Reshoring and the global supply chain
- By Michelle Elsley
A seemingly endless supply chain crunch is forcing companies to adopt new strategies to keep goods moving. Backlogs and breakdowns are the new normal and this makes getting ahead of disruptions as early as possible more important than ever. As it will take time for supply chains and the economy to recalibrate back to pre-pandemic patterns, most organisations I am speaking with are looking for new ways to ‘fix’ their supply chain predicaments.
So, how do we plan for the future?
Understandably, harnessing the power of automation and investing in hi-tech machinery will help to save precious time and money, and improve productivity; but there is another course of action gaining growing momentum which may help bring reliability, expedience and transparency - to bring supply chains home.
I recently attended a webinar series hosted by Massey University’s Dr Carel Bezuidenhout - the Senior Lecturer in Supply Chain. He invited Lisa Zhang, the Senior Tutor of Massey Business School, to share some interesting insights on reshoring.
While the concept of making supply chain local or even just domestic isn’t new at all, Lisa presented data that shows us Covid-19 may become a trigger for many companies to decide to reshore or relocate. A recent example of this is Australian biscuit and cracker manufacturer Arnott's Group set to return some of its production manufacturing to New Zealand early next year - a significant victory for the country’s food manufacturing industry which will result in many new employment opportunities.
Reshoring can potentially:
- Reduce a company’s exposure to outside risk ie - avoiding economic or political issues affecting other nations.
- Make communicating easier - domestic suppliers operate in similar time zones, speak the same language, and offer shorter delivery timeframes.
- Reduce the environmental footprint associated with transporting goods to customers.
However, there are still barriers and unexpected challenges that may be encountered during reshoring, for example:
- Domestic production is generally more expensive.
- Strict environmental or labour legislation.
- Lack of capacity, resources and distribution channels in the home company.
- Governmental support is vital to reshoring, especially for SMEs.
Data from a survey conducted in 2011 by Dr Stephen Canham and Dr Robert T. Hamilton shows that of 151 New Zealand businesses, 67 (44%) offshored and 11 had reshored to back to New Zealand. Dr Carel Bezuidenhout and Lisa Zhang are planning to conduct an updated survey about Kiwi companies’ offshoring and reshoring decisions, which will help us to understand the current situation in New Zealand.
Many clients I am working with are looking at reshoring as a possible means of futureproofing their supply chains. Reshoring is a strategy that will work for some businesses, but not others. It’s not a silver bullet for our country’s supply chain problems, but as disruptions are anticipated to persist into 2023, it could be a way to breathe new life into the NZ manufacturing sector and have a significant impact on the bottom line.
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