The complex international logistics situation reopens the debate on the globalisation of the economy and the desirability of redefining a new supply chain model that brings production closer to consumer markets.
In a post-pandemic crisis context, where many companies are experiencing supply problems and rising transport costs, the industry is looking for alternatives to avoid bottlenecks in its supply chain. Concepts such as reshoring and nearshoring are back in vogue and grabbing headlines that make these terms the most appropriate solution to respond to the new logistical challenges.
For the moment, however, we remain a long way from this supposed relocation of the industry: companies have neither returned production to the original market (reshoring) nor the approach to closer environments (nearshoring) seems significant. A recent study by MDS Transmodal concludes that container imports in Europe "are no more regionalized than they were before the pandemic."
The British consultancy's analysis does perceive, in any case, that changes are taking place in the global supply chain. In this sense, it points out that "China's dominant share of the world export market is declining," although not in favour of European production, but rather concerning other Asian markets such as Vietnam and India.
This process of supplier diversification is becoming the most common measure implemented by companies to diversify the risk of blockages in their supply chain. The Encuesta de Coyuntura de la Exportación conducted by the Ministerio de Industria, Comercio y Turismo indicates in its 2021 edition that 28.7percent of Spanish exporting companies plan to implement this strategy, and it is the most adopted strategy to protect themselves in this economic environment.
What measures do Spanish exporting companies plan to implement?
- Diversify suppliers 28.7 percent.
- Increase stock levels 21.1 percent..
- Closer suppliers 16.5 percent.
- Improve monitoring of the supply chain 16.0 percent.
- Other logistical changes 13.2 percent.
The stock increase becomes the second action planned by Spanish companies to ensure the availability of products in the face of ups and downs in the supply chain. The Ministry of Industry survey places this approach ahead of the nearshoring concept, which 16.5 percent of companies plan to apply, by almost five percentage points.
"It is much easier to increase stock than to build factories," concludes a report by McKinsey. In mid-2020, McKinsey asked supply chain managers what measures they planned to implement in response to the effects of COVID-19, and up to 40 percent of respondents said they would move production closer to their markets. A year later, McKinsey repeated the survey to verify the results and confirmed that only 15 percent of companies had made progress in this strategy, while the increase in stock rose to 60 percent..
What factors hinder the implementation of nearshoring?
- The high cost, time and complexity of relocating production.
- The accumulated investment in established supply chains.
- The labour costs of Asian economies.
- The attractiveness of the prospect of increased purchasing power in these markets.
- Increased regulation in the EU.
Despite all these obstacles, a study by the European Parliament identifies two main areas in which this relocation to EU countries can take place. On the one hand, from an economic point of view, it considers that the sectors most closely linked to technology and automation processes, such as manufacturers of machinery, electrical equipment or electronics, are the leading candidates for establishing themselves in European countries.
The report points out that this decision may respond to a second criterion, which would be political, to increase the security of supply, regional competitiveness or the states' security. In this case, the sectors that could boost their European production would be chemicals, pharmaceuticals, medical products, aerospace, automotive and electronics.
How can a logistics operator help industry in this supply chain transformation process?
"The industry is undergoing a complete overhaul of the supply chain, logistics processes and transport networks. The new challenges push shippers to look for alternatives, new suppliers and increasingly demand a logistics partner with a global structure and dimension that can respond to these changes," says Andreu Gutiérrez, Country Sales Director Road of Rhenus Logistics in Spain.