Since the pandemic and the disruption of the global supply chain, the issue of relocation has become the major topic for supply chains. Our Merkur procurement experts, Michel Henri and Carlos Ramon Morales, take a close interest in this issue and can assist you in your improvement projects.
After decades of globalization and increasing competition, new forms of collaboration and processes have been deployed to improve and make supply chains more efficient. Among these is the proximity sourcing, which we will refer to in this article as nearshoring.
Often confused with offshoring, which indicates outsourcing to countries far from the company’s home country, nearshoring also refers to the relocation of activities but to another region of the same country or to a neighboring country.
The Benefits of a Local Supply Chain
In the current context where the instability of supply chains seems to be the new reality, there are several advantages to opt for nearshoring:
- Reduce your procurement time and costs
The current congestion in the ports has caused the costs and delays of maritime transport to explode. Land transportation, generally used in nearshoring, can counteract this to a large extent, reduce your delays and save on your transportation costs. Performing sensitivity analyses, taking into account the varying cost of transportation, remains an effective way to measure the benefits of land transportation.
- Increase efficiency in your operations and customer satisfaction
We know that the impact of a late part has a direct effect on the efficiency of your operations and the performance of your plant. Reducing late deliveries will help make your manufacturing operations more efficient while contributing to your ability to meet your customer deliveries.
- Reduce your operational risk
Geopolitical disruptions, such as conflicts and economic wars, remain a major issue for supply chains. Streamlining logistics activities and adding supplier proximity to your portfolio will reduce your risks and contingencies related to the movement of goods while adding additional capacity to your current supplier base.
- Increase your inventory turnover and improve your cash position
Generally, nearshoring requires a lower level of inventory. This will allow you to order more often by reducing your order volumes. Also, take the opportunity to review your payment terms and try to improve them. The ability to meet your delivery deadlines also plays a major role in improving your cash flow.
- Gain flexibility and agility
Geographic proximity facilitates your ability to respond to the supplier, reduces your travel time and expenses, and promotes a quicker resolution of quality issues. Your products that need urgent referral are usually delivered in a shorter time frame and at a lower cost.
- Reduce your carbon footprint
Local sourcing is a very effective way to reduce greenhouse gas emissions and support your industry’s sustainability agenda.
By analyzing and measuring the impact of each of the factors listed above, you can reduce your total cost of ownership, strengthen your supplier base, and develop an agile and resilient supply base. Whether it’s for your strategic supplier development projects or your tactical requirements to resolve your issues, don’t hesitate to consult the Merkur procurement experts. We work with you towards a single objective: to make you more efficient!
We invite you to contact our Merkur experts who will be happy to assist you in your project.
MERKUR is a firm of experts in manufacturing performance and innovation and has been doing so for over 25 years. From strategy to execution, its sole objective is to make Quebec’s manufacturing companies more efficient by offering innovative solutions in product development, operational excellence, manufacturing engineering, automation and smart factory. Merkur is proud to contribute to innovation and productivity in Quebec!
KHROME PRODUIT TRANSPORT is a manufacturing integrator located in Drummondville specialized in the design and manufacturing of train car interiors and exteriors. Its strength comes from its great engineering capacity and its manufacturing agility. Among its customer portfolio, there are major manufacturers such as Alstom, Bombardier Transportation and Kawasaki Rail Car.
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