According to a KPMG survey of 250 US-based executives from companies with annual revenues exceeding $1 billion, the percentage of US-serving supply chains located in North and South America is expected to rise from 59% to 69% in the next two years. This shift from globalized to localized supply chains is a strategic response to recent crises, including the COVID-19 pandemic and the Panama Canal drought, which exposed the vulnerabilities of longer trade routes. More on this can be found in this article on U.K. Supply Chains Shift Towards Nearshoring.
Shifting Geographical Preferences
The survey also predicts a shift in the countries housing the majority of these operations. The US’s share is expected to drop from 62% to 44%, while Canada’s share is likely to dip from 39% to 30%. Mexico, however, is set to see its share rise from 27% to 36%, replacing Canada as the second-most popular country for nearshoring in the Americas. For more insights on this, check out this article on Strategic Nearshoring: Mastering Relocation to Mexico in 2024.
Streamlining Supply Chain Routes
In the aftermath of the pandemic, companies are moving away from the just-in-time approach to supply chains and lean inventory. Instead, they are streamlining supply chain routes to reduce the number of steps or locations that their products need. The average number of supply chain locations is expected to fall from 2.7 to 2.4 in the next three years. You can read more about this in the article Strategic Shift: Supply Chain Resilience Over Cost-Cutting.
The Future of Nearshoring
Despite the expected decline in nearshoring within the US, the country remains a key player in supply chains. Factors such as Mexico’s manufacturing base, low labor costs, and participation in the US-Mexico-Canada Agreement give it advantages over other countries. However, China continues to be a significant player, with many companies adopting a “China Plus One” strategy, producing goods in China and one other country. For more on this, see the article The Shift Away from China: Exploring New Manufacturing Hubs.
