Reshoring is a goal for most companies in an effort to shorten supply chains, however, small and midsize businesses (SMBs) are finding it difficult.
In a new survey, Capterra's 2023 Supplier Relationships Survey, of 300 supply chain managers at U.S. SMBs, 74% plan to shift most or all of their suppliers to North America, but managing the transition can be high-risk and complex.
The survey found that nearly two-thirds (63%) of businesses expect quicker delivery and fulfillment, and 54% expect improved supplier communication as a result of nearshoring. Enhanced responsiveness to issues helps to address an inconsistent quality of delivered goods, the second most common challenge reported among SMBs, the survey notes.
Beyond shorter delivery time frames and more consistent product quality, nearshoring also supports improved sustainability–a key benefit amid heightened consumer demands for more eco-friendly business practices. More than half (54%) of SMBs expect improved sustainability after switching to nearby suppliers.
Switching to Nearby Vendors Requires Careful Planning
While most SMBs say they are effective in maintaining existing supplier relationships, they feel least confident in their ability to switch suppliers to make strategic improvements. On average, SMBs report maintaining relationships with 27 suppliers. However, they’ve nearshored only an average of four suppliers in the past two years.
“It’s clear that SMBs believe in a ‘shorten to strengthen’ approach for their supply chains,” says Olivia Montgomery, associate principal supply chain analyst at Capterra, in a statement. “In fact, 92% of SMBs believe it’s important to shorten supply chains for long-term success. As manufacturers gradually ramp up production across North America, supply chain leaders should take this time to evolve their nearshoring strategy.”
When evaluating potential vendors, 42% of SMB supply chain managers rate price volatility as a top challenge. To determine if a supplier’s pricing is fair, SMBs most commonly compare pricing gathered directly from other suppliers (66%) and review market pricing data from financial infrastructures such as the Chicago Mercantile Exchange (55%).
In addition to price concerts, the survey suggests looking at other factors including experience, expertise, production capacity, and quality standards.
As far as which industries are adapting reshoring at a fast pace, the survey discovered that consumer electronics, food/beverage, and automotive are among the top industries moving manufacturing to North America, while apparel and cosmetics lag behind.