Summary:
Faced with geopolitical and economic tensions, friendshoring is emerging as a strategic approach to securing and sustaining global supply chains. This strategy is based on collaboration with friendly countries with shared values, standards and political stability. To initiate it, companies adopt a pragmatic approach: preparing the ground, analysing the ecosystem and gradual deployment.
Contents:
- How did friendshoring develop?
- How do you initiate friendshoring?
- What are the benefits of friendshoring?
In a global context marked by instability, companies are redefining the structure of their value chain. Among the various strategies being considered, friendshoring – i.e., globalisation among friends – is gaining ground. The principle: to redirect production and procurement towards political and economic allies of the home country in order to reduce exposure to risk. A strategy that is becoming increasingly attractive at a time when political alignment, national security and confidence in regulation have become priorities.
How did friendshoring develop?
For a long time, companies have relocated or outsourced their production and procurement activities to low-cost countries, with a focus on profitability. More recently, the Covid-19 pandemic, as well as the invasion of Ukraine and the wars Near and Middle East, have shifted priorities. They are seeking to reduce risks, build resilience and boost competitiveness. This is how new strategies are emerging with nearshoring, i.e., relocation to neighbours, reshoring, which is nothing other than relocation, or friendshoring, relocation to friends.
The term 'friendshoring' was first used by US Treasury Secretary Janet Yellen. She described this concept to the Atlantic Council, an American think tank specialising in international relations: "Friend-shoring means—and you’ve seen this in action—that we have a group of countries that have strong adherence to a set of norms and values about how to operate in the global economy and about how to run the global economic system, and we need to deepen our ties with those partners and to work together to make sure that we can supply our needs of critical materials."
According to a recent survey conducted by Capgemini, 73% of organisations believe that friendshoring will represent a significant proportion of their sourcing and production in the future. They estimate that it will account for 41% of total production capacity over the next three years. The sectors most convinced of this are services, metallurgy and mining, aerospace and defence, energy and electronics.
Through this so-called affinity economy strategy, companies want to establish stable supply chains by partnering with trusted allies with whom they are aligned. These are stakeholders who share their values in terms of fair labour practices, intellectual property protection, etc. All with the aim of protecting themselves from geopolitical upheavals, trade wars and regulatory sanctions.
How do you initiate friendshoring?
Faced with emerging risks, more and more companies are considering diversifying their supply chains. They must then question the appropriate models: friendshoring, nearshoring, reshoring... To take action, they adopt a pragmatic approach in four main stages.
Defining your project
The first step is to prepare a business case to assess the relevance of the project. This involves evaluating the financial viability, Total Cost of Ownership (TCO) and return on investment of the various models under consideration. This analysis must take into account all external factors: geopolitical risks, regulatory factors, energy costs...
Assessing your supply chain
Companies must also have a clear vision of their supply chain. They will analyse the vulnerabilities and risks of their supply chain. It is also important to clearly define priorities: accelerating lead times, controlling costs...
Identifying favourable markets
Next, organisations will study potential countries. Various factors must be taken into account: political stability, a competitive and skilled workforce, as well as favourable trade agreements (free trade areas, customs unions, common markets...).
Moving forward step by step
To limit supply chain disruptions, companies can implement their strategy progressively. For example, you can start with pilot projects on less strategic product categories. The objective: to test each option on a small scale in order to confirm quality, efficiency and reliability.
The Manutan Group, your European partner
The Manutan Group is the European leader in BtoB e-commerce. Present in 17 European countries through our 25 subsidiaries, we also operate in Africa, Asia and the Middle East through our export activity. We control our entire supply chain through solid partnerships with our 4,000 suppliers, mainly European. Our centralised teams, experts in international logistics, are also supported by trusted local contacts around the world. Wherever you are, we support you in your procurement.
What are the benefits of friendshoring?
Friendshoring has many advantages. It is a strategic response for companies to secure and sustain their supply chains.
Building resilience
With friendshoring, companies are moving towards economically and politically stable countries with which they are aligned. They thus reduce their vulnerabilities to geopolitical tensions or supply chain disruptions. This secures their supplies.
Strengthening trade relations
Friendshoring encourages long-term cooperation in more predictable environments. This strengthens international trade relations, facilitates negotiations and agreements, but also speeds up formalities and deliveries.
Improving compliance and security
By operating with countries that have similar regulatory frameworks, companies guarantee better compliance with environmental, labour and trade standards. This reduces regulatory issues but also administrative formalities.
Price stability
This strategy also limits tariff risks and sudden policy changes in this area. It thus offers better visibility on medium and long-term costs, facilitating financial planning and margin control.
Reputation
By favouring trade partners who share common values, particularly in terms of social and environmental responsibility, companies strengthen their brand image. This helps preserve their reputation with customers, investors and partners.
Today, more than ever, companies are particularly attentive to risk management and the diversification of their supply chains. It is in this context that friendshoring is experiencing a certain boom in order to reconcile security, performance and sustainability.
