Nearshoring Emerges as Key Supply Chain Risk Mitigation Strategy for European Firms

In a bid to enhance supply chain resilience, nearly half of European businesses are prioritizing nearshoring and reshoring strategies, according to a recent survey conducted by Inverto, an international management consultancy specializing in procurement and supply chain management.

The Primary Approach to Restructuring Supply Chains: The study, which involved around 95 companies primarily from Germany, Austria, and Switzerland, revealed that 42% of respondents consider regionalization as the primary approach to restructuring their supply chains. The respondents, spanning manufacturing, service, construction, and process industries, indicated a strong inclination towards relocating orders to neighboring countries to bolster efficiency, flexibility, and reduce delivery times.

Nearshoring Plans and Preferences: A significant 63% of the surveyed companies expressed intentions to restructure their supply chains in the next five years. Notably, 67% of industrial firms plan to shift procurement capacities to regions offering greater political stability. Eastern Europe emerged as the favored nearshoring region, with 57% of companies already sourcing goods from this area, and 32% planning to relocate activities to Eastern Europe in the coming years. In contrast, a mere 9% of companies are contemplating relocating to Western Europe.

Drivers for Relocation: Geopolitical tension takes center stage as the primary reason for relocation, cited by 91% of respondents. The study underscores that only 11% are optimistic that politics alone can resolve global tensions. Production costs also wield considerable influence, with 82% of companies viewing them as a key factor when restructuring their supply chains.

Inverto's Managing Director, Sushank Agarwal, emphasized the potential benefits of nearshoring, stating, "Nearshoring can unlock potential in three dimensions - increasing resilience, accelerating lead times, and making progress in sustainability." Agarwal urged companies to rethink their sourcing strategy and expand their geographical scope when evaluating nearshoring potential to maximize opportunities.

Looking to the Future: As companies grapple with evolving global dynamics, the survey signals a proactive stance among European businesses toward securing their supply chains against disruptions. The findings indicate a growing recognition of the importance of nearshoring and reshoring as strategic initiatives, aligning with broader industry trends aimed at achieving greater supply chain robustness.

With geopolitical considerations at the forefront and an increasing focus on mitigating risks, European firms are poised to redefine their supply chain strategies to navigate the complexities of the global business landscape. The survey results provide valuable insights into the shifting dynamics of supply chain management and underline the significance of nearshoring in the strategic playbook of European businesses.

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