Is nearshoring the real deal?

As companies move away from lean manufacturing, the automotive aftermarket is increasingly looking at nearshoring. But is it a fad or is it here to stay?

Nearshoring, sometimes called onshoring, would see a company’s manufacturing operations moved from overseas to closer to home. So instead of in, say, China, it would be done in North America in, say, Mexico. The pinch on the supply chain has made many companies look at this option to reduce delays in getting products into the hands of customers.

This was an obvious solution to Tom Cook, managing director at supply chain consultancy Blue Tiger International, who spoke at the Automotive Aftermarket Suppliers Association (AASA) Global Summit in Miami in February.

“A lot more companies are what we call the nearshoring, which is they’re bringing a lot more of the manufacturing here, or closer [such as to] Mexico, Canada, other countries, because of the exposures,” he said.

At the AASA Vision Conference in Detroit in April, a panel of CEOs was asked if this nearshoring was indeed a move taking place.

“This has been really painful,” Ben Smart, vice president of aftermarket for North America at ZF Services, said of supply chain delays. “And I think that that will be seared into people’s memory and strategies.”

From left, Ben Brucato of AASA, Ben Smart or ZF Services, Mike Carr of Cardone Industries, John Hanighen of Cloyes Gear & Products and Eric Sills of Standard Motor Products take part in a panel at AASA Vision 2022

An issue he raised with nearshoring is the increased cost of domestic labour. Yes, there’s an advantage to only needing to rely on trucks to move goods around. But if that comes at doubling the price of your goods, is it worth it? Unlikely, Smart said.

“And the trick now is to be efficient, learn about raw material, coverage and localization. And that’s a learning process,” he added.

Even when manufacturing closer to home, it can still be a challenge getting raw materials, noted fellow panellist Mike Carr, chief executive officer of Cardone Industries.

“Largely most of what we do is re-manufacturing. We’ve had to onshore some of the parts that go into what we do,” he explained. “So even though we may be manufacturing here in Mexico or in the U.S., we still have to get things that we need in order to be able to effectively re-manufacture.”

Nevertheless, this is indeed happening and nearshoring won’t be a short-lived experience, the panel agreed.

“If we look at the work that’s gone into the background, look at some of the work [that has been] done, looking at their strategy on supply — that’s taken a lot of investment and a lot of hours. I don’t see it as a short-term trend,” Smart said.

Image credit: Depositphotos.com