74% of U.S. SMBs Ramp Up Nearshoring But Switching Suppliers Is Highly Complex

SMBs have switched an average of four suppliers to ones in North America in the past two years, according to Capterra

ARLINGTON, Va.--(BUSINESS WIRE)--Small and midsize businesses (SMBs) are embracing nearshoring to shorten their supply chains, yet making the switch to nearby suppliers is easier said than done. Capterra's 2023 Supplier Relationships Survey of 300 supply chain managers at U.S. SMBs finds that, while 74% plan to shift most or all of their suppliers to North America, managing the transition can be high-risk and complex.

Nearshoring Offers Opportunities To Address Top Supplier Challenges

Nearshoring addresses the top challenge SMBs face with their current suppliers: unreliable delivery timeframes. Nearly two-thirds (63%) of businesses expect quicker delivery and fulfillment, and 54% expect improved supplier communication as a result of nearshoring. Enhanced responsiveness to issues helps to address an inconsistent quality of delivered goods, the second most common challenge reported among SMBs.

Beyond shorter delivery time frames and more consistent product quality, nearshoring also supports improved sustainability–a key benefit amid heightened consumer demands for more eco-friendly business practices. More than half (54%) of SMBs expect improved sustainability after switching to nearby suppliers.

Switching to Nearby Vendors Requires Thoughtful Planning and Patience

Despite the benefits of nearshoring, switching vendors is not a quick or easy process. While most SMBs say they’re effective in maintaining existing supplier relationships, they feel least confident in their ability to switch suppliers to make strategic improvements. On average, SMBs report maintaining relationships with 27 suppliers. However, they’ve nearshored only an average of four suppliers in the past two years.

“It’s clear that SMBs believe in a ‘shorten to strengthen’ approach for their supply chains,” says Olivia Montgomery, associate principal supply chain analyst at Capterra. “In fact, 92% of SMBs believe it’s important to shorten supply chains for long-term success. As manufacturers gradually ramp up production across North America, supply chain leaders should take this time to evolve their nearshoring strategy.”

Successful nearshoring relies on the strategic selection of suppliers not only to shorten a supply chain but also to strengthen it. When evaluating a new supplier, SMBs should consider factors beyond proximity, such as pricing, experience, expertise, production capacity, and quality standards.

When evaluating vendors, 42% of SMB supply chain managers rate price volatility as a top challenge. To determine if a supplier’s pricing is fair, SMBs most commonly compare pricing gathered directly from other suppliers (66%) and review market pricing data from financial infrastructures such as the Chicago Mercantile Exchange (55%). Businesses can also leverage price optimization software for price tracking and market data analysis.

As the nearshoring trend continues to gain momentum, not all industries are making the switch at the same rate. Consumer electronics, food/beverage, and automotive are among the top industries moving manufacturing to North America, while apparel and cosmetics lag behind.

Supply chain professionals must stay vigilant and adapt to changing global trade and macroeconomic dynamics. Read the full report on Capterra.com for expert recommendations on how to build resilient supply chains through nearshoring strategies.

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