A recent survey by the Retail Industry Leaders Association found that American corporate executives believe “nearly half their global manufacturing capacity will be located in North America within the next five years.”
A report by Ryder System Inc. said that manufacturing wages in China have increased 600% in the last 15 years and, coupled with infrastructure improvements and economic conditions in Mexico and a consumer demand to have products closer to point of purchase, the market is ripe for additional nearshoring.
“With increasing responsiveness to customer demand, and reducing inventories at the forefront of retail supply chain trends, nearshoring offers clear advantages in conjunction with sourcing products from Asia and other developing countries,” said Tom Kretschmer, vice president and general manager for retail and consumer brands at Ryder System Inc., in a recent white paper.
Additionally, Kretschmer said nearshoring can give manufacturers additional flexibility in terms of meeting various demand. He said nearshoring can allow manufacturers to postpone customization of a product, allowing them to react to the trend of the time.
The Ryder report also suggested more manufacturers of retail and technology good are removing the “middlemen” from the equation and bringing their product straight to market themselves. The report suggested pressure to maintain lower cost while being faster at bringing product to market have been drivers in the supply chain change.
“However, the need for ‘middlemen’ is not always specific to the product,” the report said. “It can be specific to the channel or type of retailer being delivered to. For example, if manufacturers need to reach local small businesses and retailers, then the ‘middlemen’ play a key role.”
Within the report, Scott Nemeth, group director of transportation management for Ryder, said the need to provide a demand-driven customer experience means changes are necessary in warehousing and distribution in the retail space.
“Having visibility into warehousing and distribution is crucial – there’s a lot happening from the retail perspective,” said Nemeth, in the report. “Retailers are moving into omni-channel, with same-day fulfillment and delivery, and more companies are using social data, which is creating noise in the supply chain. Retailers are working hard to fulfill the individual customer experience.”
He said retailers should be evaluating their collaboration with suppliers because that integration has become more important and spaces like the automotive industry have demonstrated the integration of suppliers in the supply chain. He said it “has become the most integrated over the past decade or so, and also one of the most efficient.”
The report concluded by suggesting innovation like nearshoring solutions can help the retail supply chain keep with customer demand.
“Hand-in-hand, with this need for supply chain responsiveness is the need for supply chain transparency,” the report said. “’Out of stock’ is out of the question. Retailers must be able to fulfill customer demand with product from wherever it is located in the supply chain, including on store shelves, in back rooms, or from distribution partners.”