How does right-shoring optimise your supply chain for more resilient and responsible procurement management?

Summary:

Right-shoring repositions each activity in the value chain in the right place, by balancing costs and benefits. Based on rigorous data analysis, companies build a flexible model that combines reshoring, nearshoring, friendshoring and offshoring. This approach strengthens resilience, competitiveness and operational control.

Contents:

• What is right-shoring?
• What are the different strategies?
• What are the benefits of right-shoring?
• How to implement right-shoring?

In recent years, global supply chains have faced many challenges: pandemics, geopolitical conflicts, logistics issues… Companies have had no choice but to rethink their sourcing strategies. Today, the focus is on right-shoring: the art of finding the right balance between costs and benefits. The objective: to strengthen the agility and resilience of supply chains, by adapting to global dynamics.

What is right-shoring?

Right-shoring involves placing each activity in your value chain in the "right place". In concrete terms, it means adopting a flexible model, by combining the different existing approaches: reshoring, nearshoring, friendshoring and offshoring.

The whole challenge is to find the best compromise. To identify it, a cost-benefit analysis must be carried out. This involves taking into account different variables: the type of products, costs, volumes, risks, delivery times, quality, level of service…

This requires a solid understanding of your value chain, as well as reliable data. As Dave Evans, President and Chief Executive Officer of MISUMI Americas, emphasises: "Right-shoring succeeds when the innovator, engineer or purchaser has access to as much choice as possible, and the visibility or transparency to make the right choice. It succeeds when they have all the data they need at their fingertips and when they can easily understand the real cost of ownership when they buy from a particular geography."[1]

What are the different strategies?

There are four main types of supply chain strategies: reshoring, nearshoring, friendshoring and offshoring. From fully local to fully global, each of these approaches offers a different balance between costs and benefits.

Reshoring

Reshoring, or relocation, involves bringing production or purchasing that was previously outsourced back home. This aims to regain control over quality, secure supplies and reduce lead times.

H3 – Nearshoring

Nearshoring favours a regionalised approach. It involves bringing operations closer to home in geographically nearby countries. This can be on your home continent, or in neighbouring countries and overseas locations. This proximity thus streamlines collaboration and reduces lead times.

Friendshoring

Friendshoring involves redirecting operations to "friendly" countries: political allies, stable partners sharing common values, standards and commitments. This approach helps to secure and sustain supply chains.

Offshoring

Offshoring refers to the outsourcing of specific operations to countries that are geographically distant, generally with low costs. Popular for years, this strategy is part of a cost reduction and profitability logic.

What are the benefits of right-shoring?

Right-shoring aims to reduce risks, boost competitiveness and, of course, strengthen supply chain resilience. This approach makes it possible to reduce dependencies on certain geographical areas, reduce lead times and offer better control of operations, whilst adapting to global market dynamics.

Right-shoring is also part of the CSR (Corporate Responsibility) strategy. Companies can integrate CSR criteria, favour areas where social and environmental standards are more aligned with those of their markets, or strengthen transparency and traceability within their supply chain.

Jamie Ogilvie-Smals, Vice President of Services at GEP, emphasises: "It's the potential scale of these benefits that's exciting: the benefits can be huge, as a company potentially optimises a large portion of its supply chain. That said, it's important not to be put off by the prospect of thinking about right-shoring. If you wish, it's entirely possible to be more targeted and tactical, and simply look at a portion of overall offshore spend."[2]

How to implement right-shoring?

Right-shoring is based on an in-depth analysis of the value chain and a balance between location, costs and benefits.

Step 1: Objective

The very first step is to clarify the purpose of the right-shoring strategy. It is essential that the company asks itself beforehand: does it wish to reduce its costs, improve quality or sustainability, gain responsiveness or resilience? The project team must define the importance of each of these objectives.

Step 2: Diagnosis

The second step involves analysing your supply chain. For each product category, the project team maps flows, suppliers, risks… Then it segments purchases and defines priorities according to criticality and optimisation potential.

Step 3: Decision-making

The third step should enable informed decision-making. This involves building a multi-criteria decision matrix that details total costs of ownership (TCO), lead times, CSR compliance, strategic alignment… The idea is to test different scenarios by carrying out modelling.

Step 4: Implementation

The fourth step focuses on executing the strategy. The team can start with pilot projects in one or two product categories. Depending on the scenario chosen, it can then select its new suppliers and enter into contracts with them.

Step 5: Management

In this fifth and final step, the idea is to monitor and adjust projects. The team relies on different key performance indicators: costs, customer service level, carbon emissions… Regularly, it reviews the results and takes the necessary corrective actions.

Manutan, your European partner

Manutan is one of the European leaders in B2B e-commerce. We operate in Europe, through our 25 European subsidiaries, but also in Africa, the Middle East and Asia via our export activities. Thanks to solid partnerships with our 4,000 suppliers, we control our entire supply chain. Wherever you are, our teams specialising in international logistics and our local partners around the world support companies in their procurement. Manutan offers a wide range of products in stock to meet requirements quickly (product range varies by country, as of content publication date).

In short, rethinking your global supply chain is a task that is as strategic as it is complex. To succeed, companies must find the right combination of strategies. Depending on the case, this can be an essential step to guarantee the security, competitiveness, or even the sustainability of business operations.