23008_Nearshoring Report

For example, in the cases of furniture and bicycles, challenges with supply disruption during the Covid-19 pandemic and massive increases in shipping costs meant manufacturers have looked to reduce the length of their supply chains by sourcing components and locating their own production facilities closer to where their consumer markets are found. This offers them shorter transport routes and greater flexibility especially for supply of components for JIT production as well as reducing transport costs and emissions.

SHIPPING COSTS BY ROUTE

16000

14000

12000

10000

8000

COMPOSITE INDEX

6000

USD PER 40 FOOT CONTAINER UNIT

SHANGHAI-ROTTERDAM

4000

2000

CONSUMER GOODS

0

DEC-2007 JUN-2018 DEC-2018

JUN-2019

DEC-2019

JUN-2020

DEC-2020

JUN-2021

DEC-2021

JUN-2022

DEC-2022

SOURCE: Drewry World Container Index

Increases in transport costs during the Covid-19 pandemic hit furniture retailers particularly hard: with the increases in container shipping costs, the cost per product for these large bulky items rocketed. This coupled with delays to delivery as a result of shutdowns in factories in China and elsewhere in Asia as well as major shipping disruptions, meant that retailers have looked to sourcing products closer to their home markets. Locations which have benefited include Poland, Latvia and Lithuania, due the low labour costs, experienced workers and access to raw materials such as wood. Türkiye has also enjoyed increased attention from companies such as Ikea and some retailers with domestic sources of supply – such as in the UK and Germany – have increased production where possible to ensure products are available.

Some of the same reasons that nearshoring is valuable to other sectors also apply to some consumer goods but typically where there are particular constraints or challenges moving product from farther-away locations to the markets of consumption.

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