Buffeted by rising transportation costs and increasing customer demands for fast delivery, high-tech executives are pulling back from a long-held strategy of offshoring their supply chains, according to a survey released today by consultancy IDC Manufacturing Insights.
Polled about their plans for building supply chain networks to support manufacturing, 47 percent said they continue to pursue offshoring strategies to reduce labor costs. However, a growing portion of those executives are taking the opposite path, positioning their supply chains closer to local resources and markets to cut transportation and inventory carrying costs, reduce transit times, protect intellectual property rights, and improve customer service.
About 45 percent of respondents are "right-shoring"s—optimizing the supply chain for cost benefits—while another 35 percent said they practice "near-shoring," which moves manufacturing or assembly closer to the location of demand, according to the fifth annual survey of its kind, which is commissioned by Atlanta-based shipping and logistics giant UPS Inc.
The popularity of near-shoring has grown by 25 percentage points since 2010 as corporate leaders seek more nimble supply chains in an age of burgeoning high-tech exports and global markets, according to the survey.
"High-tech companies are building more flexibility into their shoring strategies and supply chains so they can respond better to demanding market dynamics," said Dave Roegge, high-tech marketing director at UPS. "They're thinking more holistically about their strategies to evaluate their transportation costs and the time it takes companies to deliver goods."
IDC researchers polled 516 high-tech executives and senior high-tech supply chain professionals in North America, Europe, the Asia-Pacific region, and Latin America.
Virtually all respondents expressed optimism about the growth outlook for high-tech U.S. exports, with 46 percent predicting growth to continue at its current pace, or even faster, through 2017. Penetration of emerging markets is becoming more prevalent, with 71 percent saying they sell products in China, 45 percent in India, and 42 percent in Brazil.