Asian Manufacturers Consider Nearshoring, Too

Asian Manufacturers Consider Nearshoring, Too

Even in Asia, manufacturers are adopting 'close to home' supply chain strategies.

We hear a lot about nearshoring in the United States, the practice of moving production and sourcing closer to the point of consumption (which generally means relocating factories from China to Mexico or Latin America, not necessarily returning to the U.S.). As it turns out, supply chain managers in the Asia-Pacific region are also adopting a "close to home" logistics strategy, particularly when it comes to warehousing activities.

According to a recent study of Asian supply chain managers conducted by business analysis firm Analytiqa, unanticipated transportation disruptions as a result of natural disasters in the Asia-Pacific region have highlighted how multinational manufacturers can find themselves without critical components and finished inventory. (The study was conducted before the Japanese earthquake and tsunami, but natural disasters have been frequent in the region, including the 2004 Indonesian tsunami and the 2008 earthquake in western China).

Asian manufacturers know first-hand the implications of damaged transportation infrastructure, and when you factor in the volatility in fuel prices, it becomes obvious why many of these companies have opted to outsource key components of their supply chain management to third-party logistics providers (3PLs). As Analytiqa reports, these manufacturers are looking for 3PLs with proven track records for service and expertise within their operating markets.

Similarly, the strategies of Asia-Pacific supply chain managers are focused on many of the same issues their U.S. counterparts are dealing with, such as forecasting accuracy, intensifying supply chain complexity, managing the strain of increasing costs and aligning the performance of 3PLs to their strategic supply chain goals.

"Leading Asia-Pacific manufacturers are demonstrating an increasing appreciation of their supply chain's role in achieving sustainable competitive advantage," says Mark O'Bornick, research director with Analytiqa. "Nonetheless, the current market environment poses multiple challenges to their entire value chain. Despite supply chain directors being able to clearly identify areas of improvement, along with potential solutions, supply chain issues are not always granted the board-level time they require." According to Analytiqa's research, 57% of Asia-Pacific manufacturers do not include a supply chain professional as a board member.

Recognizing the need to improve logistics efficiency, Asia-Pacific manufacturers plan to launch strategic initiatives over the next two years to help benchmark their supply chain performance, investigate alternative transport modes and increase their supply chain forecasting accuracy. Even so, only 47% of these companies plan to frequently review their supply chain model this year.

See Also:
Cargill Flies a Kite to Reduce Fuel Consumption
Portrait of Supply Chain Visibility
Top 11 Priorities for Supply Chain Information Technology

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