Is onshoring the answer to the global supply chain crisis?

By Dr John R. Thomas
Thursday, March 24, 2022

With backlogs in orders and increased shipping costs, bringing operations home with the help of advanced digital technology may provide greater opportunities for SMEs

Global supply chains and international trade have exploded in the last 50 years. The intricate, international sequence of steps needed to make and sell products on a global scale has allowed companies to source production where it’s cheapest, delivering a wider range of goods at lower costs to consumers.

Yet international trade can also create problems. COVID-19 revealed that modern global supply chains are a house of cards, collapsing the moment they come under any kind of sustained pressure.

Welsh flag for Onshoring Article

Businesses wrong-footed by global lockdowns have found the speed of recovery treacherous to navigate. Clogged ports (compounded by events like the blockage of the Suez Canal, freak weather events and a fire at a Japanese silicon chip manufacturer) have led to significant backlogs and a major increase in shipping costs, which are then often passed onto the consumer.

The pandemic has highlighted how interconnected and easily destabilised global supply chains can be. Supply chain bottlenecks, congestion and blockages in the production system have affected a wide variety of sectors, services and goods.

Onshoring — the practice of bringing offshored operations back home to their original country — may be the solution to these challenges.

Advantages of onshoring

Businesses re-examining their supply chains have come to realise that their logistics networks may not be as resilient as they once thought.

However, this situation also offers opportunities. By exploiting digital Industry 4.0 techniques, small and medium sized companies (SMEs) can become agile and flexible, minimising the impact of long supply chain delays on which they have little influence and control.

By onshoring operations and developing technologies that facilitate the adoption of more flexible, demand-driven business models, supply chain response times can be reduced. It also allows SMEs to improve their resilience, enabling them to withstand disruptions caused by global events.

Sourcing goods and services closer to customers and end markets can help to de-risk supply chains while simultaneously shortening the overall lead time from order to delivery.

Adapting to digital

Digital-inspired technological advances are set to transform modern manufacturing as consumer demand for bespoke products increases. 3D printing of new design prototypes and individualised joint replacement in surgery are just two examples of this phenomenon.

These changes have huge implications for supply chain businesses, who will need to respond and adapt. Flexible processes such as additive manufacturing and reconfigurable robotics will reduce the importance of economies of scale in some types of manufacturing, supporting greater localisation of the supply chain while allowing greater customisation of products and services.

Deploying digital automation is a compelling reason to onshore and shift production to a domestic base. Automation allows organisations to offset some of the costs of onshoring, using robotics and intelligent capabilities that automate machines and tools. These intelligent systems can complete tasks more quickly and accurately than humans.

 

Dr John Thomas

Closing the skills gap

Any manufacturer considering onshoring operations should develop a strategic plan, taking into account supply chain risk, continuity of supply, quality, and price.

An understanding of how to close the gap in digital skills is also important. The digital skills gap refers not only to a shortage of highly skilled technology and IT professionals, but also a lack of fundamental skills among employees, which prevents them developing capabilities for performing more complex day-to-day tasks.

In 2019, The Open University’s Bridging the Digital Divide report found that nearly nine out of 10 (88%) UK organisations admitted to facing a shortage of digital skills, resulting in a significant negative impact on productivity, efficiency and competitiveness.

Stronger partnerships are required between governments, industry and education providers to ensure new skills are developed in the following competence areas:

  • Information and data literacy
  • Digital content creation
  • Cloud computing
  • Digital communication and collaboration
  • Digital problem solving
  • Digital security
  • Digital project management

A good example of collaboration between government, academia and industry is the SMART Digital Accelerator at University of Wales Trinity Saint David (UWTSD).

This programme utilises industry expert advisers to work with manufacturers in Wales, helping them identify the right technology to boost their bottom line.

The project is funded by Welsh Government, delivered by UWTSD, and supported by the Advanced Manufacturing Research Centre Cymru (AMRC Cymru). With the support of SMART Digital Accelerator, Welsh companies can capitalise on new opportunities, grow their organisations and improve competitiveness.

About the Author

Dr John R. Thomas is a consultant and lecturer with 40 years of experience introducing state-of-the-art skills and techniques in diverse industries. He is also an expert adviser on the SMART Digital Accelerator team at University of Wales Trinity Saint David.

 

Further Information

accelerator@uwtsd.ac.uk