This Editor had the opportunity to view two recent webinars that present a likely ongoing picture of North America based businesses efforts in addressing their supply chain resiliency strategies, and specifically reshoring efforts among North America based supply networks.

 

Thomasnet.com Event

For over 120 years, Thomas and the presence of Thomasnet.com has served as a prominent North America supplier sourcing platform serving professionals on both sides of the industrial buying process. The platform reportedly serves a $2.4 trillion U.S. industrial marketplace among upwards of a half a million U.S. companies.

The organization conducted a webinar reviewing Q2-2021 industrial sourcing and supply chain activity levels which was anchored by Thomas CEO Tony Uphoff, and CMO Shawn Fitzgerald. There were some important takeaways that we wanted to highlight to our Supply Chain Matters readership.

Last year, and again this year, Thomas polled its client base in a survey asking manufacturers how likely, or extremely likely, they are to increase their materials nearshoring sourcing efforts. In last year’s survey, the number was reported as 54 percent.  This year, it was 83 percent, with the current sentiment described by the presenters as unprecedented.

The webinar then highlighted Q2 sourcing categories with the highest activity levels.

A listing of the Top 20 Most Sourced Products during the recent quarter indicated the top ten categories to be:

  1. Adhesives
  2. Medical equipment and supplies
  3. Steel
  4. Packaging
  5. Printed Circuit Boards (PCBs)
  6. Face masks
  7. Tools
  8. Labels
  9. Food Products
  10. Lumber

Included in a listing of the Top 20 Products/Services with the Biggest Sourcing Increases were:

CAD/CAM Software– growth of 775 percent

Medical Assemblies– growth of 742 percent

Plumbing Contractors– growth of 715 percent

Architects– growth of 655 percent

Oxygen Concentrators – growth of 552 percent

Judging from both lists, one could surmise that sourcing activity was driven by both additional COVID-19 outbreak and medical safety needs, and in seeking domestic sources of materials in very short global supply.

The webinar’s sharing of two specific examples of regionally focused most in-demand sourcing needs included in rank order:

A listing for Texas which continues to recover from the effects of a severe winter freeze and lingering COVID infection levels: – steel, medical devices, supplementary food and lumber.

The listing for Pennsylvania, a concentrated area for energy and manufacturing production: corrugated boxes, railroad ties, steel, contract manufacturing and adhesives.

 

Economist Intelligence Unit Event

The Economist Business Unit conducted a webinar titled: Should U.S. Businesses be Thinking About Reshoring?

The essence of this webinar was a contrast of arguments that indicated that with the U.S. economy currently booming, with the new manifestations of the USMCA regional trade agreement, and with the Biden Administration’s ongoing focus on strategic supply chains and growth industries, the case for nearshoring would seem to be favorable.

Instead, the EIU perspective is that wholesale reshoring may be overblown because:

  • Asia remains an important and rather large market for S. businesses.
  • China proved to be highly resilient in recovering from the initial pandemic in that country.
  • Perceptions that North America’s lack of global supply chain competitiveness compared to Asia based production sourcing remains to linger.

The upshot assessment by the EIU observers based on data reviewed was that firms will continue to favor convenience, lower cost and known supply network capabilities. The stated takeaway was that nearshoring will be selective or supplementary, directed at specific needs for supply resiliency or in the context of a broader, multi-year transitionary strategy.

 

Supply Chain Matters Perspectives

Readers will likely encounter other similar surveys regarding tendencies toward nearshoring. Some readers might note that their procurement teams have already embarked on a phased assessment of supply network resiliency with some context to nearshoring. In the end, this is an individual business decision predicated on your firm’s business growth and profitability strategies.

As we have noted in prior insights on this particular topic, particular businesses and industry situations will drive such actions. And yes, businesses are being selective.

We do want to reiterate what we stated in our 2021 predictions in this specific area.

What was likely the most important takeaway from the pandemic in 2020 was that supply network sourcing strategies predicated solely on lowest cost producer exposed critical vulnerabilities for manufacturers, retailers and other firms.  These vulnerabilities related to the elements of overall risk, in the context of supply network resiliency, global transportation and other business continuity elements. For certain industries, geo-political risk factors or climate change impacts will be an added consideration.

Thus far at the mid-point of 2021, the vulnerabilities of supply and climate related risks coupled with global transportation disruption are playing out to extreme dimensions. An even more concerning factor is exploding costs across multi-industry supply networks which are leading to heightened pressures for finished goods price hikes.

At this juncture, one could argue that insuring supply network resiliency has become a rather complex decision point with current levels of global supply chain volatility.

We were pleased to observe from the data that many more North American firms seem to be focused on supply network resiliency strategies and whether nearshoring supports these needs. The Thomasnet data seems to reinforce that selective forms of supply resiliency are being exercised.

The takeaway remains that in this new normal of business, one of the most important factors in supply network resiliency is weighting the factors of risk, and actions to alleviate such risk. Being selective and being laser focused is most important.

Sliding back to the former tendencies of lowest cost without risk context is not.

Additionally, stockholders and equity investors need to understand that supply network resiliency has to sometimes be weighted higher than short-term profits. Too many shareholders and investors seem to remain obsessed with short-term performance without weighing a company’s needs for transition toward supply network resiliency strategies, be that nearshored or global in perspective. Environmental, social responsibility and broader business sustainability factors are a further component of overall supply chain resilience.

Perhaps when the dust settles, investment evaluation of publicly listed manufacturers, retailers and services providers will include and weight such assessments.

 

Bob Ferrari

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