The COVID-19 pandemic was rough on everyone. Due to the various shortages and delays brought on by the 2020 year, which highlighted the fragility of global supply systems, businesses are now looking for solutions to potential disruptions in the future. Reshoring, the process of moving production and sourcing back to home markets, has been started as a result of this. Reshoring has become more popular as a potential remedy despite issues including financial and timing limits.
Utilizing Latin America: Strengthening Supply Chains
Numerous businesses have expanded into Latin America as a result of the pandemic’s revelation of supply chain vulnerabilities, offering a different choice for sourcing. In order to improve supply chain resilience, Chinese businesses are developing factories and research centers in important border cities like Monterrey. This interest in Mexico was recently highlighted by The New York Times.
Foxconn, a supplier of parts for Apple’s iPhones, is a prime example of effective reshoring. Foxconn assisted Apple in minimizing delays brought on by Chinese government restrictions by opening facilities in Ciudad Juarez, Mexico. In line with their reshoring strategies, other tech behemoths including HP, Dell, IBM, Microsoft, and Huawei have also made investments in Latin American nations like Mexico. Even now, Tesla is planning to build a new gigafactory in Monterrey.
Benefits of Reshoring
Reshoring offers a way to prevent future problems with the global supply chain, despite the fact that it can be resource-intensive. For businesses navigating the current environment, collaborating with Latin American nations provides enticing economic benefits.
Modern logistics providers are crucial in assisting firms with sourcing diversification and reducing reliance on a single nation. Latin America offers low pricing and dramatically reduced travel times thanks to its wide network of suppliers and logistical partners, paving the way for improved supply chain resilience.
A slow process of economic decoupling has started as a result of rising tensions between the United States and China as a result of issues like Taiwan. Diversifying supply chains into South America in this situation is a tempting idea.
The Reshoring Initiative 2020 Data Report indicates that 69% of businesses identified supply chain interruptions as the main justification for reshoring, a problem made worse by the epidemic. Even though it is projected that Latin America’s economic growth will decrease, J.P. Morgan’s 2023 global forecast underlines the beneficial nature of nearshoring and comparable methods.
Despite the long-term advantages of nearshoring, there are still certain obstacles. Vigilant monitoring is necessary due to the quality differences between items from Latin America and other countries. Challenges include probable shortages of raw materials and capacity limitations in Latin America’s manufacturing infrastructure.
Nearshoring: Wrapping It Up
A thorough evaluation of aspects including personnel availability, the local business environment, and long-term strategic alignment is necessary before making the choice to nearshore. The sustainability of nearshoring as a business model can be ensured with the use of predictive modeling and other techniques.
It is recommended for supply chain specialists to ask distributors and suppliers about price and possibilities for a nearshore alternative in Latin America. Due to China’s established advantages, switching over right away may not be the best option, but having Latin American options open can have long-term advantages, particularly when supply chain interruptions occur.
The key to success in an uncertain world is preparation. The lessons learned over the last three years emphasize how crucial it is to be prepared for the unexpected and have robust supply chain choices available.