- 3 September 2015
- Transport / Logistics Services
A research paper by UPS suggests that 56% of European companies are planning on ‘right shoring’ their business interests as part of their logistics strategy. However, most businesses still ‘off-shore’ their business interests in the name of cost saving.
Right shoring involves balancing their supply chain from production to warehousing and distribution. The factors involve cost, quality and time to recover from operational failures. With a business in the UK, it may be more efficient to have its goods manufactured in one of the new EU countries than China due to the shorter length of the supply chain ensuring less can go wrong.
Near shoring may involve the company making its goods very close to clients to reduce the levels of inventory in transit for example. Where it can take over four weeks to get goods between China and the UK for example, making for long lead times in production, the company can be more responsive to demand with goods made in the UK even though there are price disadvantages.
The UPS study suggests that there is a clear trend toward moving supply closer to demand. VP of marketing at UPS Europe Scott Aubuchon said, “Fifty four per cent of respondents in Europe moved manufacturing closer to demand two or more years ago and 34% moved assembly closer to demand this year.”
However, 59% of European respondents currently off-shore their manufacturing arms for the sheer cost advantage of doing so. This could well change in the years to come.