While outsourcing to other countries may reduce manufacturing costs, companies are starting to realize that overall supply chain costs may increase. A recent report by AMR Research reveals that while 90% of surveyed goods producers have outsourced production -- frequently offshore to developing economies such as China, India, and Korea -- 56% of the responders say that the total landed cost of the goods had actually increased. Among the hidden costs that drive up the final price of goods are rising fuel costs and higher inventory holding costs due to the longer distance and unplanned airfreight. One way to offset these supply chain costs is near-sourcing: balancing the benefits of lower-cost manufacturing with shrinking the distance of supply source to the markets served.
Brian Flood, President of Last Mile Logistics Group, points out, "It's easy for the scale of an overseas supply chain to overwhelm supply chain managers, given the number of variables involved and associated costs. Near-sourcing can mitigate the supply chain risks of delays at crowded ports, expedited transportation costs, obsolescence and variable overseas quality and counterfeiting."
While near-sourcing for the US market may involve looking at closer countries such as Mexico and Latin America, another component is analyzing the in-country distribution network to improve local market access. Flood continues, "Outsourced manufacturing may be a permanent supply chain solution for some companies, especially if the inbound supply chain is well-managed. Near-sourcing solutions that include outsourcing to regional 3PL companies to improve access to the markets that a business sells in is one component that can reduce costs and enhance customer service. Last mile 3PL providers with local distribution capabilities like LMLG offer a crucial part of a near-sourcing strategy, and with our Logistics Value Added (LVA') financial measurement, we can show businesses in simple financial terms the benefit that near-sourcing through the use of a regional 3PL can provide."
