In the dynamic landscape of OEMs and distributors, sourcing strategies play a pivotal role in ensuring operational efficiency, cost-effectiveness, and overall business success. One key approach is near-shore sourcing. According to a UBS Bank poll earlier this year of more than 1,600 executives, many senior leaders in a variety of different sectors intended to move parts of the supply chain closer to home — 78% in Europe, 70% in the U.S. and 54% in China. Daniel Harms, CEO, Americas at Optimas Solutions dug into the intricacies of near-shoring, examining their benefits, strategies, and how they impact the supply chain for OEMs and distributors.

Near-Shore Sourcing

Near-shore sourcing involves procuring goods and services from suppliers located in close geographical proximity to the manufacturing or distribution facilities. This approach offers several advantages for OEMs and distributors:

• Reduced Lead Times: One of the primary benefits of near-shore sourcing is the reduction in lead times. Proximity allows for faster transportation of goods, minimizing delays in the supply chain.
• Lower Transportation Costs: With shorter distances to cover, transportation costs are typically lower in near-shore sourcing. This can contribute to significant savings, especially for bulky or time-sensitive materials.
• Improved Communication: Near-shore sourcing facilitates easier communication between the OEMs or distributors and their suppliers. Time zone alignment and cultural similarities can enhance collaboration and problem-solving.
• Flexibility in Order Changes: Proximity enables more flexibility in adjusting orders, responding quickly to changes in demand, or accommodating last-minute modifications to specifications.

3 Best Practices in Near-Shore Sourcing

1. Implement in Stages

Not everything needs to be included in a near-shore sourcing strategy. By implementing in stages, you can gauge where you have the most disruption in your business. These items can be segmented by product families, product characteristics, and usage to ensure you are selecting and leveraging the proper local partners and distribution centers.

2. Find the Right Partners

This best practice is crucial in making your transition seamless and successful! Some attributes to look for include:

• Do they proactively bring cost-out activities?
• Do they have in-house testing to ensure there is no sacrifice to quality or additional time and/or costs to send out for testing?
• Do they have on-hand and local expertise?
• Do they have certifications?

3. Use Data-Driven Segmentation

Let the data feed your decision making. Utilize quantitative forecasting, as well as qualitative knowledge, and collaborate for end-to-end visibility.

Choosing the Right Strategy

Making the decision on near-shore sourcing depends on various factors, including the nature of the industry, the specific needs of the OEMs or distributors, and the preferences of the end consumers. In some cases, a hybrid approach that combines elements of both near-shore and on-shore strategies may be the most effective solution.

Sourcing strategies are critical determinants of success, whether opting for near-shore or on-shore sourcing, each strategy presents a unique set of advantages and challenges. The key lies in understanding the specific requirements of the business, weighing the pros and cons, and strategically aligning sourcing decisions with long-term goals. Ultimately, a well-thought-out sourcing strategy can position OEMs and distributors for sustainable growth and resilience in the face of an ever-changing global market.

You can watch Daniel’s full IFE 2023 presentation by visiting our video library, IFE Replay.