Global trade flows remain hugely turbulent in the post-pandemic era, as we progress through a hugely challenging chapter for globalisation.
Financial, inflationary and economic pressures have subdued consumer demand in many markets, with several economies on the brink of recession.
With no end in sight, the tragic Ukraine crisis is continuing into a second winter, with ongoing disruption to Asia-Europe goods flows and transport connections across Eurasia.
Acrimonious geopolitical disputes continue to linger between major trading nations, and mainland China – the world’s largest factory – struggles to fully bounce back after their severe COVID-19 restrictions caused unpredictable and intermittent shutdowns.
Intensifying the uncertainty is a never-ending stream of additional disruptions to global supply chains – including earthquakes, typhoons, floods, hurricanes, power outages, rising energy prices, transport disruptions, labour shortages and worker disputes.
As a result, many multi-national companies are now seriously exploring, or actually implementing, operational initiatives to relocate their sourcing and production activities closer to home – known as Near Shoring – in order to reduce risk and increase resilience.
For the USA, Mexico is the prime candidate for nearshoring operations, particularly with the USMCA preferential trade agreement between the United States, Mexico and Canada.
For Western European markets, Poland, Hungary, Turkey and even some North African countries would all come into play as potential nearshoring locations.
Such discussions inevitably raise big concerns about higher labour costs outside of emerging markets. However, in reality this represents a huge opportunity for more widespread deployment of automation and robotics.
The manufacturing cost differential nowadays is that human labour is over four times more expensive than robotics – a substantially different economic model to when offshoring commenced some thirty years ago.
Furthermore, automation solutions are now readily available as a service model, eliminating the need for up-front capital investment.
Implementing nearshoring initiatives will result in a much more regional approach, eliminating some of the profound inter-dependencies inherent in today’s over-globalised supply chain ecosystems.
Shorter, regional supply chains will enable companies to reduce lead times, freight costs and emissions, at the same time as increasing control, responsiveness and resilience.
Between 2025 and 2030, the world of supply chain will change quite dramatically!