Regional Sourcing Strategies

Trend Definition 

What is the essence of this trend? What is its impact? 

• Essence: Regional sourcing strategies, for instance, reshoring, nearshoring, and ally-shoring are procurement practices focused on purchasing goods and services from geographically, economically, or politically closer suppliers 
• Impact: These strategies offer benefits like reduced dependency on distant suppliers, therefore reducing the risk of disruptions and enabling shorter lead times, enhanced visibility, lower environmental impact, and streamlined communication

Trend Drivers 

Why is this trend emerging now? What’s changing? 

• Increasing Supply Chain Disruptions: Recent global events, such as the COVID-19 pandemic and trade wars, have led to severe supply chain uncertainty and disruptions
• Shift in Global Trade Policies: The rise in protectionist policies and tariffs, especially in key markets like the United States and European Union, casts doubt on the continuation of globalisation at the known speed
• Easier Transportation: Short transport routes not only benefit time-to-market and proximity to customers but also reduce carbon emissions caused by the transportation of goods

Use Cases 

How to apply this trend? 

• Reshoring: Manufacturing in the company’s home country 
  Example: Intel currently builds a $20 billion manufacturing plant in Ohio, reshoring the production of chips following the CHIPS Act
• Nearshoring: Moving production closer to the headquarters 
  Example: Boeing outsourced its wiring production to Safran, operating several plants in Mexico, to benefit from reduced procurement costs and lead times
• Ally Shoring: Production in allied countries 
  Example: Apple relocated parts of its iPhone production from China to India to lower the risks of supply chain disruptions following geopolitical tensions

Procurement Relevance & Response Strategies 

How should Procurement adapt its Processes, Organisation, and Strategy?

• Constant Risk Assessment: Regularly reassess supply chain risks to identify potential vulnerabilities and implement measures to mitigate them
• Reconfigure Supplier Network: Establish new procurement networks around the newly opened plants to stay competitive through cost and speed optimisation