23008_Nearshoring Report

So which sectors are more likely to look consider nearshoring? There are several distinct categories of product that may look to this strategy to create benefits:

Those where shorter journey times – and therefore proximity to destinations – is important. This includes products where lead times for delivery of product from design drawing board to shelf or rack is becoming shorter and shorter – this includes apparel (particularly spurred by the ‘fast fashion’ trend where speed is a key element of success). This also includes products where the economy of distance to final market of assembly or consumption is important (such as, automotive parts needed on a JIT basis for delivery to a primary automotive plant)

Those where consumer preferences or technical requirements for locally made products means nearer or onshore locations are more attractive. This is particularly the case where ‘Made In’ effects (where the product is made) has a bearing on consumer demand or where different countries/regions set specific quality or technical standards that must be met.

Those where supply of strategically important goods are constrained or restricted including products like semiconductors, which during the Covid-19 pandemic, suffered significant challenges to supply due to shutdowns in key manufacturing locations. This is driving decisions by both businesses (which are considering how to establish a more diverse, less concentrated supplier network) and governments (which are considering how to support the development key industries within their geographies)

Those which require capital intensive investment – particularly where production is highly automated with relatively lower labour-intensive requirements. Movement of these operations may be expensive in the short term but, for new investment, nearer-to-home locations are likely to appear more attractive

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