Building a Right-Shoring Strategy: A Holistic Approach to High-Tech Supply Chain
For high-tech manufacturers, the name of the game is flexibility. This is a fast-moving industry where the winners are fast and nimble.
Winning organizations are innovative, and they get their products to market quickly. The latter part of that equation requires the right supply chain strategy.
New data from UPS reveal that high-tech companies increasingly take a comprehensive approach to their supply chains, often considering many factors to decide where they will manufacture and assemble their products. Many supply chain managers see “right-shoring” as part of the answer, according to the Fifth Annual UPS Change in the (Supply) Chain Survey (CITC).
For a long time, high-tech firms had a rather simple manufacturing formula: Assemble or assemble products in countries where labor costs are lowest. They called the strategy “off-shoring.” By now, we all know it well. In the United States, the trend dates back to the early 1980s economic recession when manufacturers sought lower labor costs in international locations. Off-shoring also enabled companies to take advantage of currency rate differentials and to penetrate new markets.
More recently, companies saw greater value in shifting production and assembly sites closer to end consumers. This was the genesis of the “near-shoring” trend, which takes advantage of shorter time to get products to market. It also helps cut shipping costs.
These days, however, more companies are exploring right-shoring, which balances other metrics to determine the proximity of sourced materials to production, warehousing and distribution. These metrics may be cost or resources (skills and infrastructure) for the best overall margin performance and customer satisfaction.
Forty five percent of CITC survey respondents said they use right-shoring strategies. Forty seven percent said they off-shore. And 35% said they near-shore. Respondents had the option to select multiple strategies.