Strategies of technology companies to meet goals

The last three years have shown that it is essential for companies, especially technology companies, to find solutions to logistics problems if they want to remain competitive.

When we talk about logistics problems, we are referring to the different problems that companies must solve to meet delivery deadlines and the costs that can skyrocket.

Since before the beginning of the pandemic, back at the end of 2019 and early 2020, the inconveniences that were disrupting the supply chain began to add up.

The pandemic, rising fuel prices, the Russian invasion of Ukraine, and rising wages in China betrayed costs, causing a downturn in the global economy, and have driven the need for companies to look for alternatives in order to get back on the path to positive results.

Since 2001, when China joined the World Trade Organization, the opening of this country to the world skyrocketed, becoming a host for thousands of companies from Europe and the USA, which chose to place their factories in those latitudes, taking advantage of its “hospitality,” causing millions of Chinese to leave the countryside to work in the new plants that were opening.

During the nearly 20 years that followed, China strengthened its position and increased its influence on the balance of trade in many countries around the world. But pandemic blockades wreaked havoc on supply chains, delaying deliveries and making it difficult for companies to fulfill orders taken.

On the political side, sanctions against China by the U.S. government also forced companies to look for alternatives that were “better seen.”

The fuel price skyrocketed, impacting the value of transportation and causing the sea freight of a container to go from $2,500 to $20,000, which was a determining factor in the search for less expensive options.

What are nearshoring, friendshoring, and onshoring?

Against this backdrop, U.S. companies needed to find closer locations for their factories, mainly in Mexico, but in general, the entire U.S. region is benefiting greatly. This relocation is known as “nearshoring” and means taking advantage of geographic proximity to reduce transportation logistics costs.

Another mechanism, which has a strong political influence, is known as “friendshoring” and can be translated as relocating the facilities of companies formerly based in China to countries that share ideological principles.

And the third, “onshoring,” refers to the fiscal, structural, financial, economic, and political benefits that different U.S. states offer to technology companies that decide to set up in their territory, prioritizing renewable energies and care for the environment.

Not everything is rosy

Despite what it may seem, there are several drawbacks to the relocation of Chinese companies to Mexico or the rest of Latin America—mainly related to infrastructure, security, and politics.

In addition, ocean freight costs have returned to pre-pandemic values, eliminating this aspect of the logistics problems.

Another point to keep in mind is that China is the main buyer of many of the products manufactured by companies located in its territory. So it would be logical to think that this could change if companies decide to move elsewhere.

It is quite possible that many companies decide to modify their structure, distributing their production in different locations to achieve a financial balance, trying to take advantage of the different benefits. 

Continue reading about the different industries with Trebinaldi, a content service provider member of ATA. And remember! You can rely on us if you need original content, translations, or proofreading of your blogs, website, social media, business, and more!

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