Next-shoring

Two years ago, McKinsey published a report entitled ‘Next-shoring’, which highlighted ‘proximity to demand’ and ‘technological transformations’ as factors which will revolutionise global supply chains. Recent developments might give cause for a second read. With oil prices back on the rise, a fall in the value of sterling, protectionist policies from the US, a rise in the cost of Chinese labour (34% over 3 years), the decreasing cost of robotisation, shorter product life-cycles and the prospect of trade tariffs, UK businesses have cause to reflect on how they structure their supply chains. The pressure is towards speed, vertical integration and simplification, mitigating the increasing supplier risks and transaction costs. The case for onshoring certain forms of manufacturing is hence becoming more compelling, adding value to an industrial sector already benefitting from e-commerce led reorganisations.