How to Make Reshoring Suppliers a Reality

Reshoring is an opportunity for future-minded organizations to expand their horizons when it comes to supplier relationships.

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On Jan. 25th, U.S. President Joe Biden signed the Made in America Executive Order in support of domestic manufacturers, businesses and workers. Following the supply chain disruptions of 2020 and the Coronavirus disease (COVID-19) pandemic, many organizations across the globe are prioritizing bringing their suppliers closer to home. Reshoring your suppliers not only gives you the opportunity to support domestic manufacturing efforts, but it also provides a good opportunity to evaluate the health of your supply chain, the quality of supplier data and your ability to begin and nurture relationships with nearshore small and diverse businesses.

Why should you re-shore your suppliers?

In recent months, many international supply chain disruptions contributed to business losses that touched every industry, prompting procurement professionals to reconsider their strategies and make appropriate adjustments. Reshoring suppliers solves several relevant problems, including achieving greater control and flexibility over your operations by moving them closer to home, avoiding the instability of international trading and shipping and potential for cost savings in labor and production.

Increase competitiveness

By adding new vendors to your supply chain, you’re encouraging a competitive ecosystem where you can leverage different supplier relationships to achieve your business goals. In addition to being patriotic, reshoring your suppliers is an opportunity to seek out innovative nearshore vendors who can reinvigorate your current supply chain.

Expand or begin a diversity program

Sourcing new suppliers is also an opportunity to create a successful supplier diversity program that will make your network or suppliers more diverse and inclusive. In addition to the meaningful social impact a diversity program creates, expanding your Tier 1 and Tier 2 diversity spend may increase an organization’s eligibility for government sponsored tax rebates and environmental, social and corporate governance (ESG) requirements.

How to re-shore your suppliers

The idea of nearshoring may be initially daunting, especially for organizations currently working with international suppliers. However, the process can be made more effective by implementing a data-first strategy. Here’s how:

1. Start with quality supplier data

Good data ensures visibility into your current supplier landscape so you can easily identify where changes can be made. By powering your procurement technology stack with accurate and managed supplier data, you’ll be in a better position to identify the exact details of your overseas supplier relationships in order to identify similar alternatives in your own country.

It’s best to start by evaluating your supplier data first because this is often the most often neglected first step, despite being foundational to the success of any procurement strategy. By making sure you’re working with  an accurate and enriched vendor master, you’ll be setting your reshoring initiatives up for success. In addition, it’s important to continually monitor changing supplier information with an emphasis on the fact that more disruption means more changing information.

2. Evaluate spend categories 

Once you’ve deemed your supplier data accurate enough to work from, you can begin to evaluate exactly what categories or commodities could be feasibly re-shored. Obviously, some categories will not be able to be re-shored—like travel-related expenses, for example—and differentiating between which offshore vendors can and cannot be replaced with domestic vendors will allow you to understand the potential scope of your reshoring capability.

If you’ve already cleansed your vendor master, you’ve likely already broken down your supplier information into easily evaluated categories. If not, there are e-procurement tools on the market that can take an upload of your vendor master and quickly generate a categorical view of your total spend.

3. Identify similar suppliers

The challenge with identifying similar suppliers to the ones you’re already using (for a nearshoring initiative or just in general) is that often, there are very specific and granular requirements that a supplier must meet. Capabilities, turnaround times, sustainability or diversity certifications, the list goes on. When you add the need for a specific geographic area, supplier identification becomes even more challenging.

However, these challenges are vestiges of the old way of doing procurement sourcing, and can be overcome by plugging your clean supplier data into a supplier discovery tool with an advanced, filterable search tool. What used to take procurement teams hours or days to accomplish can now be done by a quick search. By leveraging an e-procurement tool with a powerful search function that’s built on a foundation of accurate supplier data, identifying new suppliers in your home country can be an efficient process.

Reshoring is a smart move for forward-thinking companies

A reshoring initiative is about so much more than patriotism or answering the call of the recent Executive Order. It’s an opportunity for future-minded organizations to expand their horizons when it comes to supplier relationships. Expanding your supplier base brings opportunities for innovation, diversity and agility to protect against future disruptions, and the way to achieve all of this is to bring your suppliers home.