The Logistics Scare and Nearshoring

Before the coronavirus, the rapid growth of international logistics and supply chain was unstoppable. Then came COVID-19.  Manufacturing plants stopped producing as consumers kept consuming. The largest issue of them all was the dependability of supplies from the world’s leading manufacturer, China. When the Coronavirus struck China, the manufacturing of goods and international trading logistics were halted putting nations like the United States in a stranglehold.

Believe it or not, the United States didn’t always rely on China for manufacturing. For decades the United States has relied on Mexico as a vigorous manufacturing partner. In the mid 1990’s and early 2000’s, many manufacturers turned to lower cost production partnerships in China. In 2020 we felt the repercussion of depending on one nation for a majority of our manufactured goods. The best example of this issue was the rise in demand for N-95 masks and the decline in Chinese production, as well as shipping.

A solution to this supply issue is nearshoring. Nearshoring is the process in shifting production and supply chain logistics to nearby countries rather than production plants further away. Many manufacturers and logistics firms are looking back to the possibility of production in Mexico and altering the dependability away from China. The supply chain that China offers is unparallel to all, but the flexibility to shift production to other countries is a must after COVID-19. When one manufacturing supply chain is rattled, companies have to be able to fill consumer demand without disrupting the flow of goods.

Opportunity arises during turbulent times. Logistics firms optimize a rather complex system of operations to deliver goods from the point of origin to the point of consumption. In 2019, logistics spending accelerated with an 11.4% increase parallel to the e-commerce growth within the United States. In the past decade we have seen industrial rents hit an all-time high, but the demand for more space is growing. The hiccups this nation has faced in its international supply chain logistics validate the necessity for expansion in our nation’s infrastructure.