Three Considerations for Domestic Supply Chain Efficiency

What are some key requirements for domestic supply chains to operate efficiently? Well, it’s complicated, and much depends on the current operating environment. But, here are three considerations to be made at a high level.

1.) Strategic inventory management and proximity to your product.

Businesses will need to take a long-term approach of where they manufacture, store, and distribute their inventory. In June 2022, an ABB poll of 1,600 executives in U.S. and Europe said 70 percent of respondents are looking into or planning to re-shore or nearshore their manufacturing. More than a third said they plan to return production to the U.S. It’s possible that today too much inventory is too far away from the end customer, which in times of stress can lead to supply chain issues. In October, the average material lead times from suppliers remains 85 percent higher than pre-pandemic levels.

Shippers are asking themselves, how can we better control our own destiny to deliver that velocity? The answer to that may be not having too much production and inventory under the control of things like geopolitical issues or a backed up port.

2.) Adding capacity and investing in technology

Businesses poised for growth are planning for the future with significant investments in capacity and technology improvements. This is an important component in ensuring an efficiently run supply chain, however, in many cases capacity could be limited to labor availability. Many shippers we talk to today are looking at technology for strategic planning and to supplement some manual labor. Research shows most business leaders are looking into robotics, digitalization or artificial intelligence to help offset a diminishing labor resource or the escalation in labor costs.

For example, you may not be able to change to distance and speed of travel, but you can always improve your processes and data to improve decision making. 

3.) Create a sense of urgency

There’s an old proverb that says, “Build the well before you are thirsty.” As business leaders, we need to be making decisions now and commit to preparing for potential issues in the supply chain. Geopolitical issues will always arise at inconvenient times, but as business leaders, it’s our job to best prepare for issues within our control and consider potential risk outside of our control.

Shifting the global supply chain as we know it will not happen overnight. In fact, it will likely take a decade or more to accomplish nearshoring. But, those wells need to be dug today to prepare for it.