The COVID-19 pandemic showed us how vulnerable our global supply chains are, a vulnerability that has only increased with turbulent international relationships and the Russia-Ukraine war. Globalization has been at the forefront of global supply chains for years for many good reasons, but despite the benefits it has offered, it has also created a system rife with potential weak links. As we saw, a single accident in Egypt could disrupt the world’s supply chain for months.
We need a more resilient solution, and regionalization and omni-shoring offer two.
Long-term benefits of regional manufacturing
Regionalization and omni-shoring have many benefits, including minimizing disruption risks, decreasing carbon emissions, and lowering transportation costs for end products. Additionally, North America (one of the biggest markets for end products and a region where consumers have increasing demands) has a free-trade agreement in place, which removes tariff uncertainties and provides easier logistical solutions for the region.
Many organizations have already expanded their factories to Mexico in an effort to create a regional supply chain and decrease transportation time and cost, plus reduce import tariffs. We at DHL have seen an increase in the U.S.-Mexico trade relationship, for example. The proximity between these two nations is part of why, but the 2,000-mile shared border and cultural similarities between the countries also make processes more efficient.
Omni-shoring helps not only end-product countries like the United States, which has the world’s largest economy, but every country involved in the new, localized supply chain. Central American countries, including Mexico, are predicted to earn billions and see increased employment rates.
Alongside this, moving closer to end-markets has many benefits for the logistics industry, including lower labor costs, taxes, energy consumption, land costs, and more. The automobile, furniture, machinery, and electro-domestic industries are already moving toward local manufacturing in pursuit of these benefits, which is why they now account for a high share of demand for land in nations like Mexico.
What It Takes To Put Omni-shoring And Regionalization Into Effect
There are several things to keep in mind when shifting to omni-shoring and regionalization.
First, this is a global effort that will start to take shape over time, because breaking the cycle of offshoring and outsourcing is no small matter. Companies will need a strong action plan and a clear idea of their target market and possibilities for relocation.
Second, the countries where manufacturing will be relocated to must be aware of the economic investments, they will need to make to prepare zones for new development. Companies, meanwhile, must be ready to train personnel in the new region. It will take constant communication between the new components of the supply chain to ensure smooth transitions.
Omni-shoring and regionalization have proven to be a strategic and cost-effective solution for businesses seeking to thrive in a globalized world. By leveraging the advantages of proximity and cultural alignment, companies can optimize their operations and foster long-term success in an increasingly competitive landscape. As businesses continue to adapt to changing market dynamics, omni-shoring and regionalization are set to play a vital role in their growth and expansion strategies.
