As businesses have been hit with challenge after challenge in recent years finding ways to mitigate risk, navigate change and manage costs is essential. For many, relocating supply chains has supported this. Reshoring or nearshoring can support growing companies to expand or well-established companies to streamline processes.
Offering improved accessibility, refined logistics and, often, time savings and increased expertise, it can help businesses to save money and improve quality.
But it can also present logistical challenges, risk product consistency, and push costs up, whether for up-front investment or ongoing labour costs.
Here we explore the pros and cons of moving supply chain partners in greater detail. In particular, we have considered the impact of this for those working in metal manufacturing or sheet metal fabrication in Europe and considering moving operations from Asia to Europe or outsourcing to Europe.
1. Creating cost savings – Working with suppliers in the UK or Europe will help to overcome how transport costs have rocketed in recent years, particularly for the sea freight so often required to bring products from other continents. This can also offer environmental benefits, limiting the emissions generated by transporting goods. Geopolitical issues and increasing extreme weather events have also disrupted supply chains, slowing the movement of goods around the world and further pushing up costs.
2. Improving lead times – By shifting suppliers to markets closer to theirs, businesses can improve lead times, allowing them to become more responsive to changing market trends and customer needs.
3. Accessing external expertise – For businesses bringing their supply chain back onto the continent, Europe has a strong reputation for its high manufacturing standards and highly skilled workforce. This could improve overall product quality, delivering wider financial and reputational benefits.
4. Reaching your target markets more easily – A study by the European Commission found that nearly 85% of European consumers prefer products that are made within the European Union, highlighting the value of ‘local’ production.
1. Risking disruptions – Changing your supply chain from one company and location to another will require input from a number of your operational and administrative teams and will likely present initial disruption or teething problems. This is likely to be heightened if moving from one continent to another, perhaps presenting new language barriers, currency changes or cultural differences. There could also be logistical or digital challenges – for metal manufacturing, for example, transferring drawings developed from scratch might present difficulties. However, this can be mitigated by ensuring the new supplier follows clear processes and ensures strict quality checks is key.
2. Requiring investment and new infrastructure – Moving suppliers requires an upfront investment, from simply requiring your team’s time and expertise to implement new processes, to substantial expenditure in the development or acquisition of new facilities. Investment is also required to ensure the associated infrastructure is in place to make changed operations effective and efficient. However, this budgeting can be made more palatable by being clear on the long-term benefits of moving suppliers.
3. Incurring higher labour costs – Businesses within Europe typically have higher labour costs than their counterparts in Asia, which can impact production costs and the bottom line. However, this can be offset by improved lead times, reduced transport costs, and improved quality and productivity delivering greater value for you and your end customers.
4. Considering geopolitical factors – Outsourcing to Europe from Asia can present new geopolitical factors for consideration, such as the changes created by Brexit. For example, sheet metal fabrication in Europe has been impacted by fluctuating steel prices, exacerbated by the war in Ukraine and labour strikes in the UK.
Relocating supply chains can present both opportunities and challenges. In the short term, there can be issues around service disruption and high up-front investment. However, in the long run, there can be cost and time savings and improved logistics and environmental performance as well as increased product quality.
Being clear on your business and project objectives – whether the desire is to grow sales, minimise risk, refine processes, improve products, or otherwise – is the best place to start. Other factors such as your wider business goals, the sector or industry you operate in, and flexibility to European markets and standards should also be considered. Conducting a comprehensive analysis will support all of this.
Working with experienced businesses, willing to offer guidance and expertise early on, will also ensure a suitable, successful transition.
At ADS Laser we offer premier metal laser cutting, folding, fabrication, finishing and assembly, providing bespoke to volume solutions.
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