A few years ago, as manufacturers broadly began to warm to the practice of selling their products into emerging markets, the concept of regional supply chains gained some attention. On the new global playing field, the theory went, a manufacturer needed to fine-tune the old model of distribution. No longer was the hub-and-spoke concept — producing goods in a central location and shipping them out from that base — necessarily the best way forward. Instead, manufacturers could speed goods to market, reduce transportation costs, and mitigate risk (even as some other risks rose) by creating products closer to their end markets.
Free-trade agreements between the U.S. and other countries grew in number and force, and the standard of living in emerging markets rose. Concurrently, the idea of regional production and supply chains gained traction. And then the price of oil exploded. That was likely the single greatest factor in promoting the new model. Suddenly, making widgets in China and shipping them all the way to Brazil was an exercise in frustration, with poor profit margins to boot. Why not make the widgets in Brazil?
By no means has the pendulum swung completely, though. The allure of shortened supply chains brings with it the risk of managing production facilities in new markets, with new suppliers, new regulations, and new labor force dynamics. It is no panacea. But it seems that manufacturers are paying more than lip service to the idea of regional supply chains today, and the transition will be interesting to watch.
We’ll be watching it unfold here on the new Supply Network Channel of ManagingAutomation.com. I will serve as the channel editor, updating this blog, moderating our forums, and interacting with you, our readers. I’m eager to hear from you about topics such as transportation & logistics, supply chain collaboration, warehouse management, and much more. You can always leave a comment for me here or in our forums. This new channel is about you, first and foremost. Thanks for visiting.
3 Comments
I’ve seen some academic articles the other day that retailers in UK are now moving some productions back from overseas supplier. The reason is that onshore sourcing is more responsive that overseas sourcing.
Hi Chris,
I agree with your concept of regional supply chains. I cover global trade management for Gartner and rarely is a supply chain truly “global.” Many of our clients are extremely US-centric and only care about 6 or so of the 180+ free trade agreements in the world. The software to support global trade often deals with the regulations in the US and Europe but not other regions. I’m looking forward to reading more from you.
William McNeill
Research Analyst
Gartner
Supply Chain Network Channel – that’s great! Nice vehicle and a great topic. Would love to catchup some time Chris.