Regionalization: a Catalyst for Supply Chain Efficiency

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In response to growing customer expectations, supply chains are looking at regionalization as a way to be more efficient.

At the beginning of this year, Morai Logistics presented 4 supply chain and logistics trends to watch for 2019. Included in this list were the current capacity crunch, transportation regulation mandates and direct-to-consumer fulfillment that result from an increase in consumer expectations. To expand their distribution capacity, supply chains have tried localizing production through a strategy called demand-chain. Yet, the continued growth of the market is so pervasive, that the industry must continue to innovate.

According to Supply Chain Management Review, globalization has pushed supply chains to think smaller when it comes to tackling the big picture. Rather than disperse manufacturing across the globe, research indicates that regionalization is a more viable option. Organizations benefit from mobilizing products closer to the consumer, and also help remove barriers associated with efficiency and delivery.

This article by Morai Logistics explores the concept of regionalization, or post-globalization, and its current impact on the supply chain industry. It also aims to outline the benefits organizations gain from implementing this type of organizational restructuring.

Regionalization at a Glance

As mentioned above, regionalization has been found to be a product of globalization. It’s a form of organizational restructuring that aims to address ‘visibility and velocity’. The idea here is to propose a greater emphasis on meeting the growing expectations of consumers that are influenced by globalization. It also moves us to ask the question, can regionalization actually act as a catalyst for supply chain efficiency?

Research defines regionalization as involving…

The reorganization and division of manufacturing into smaller segments and more localized economies.

Global supply chains are very complex and can lead organizations down a path with greater risk and vulnerability. However, a consistent factor that has been a positive contributor to both globalization and regionalization is technology. How industries learn to leverage and apply manufacturing technology, enables organizations to create regional supply chains.

In order to lead in a fairly competitive industry, supply chains must become more strategic. According to Global Supply Chain Ecosystems writer, Mark Millar,

World class organisations no longer perceive the supply chain as merely tactical support for business as usual, but take a holistic position that their supply chain is what drives the business.

This has never been more applicable than when it relates to regional supply chains. As customer expectations continue to grow, there are considerable advantages to having production closer to home. Let’s explore some of the top advantages that regionalization provides organizations.

Benefits of Regionalization

To meet the growing needs of consumers, organizations must ensure their supply chains are efficient and agile. That means working technologies to create efficient, cost-effective solutions. As mentioned above, technology plays an integral role in enabling supply chains to become innovative at their approach to moving product.

When an organization breaks down a complex supply chain into smaller regional locations, they are able to streamline processes with ease. In addition, they achieve the following benefits:

  • Create visibility across supply chains
  • Increase the velocity and agility of supply chains
  • Improve response rates to ‘market changes’
  • Deliver consumer expectations and demand

In conclusion, supply chains must continue to evolve their structure in order to compete and meet the needs of today’s consumers. While the impacts of globalization remain, there is a need to respond to change in a more efficient and agile manner. Regionalization is a beneficial way for supply chains to utilize their existing networks of manufacturers, by separating them into smaller sites. This will ultimately help organizations bring product home to their customers, while differentiating the business and improving performance.

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