The Shift to Reshoring

Leverage supply chain segmentation to balance global production strategies and enhance profitability


According to the Gartner study, enterprises must analyze their supply chain networks through segmentation and cost-to-serve analysis that accounts for agility and risks—like quality problems and intellectual property theft—in addition to per-unit costs. Today, Dell Inc., which revolutionized both the computer industry and supply chain management with its direct-to-consumer business model in the 1990s, is one of a number of companies that are transforming their supply chains by leveraging segmentation. Instead of using a one-size-fits-all approach to supply chain processes and policies, segmentation is helping these companies determine specific channels and customers that should be sourced from specific locations within their supply chains—and how these supply chains should be managed to profitably service all of those different market segments.

By understanding the profit profiles of their customers and products, companies can tailor a more profitable supply chain strategy to each of them. This drives a more innovative approach to building different strategies within the supply chain regarding production planning strategies, lead time policies, inventory policies, network flows and transportation modes. All of these considerations play into the decision of where best to source production.

Key considerations

Manufacturers should consider the following when leveraging segmentation to assess, define and create the best sourcing strategies:

Regionally match supply to demand—It might make sense to continue producing products that are sold to Asian channels in China but for products being sold in the Americas, a manufacturing reshoring strategy may help companies more economically serve the market by being closer to the source of demand.

Recognize the trade-offs—Before finalizing any decisions, evaluate the trade-offs between labor costs, logistics costs, inventory costs, quality assurance costs and the importance of speed to market.

Execute with flexibility and efficiency—Optimally execute against differentiated production and service strategies—including make to stock, make to order, configure to order and engineer to order—with flexible capabilities that match specific segments with the most efficient supply chain strategy.

Factor in the value of speed to market—Even a company that is experiencing growth in emerging markets still faces tremendous innovation pressure to maintain market share. When it represents a speed-to-market advantage, reshoring production should be considered. If the majority of a company’s market is Americas-based, moving manufacturing near-shore can substantially decrease go-to-market timeframes, which is especially valuable for companies with frequent new product introductions and short product lifecycles.

Drill into the cross-sections of different market attributes and dimensions—Companies need to move beyond simply looking at market demand and better evaluate the attributes of the customers, channels and product they service. For instance, a high-volume, low-configuration product with few options that moves through a particular channel to a specific market might warrant a different overall supply chain strategy than other products that have volatile demand and high production costs.

Strive for better service at lower cost—Managing the global supply chain with a holistic approach helps companies gain visibility and determine where they can realize the quickest speed to market with the lowest cost to serve. As consumers change their preferences, companies are able to swiftly devise an appropriate strategy and guide product inventories through channels and into the end-users’ hands. Time will tell how profoundly the reshoring shift will affect global and national economies, as well as what role governments will play in making global manufacturing capacity decisions. What is clear is that today’s manufacturers can and should leverage innovative technology tools—such as network optimization, inventory optimization, segmentation management, transportation management and supply chain optimization solutions—available to them to revisit their global production strategies and modify production footprints where needed based on thorough, intelligent analysis and planning.

Segmentation enablement

Supply chain segmentation capabilities enable companies to better align supply chain policies and manufacturing and distribution assets with customer and product value propositions and profitability. This enhances sales and customer service by enabling companies to more reliably deliver on their promises. With successfully deployed segmentation strategies, manufacturers are well-positioned with the visibility and information necessary to intelligently find and maintain the right balance between offshoring and reshoring models.

 

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