Next-Shoring: New Frontier for Manufacturing?

The manufacturing industry is changing how it operates. In many ways, it's not unlike changes we've seen before.

Manufacturers have always focused on being close to suppliers and customers. To accomplish this, and to produce enough inexpensive products to meet global demand, companies have moved around the world to reach larger markets and obtain more raw materials and affordable labor.

US manufacturers have traveled offshore to China and India and near-shore to Canada and Mexico. When energy and costs shifted, they would re-shore.

The change we're seeing now is yet another way to bring supply and demand closer. It's called next-shoring, a concept named in 2014 by a team of McKinsey analysts. Next-shoring focuses on the physical proximity to emerging markets, innovation, talent, and customers.

But here's the key difference between next-shoring and industry changes of the past: Next-shoring transcends geography. Manufacturers aren't moving operations to other countries; they're reinventing their entire ecosystems. Through the use of technology, manufacturers can be close to innovation centers or their customers without moving their main operations.

For the full story, see EBN sister site InformationWeek.

6 comments on “Next-Shoring: New Frontier for Manufacturing?

  1. _hm
    September 6, 2014

    Yes, most organizations has lost sense of direction for locating manufacturing and research centers. They look at each other in confusion and may need help from some leaders.

    September 8, 2014

    I have never been a big fan of chasing the lowest cost countries as when does it ever end so I will read the full article with great interest.  I suppose it makes sense for companies to find the optimal solution to supply chain management across the globe.

  3. Hailey Lynne McKeefry
    September 8, 2014

    In concept, this all makes sense to me. I'd be interested in what OEMs and distributors see as the biggest challenges to making this shift to next shoring.

  4. Hailey Lynne McKeefry
    September 8, 2014

    I read with interest January report from McKinsey & Company titled “Next-shoring: A CEO's guide.” It outlined a set of steps for organizations to reach this new level of planning: 

    • Optimize location decisions: Emerging markets are growing in their consumption, and it is important to have manufacturing facilities that are close.
    • Build supplier ecosystems: Successful new products will result from the combination of technical expertise and local domain knowledge.
    • Develop people and skills: Manufacturing is evolving, and it needs talent to thrive. Different regions will face different workforce challenges.

    What do you think?

  5. SP
    September 9, 2014

    are they going to change their manufacturing locations? not practical from cost perspective.

  6. Hailey Lynne McKeefry
    September 25, 2014

    @SP, It's not alwaysa bout moving locations. Sometimes, its about shifting resources or making new partnerships. I think, increasingly, organizations are going to have to think outside the box for manufacturing alternatives. It's prohibitively expensive to always go the build it yourself route.

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