play out and must be considered when looking for new nearshoring destinations.
5. Sustainability
44% of regional manufacturers and retailers say sustainability is the main reason they’re looking to change their sourcing strategy. Unsurprisingly, consumer pressure, shareholder expectation, and legislation shifts are putting demands on their operations. Choosing a suitable country for shoring activities means finding a partner aligned in its commitment to meeting their sustainable goals.
The right partner countries should ideally boast eco-friendly manufacturing processes, energy-efficient infrastructure and a commitment to reducing waste and emissions.
Initiatives like the EU-funded Central European Green Corridors project go a long way in helping businesses make the right decision.
6. Close to EU markets
For European technology and electronic manufacturers, proximity to EU markets solves a lot of problems.
It allows for quicker and more cost-effective transportation of goods, reduces lead times, and improves overall supply chain efficiency.
This geographical advantage enables businesses to respond rapidly to changing market demands and fluctuations, enhancing their competitiveness in the region.
The perfect fit to drive change
Of course, finding the right country to relocate operations to one part of the sourcing puzzle; finding the best logistics partners is also vital. So, what do they look like
From our perspective, businesses need to work with like-minded businesses with the expertise to thrive in the face of supply chain disruptions. Partners that understand the unique demands of each business and are able to deliver both local and regional solutions for every element of the supply chain. And ones that understand that nearshoring doesn’t have to be overcomplicated and complex - it can be an incremental shift in activity as long as it’s supported by other supply chain solutions simultaneously.
With careful consideration and a forward-looking approach, businesses can embrace nearshoring as a transformative strategy to navigate the turbulent market landscape and secure a prosperous future.
To discover more about how Maersk can help your nearshoring strategy, download the full report.
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