How to Drive Cost-Effective Nearshoring with Automation

The past couple of years’ supply chain delays and uncertainty have led many manufacturers to rethink their long-term supply chain strategies. And increasingly, they are exploring cost-effective nearshoring strategies as a way to gain greater control, shrink transportation times and costs, and improve their competitive position. In fact, Deloitte’s Future of Freight Report found that 62% of United States manufacturers have begun the process of shifting from suppliers in Asia to suppliers based in closer-proximity markets.

For decades, the comparatively low wages of skilled labor across many Asia-Pacific countries provided a cost-benefit even when raw materials or components had to be shipped from the U.S. for use in offshore production. However, the equation has shifted with the growing adoption of automation powered by real-time data to manage nearshore operations. This enables manufacturers to compete on the basis of faster, predictable turnaround times and greater customization to meet buyers’ demands while also helping to offset higher regional labor costs.

Six Ways Automation and Real-Time Data Can Drive Cost-Effective Nearshoring

Let’s look at six ways that using a manufacturing enterprise resource planning (ERP) system to leverage real-time data and drive automation can help manufacturers get the most out of their nearshoring by controlling costs, improving supply chain performance, increasing quality, and gaining valuable customer feedback.

1. Optimize inventory management.
   The trucking and rail transportation used with nearshoring makes it cost-effective to handle smaller shipments, minimize the need for excess inventory, and support just-in-time (JIT) manufacturing. In this scenario, manufacturers and their nearshore partners can gain accurate, up-to-date insights into inventory overhead by capturing real-time data from the shop floor—typically using a manufacturing execution system (MES)—and automatically updating the ERP system’s inventory management. By understanding, for example, the rate of production, the amount of material being used in production, and the amount of scrap available for reuse, it’s possible to maintain the right level of inventory to support customers while minimizing overhead.
2. Strengthen collaboration with suppliers and contract manufacturers.
   Supply chain integration across platforms and applications provides continual updates on product quality at the network and supplier/contract manufacturer level to facilitate operational efficiency and greater knowledge sharing. Real-time data, in combination with technologies such as ERP, supply chain management (SCM), customer relationship management (CRM), and analytics can help manufacturers and their partners collaborate and ultimately orchestrate efforts to adapt to changes in demand in real-time—without impacting quality levels.
3. Increase productivity via shop floor insights and light-out operations.
   For some manufacturers, nearshoring takes the form of setting up their own facilities across the border. Real-time data captured by MES software at nearshore facilities can prove invaluable for gaining a more accurate, immediate end-to-end view of shop floor operations. This, in turn, enables manufacturers to identify production bottlenecks across nearshore production operations and quickly make informed decisions that will increase production efficiency and cost savings. One DELMIAWorks customer who has been nearshoring for years—expanding operations from the western US to Mexico—has gone further. The manufacturer leverages real-time data and MES software to remotely run lights-out production runs in the nearshore facility, minimizing staff demands while maximizing productivity.
4. Ensure production consistency.
   Nearshoring makes it easier for manufacturers to deliver different parts and products while meeting customers’ tight timelines. By implementing an intuitive touchscreen user interface at each work center on the shop floor that ties back to the MES and ERP software, manufacturers can help to get operators started on production runs quickly while ensuring consistency across local and nearshore operations. Through easy-to-use widgets, managers can set up work center dashboards and rename fields to present operators with only the information and processes needed to do their exact jobs. Additionally, with immediate access to real-time product and process monitoring data, operators, managers, and others can quickly respond to customer inquiries, management requests, and production planning adjustments as necessary.
5. Improve alignment between costs and pricing.
   Adjusting customer pricing to align with rapid cost changes for raw materials is difficult in any instance. It’s even more complicated when an offshore partner is thousands of miles and an ocean away. Nearshoring reduces the gap between the time materials are purchased and when finished goods are delivered to customers. When an ERP system uses real-time cost data to automatically update customer pricing, manufacturers can more effectively maintain their margin as well as justify their cost structure with customers. Automation also significantly reduces the demands on employees—in the case of one DELMIAWorks customer, cutting the time to update individualized customer pricing from 40 hours over 2 weeks to just 2 hours.
6. Adapt Rapidly to Change.
   More and more manufacturers with nearshore operations are competing on their ability to handle short runs and speed up the time to delivery for customers. Because their success depends on the ability to rapidly switch between different production runs, one-size-fits-all automation solutions are impractical. Instead, they rely on ERP systems, such as DELMIAWorks, with its support for 28 different manufacturing styles, to quickly reconfigure production lines and workflows, as well as create and modify production plans to meet customer demand. Each manufacturing style also provides contextually relevant, real-time production and process monitoring data to help manufacturers make better, faster decisions and ensure that production plans are accurate and up-to-date.

Conclusion

Nearshoring strategies are gaining momentum as manufacturers seek greater control and continuity in the wake of supply chain uncertainty—and as automation and real-time data provide a viable and cost-effective nearshoring option. By combining real-time data with ERP, MES, and other software solutions to automate their operations and improve decision-making, manufacturers with nearshoring business models are gaining the ability to increase customer satisfaction, streamline operations, reduce their costs, and gain a competitive advantage.