The current landscape, mired in geopolitical tensions, trade disputes, inflation, shortages, stockpiling, and the far-reaching impact of Covid-19, calls for an evolution in sourcing practices. The objective? To maintain supply continuity while keeping cost management at the forefront. However, there's no singular solution. Depending on the unique business scenario, nearshoring might be the right move for some, while others might still find offshoring to be their best bet.
As 2023 unfolds, the lingering challenge of supply and material shortages continues to hold center stage for businesses across industries. This daunting concern is shared by over one-third (37%) of respondents in the CPO Compass 2023 survey by Procurement Leaders. Reacting to these uncertainties, foresighted companies are prioritizing resilience and fortifying supply security. Significantly, 42% of the recent survey's respondents reported that they've already made permanent changes to their supply chains, marking sourcing as an area of vital focus.
Revisiting Sourcing Decisions
Traditionally, sourcing decisions hinged primarily on cost considerations. However, procurement in 2023 must navigate a complex balance between cost-effectiveness and critical factors such as risk management, sustainability, and innovation. This introduces the need for a more tailored strategy known as "right-shoring" – identifying the perfect mix or solution that strikes the right balance of agility, resilience, and competitiveness for your enterprise.
Implementing Right-Shoring in 2023
Kick-starting a right-shoring strategy doesn't need to be a herculean task. Here are some foundational steps that businesses can adopt:
- Sync with Business Strategy: Ascertain that procurement goals are harmoniously linked with the company's overarching objectives. This eliminates the potential for strategic gaps and misalignments.
- Re-evaluate Your Value Chain: Take a fresh look at your end-to-end value chain and the encompassed supply chain. Understand the core pillars of your business and avoid endangering these critical elements. Identify areas where changes have occurred and whether these signal a need for a revised sourcing approach.
- Begin Small, Dream Big: Identify opportunities that create value – be it reducing risk exposure, enhancing quality, or boosting performance. Start by addressing areas needing restructuring or improvement, for instance, a production location in a high-risk zone or a facility grappling with labor-related issues. As your strategy and capability take shape, you can then shift focus to the next area.
- Harness technology: Leverage technologies like AI and data analytics to make your value chain more interconnected and agile. These tools can boost visibility, aid in anticipation and planning, enable collaboration, and facilitate quicker decision-making. They can help evaluate suppliers, conduct e-auctions, analyze responses, and much more. However, remember that the accuracy of your data and the human skills in utilizing technology will be the real game-changers, especially in sourcing decisions.
A Clarion Call for Action
The consequences of inaction are clear and significant. The variables influencing business decisions have evolved, and what seemed like the ideal solution in the past may no longer be appropriate. With businesses exploring both nearshoring and offshoring avenues, it's critical for CPOs to reassess their approach. They need to devise an effective strategy to seize the opportunity and reap the rewards of right-shoring.
In conclusion, right-shoring isn't just a buzzword; it's a business necessity. By adopting a strategic, custom-tailored approach to sourcing, businesses can build a robust, resilient, and agile supply chain, preparing themselves for the challenges of an increasingly unpredictable future.
