Will the trend toward a return to “regional manufacturing” boost volumes in over the road transportation in North America as manufacturers move away from Asian overseas operations? American manufacturers are adapting to significant modulation in the nature of their supply chains as market forces and current global events promote operating “closer to home”. Transportation logistics software solutions play a key role in effectuating this change.
“Global supply chains were being disrupted long before Covid-19 emerged,” says Kamala Raman, senior director analyst with the Gartner Supply Chain Practice. In a recent Gartner survey titled “Weathering the Supply Chain Storm”, Raman said, “Already in 2018 and 2019, the U.S.-China trade war made supply chain leaders aware of the weaknesses of their globalized supply chains and question the logic of heavily outsourced, concentrated and interdependent networks. As a result, a new focus on network resilience and the idea of more regional manufacturing emerged.”
The survey shows that a full third of companies with global supply chains intend to move their sourcing and manufacturing activities out of China in the next few years. With trade wars and tariffs pinching operational profitability, manufacturers are looking at alternative locales like VietNam, India and, Mexico.
For American manufacturers of high tech, industrial and food and beverage products, the Mexico option poses a unique opportunity. Keeping manufacturing on the western continents would largely preclude ocean and air transportation necessary to import product and materials from Asia. Instead, these organizations would be able to move freight over the road, via rail and multimodal carriers. This strategy is not without its risks though.
58% of survey participants agreed that the resilience fostered by pursuing regional manufacturing supply chains would add structural cost to their supply chain operations. Raman noted, “To find balance, supply chain leaders must engage in risk management to assess their organization’s willingness to take risk onboard and decide how to quantify that risk against other network objectives such as cost effectiveness.”
Leading TMS software solutions focused on North American logistics like UltraShipTMS are well-suited to enabling regional manufacturing supply chain management in North and Central America. This particular expertise makes them perfect partners to help mitigate the risks of this emerging trend. “While we offer logistics automation platforms suitable for all modes across global operations, our strongest competency is OTR in North and Central America” says UltraShipTMS VP of Sales, Anthony Vitiello. He urges all manufacturers to examine the potential benefits of bringing manufacturing supply chains back a bit closer to home.