As world leaders gather in Davos for the annual meeting of the World Economic Forum to discuss a business environment that is so disrupted it is now being called a “polycrisis,” deglobalization is one of the hot topics on the agenda. Following the well-documented supply chain meltdowns we’ve seen over the last few years, it is only natural that many companies are looking for ways to bring their manufacturing operations closer to home or the regions they serve through nearshoring or reshoring.
In a white paper published by the World Economic Forum in January 2023 entitled A Global Rewiring: Redefining Global Value Chains for the Future, the authors call out the role that technology has to play in making nearshoring cost competitive:
“Technology is particularly important to control cost pressures when moving to multi-local value chains. It enables firms to drive efficiency, ensure business continuity and reduce labor costs in new, higher-wage markets. Automation and digitalization technologies achieve this in different ways. The judicious use of automation in manufacturing processes can help to offset cost differentials and decrease exposure to labor shortages, which is particularly important when relocating to markets with high labor costs or aging populations.”
We agree that technology is critically important for making reshoring and nearshoring cost competitive. But the technology doesn’t have to be complicated. There are many ways that companies can install low-cost technology, such as sensors or cameras that can be integrated with AI algorithms or machine learning to create solutions that identify costly product waste and overages or to help reduce water or energy consumption. These are just a few of the types of solutions that can be implemented in weeks, with returns in just a few months.
Taking a P&L-focused approach to implementing these technological innovations is a pragmatic and rapid way to create a cost-competitive Smart Factory that can make reshoring and nearshoring strategies pay off.