Due to the great advancement in the field of automation, robotics and software engineering, the demand for the large teams of low-skilled and fairly inexperienced workers in remote places has been declining. Instead, a large number of high-tech companies is opting for strategic shifts in their supply chain model and are slowly transferring to nearshoring.
The benefits that come with this particular business model are numerous: this way the companies are enabling greater customer-centricity, meeting changing customer demand patterns and capturing rising growth opportunities. In addition, they are striving to bring production closer to demand, as well as to improve control over quality of the development process. The following article outlines some of the benefits of nearshoring for the high-tech companies.
Lower quality at a lower rate
The chase for the lowest cost of labor is no longer the only factor when looking to outsource. China used to be, and still remains for some, an attractive offshoring destination due to the lower cost of labor force. However, once you include the cost of shipping, it becomes apparent that it does not pay off in the long run. Furthermore, the fact that “cheaper is not necessarily better” cannot be so easily disregarded. This means that aside from the cost, the skills and the quality of workforce has to be taken into consideration as well.
By taking a broader look at the network design, and adding lead times, intellectual property and product quality into the total supply chain equation, nearshoring soon became an important variable. By moving software development operations closer to the parent company, project managers are provided with a close oversight of their operations. If a company localizes its supply base, it enables the managers to take more frequent visits and monitor the entire process. Consequently, by checking every part of the process, what the company is actually contributing to is the utmost quality of the final product.
With moving operations closer to their customer base, high-tech companies are provided with the better understanding of their customers’ needs, as they are designing product with a specialized configuration to meet the needs of the local consumers. Almost 40% of professionals expect their supply chains to grow after shifting their focus from product cost and quality to customer-centricity. Furthermore, refocusing the efforts will improve customer service by contributing to the reduction of lead times, improved planning, improved fulfillment and improved post-sales/returns capabilities.
Early bird sells the worm
Tech market is a highly competitive one, with new products emerging on a daily basis – every second counts. Manufacturers are racing to be the first ones to introduce their innovations to the customers and the first one to get to the market has an advantage by being the first to satisfy customers’ needs. When transferring a part of your project or an entire one to a particular area, consumers get products more quickly than when shipped from a remote part of the world. Overall, this contributes to downsizing the number of lost sales and stock outs.
Nearshoring certainly stands out as a convenient business model as it offers both temporal and locational proximity. With such benefits, you are looking at a successful collaboration with your nearshoring partner, high levels of productivity and first-class product quality at a lower cost.
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