Worldwide supply chains are feeling the impact of El Niño affecting the Panama Canal, increasing extreme global weather patterns and trade disputes. These global supply chains have been disrupted for myriad reasons over the past three years, and they are still very unpredictable. At its worst, transit times from Asia to the U.S. could take as long as three months.
These continued disruptions mean companies are looking for alternatives and realizing the benefits of having facilities and services closer to home. Nearshoring — or reshoring — the process of transferring business closer to home, is becoming very attractive to U.S. companies. It allows companies to be more agile, have a quicker reaction time to market shifts, and hold less inventory, saving cash.
According to Deloitte’s ‘Future of Freight’ report, the shift to nearshoring or reshoring could reduce the share of Asia-originating shipments to the U.S. by 20% by 2025 and by 40% by 2030. In 2022, 400 North American companies were exploring moving their operations from Asia to Mexico, Mexico’s economy minister Raquel Buenrostro said.
Not only is Latin America much closer geographically to North America, allowing for time zone overlap, but it also offers reduced labor costs with the added assurance of human rights. And with more companies looking to move operations closer to the U.S., it will have a massive impact on the continued development of countries in the region.
Latin America is a predominant source of fresh produce for much of the world — it’s a critical region for the world’s food supply. An increase in investment across Latin America allows the countries the ability to improve the infrastructures that the logistics industry relies on. With increased investment comes an increase in the quality of life for those who call Latin America home. Better infrastructure benefits not only businesses that operate in the region, but also the people that use the roads, bridges and tunnels to get where they need to go.
Compared to the United States and Europe, Latin America doesn’t have the same level of infrastructure to move products efficiently. However, increased trade between Latin America and other regions means an influx of investments to improve these things, including the region’s ports.
But it will take a shift in the entire logistics industry. The industry must become more flexible and agile, using technology for solutions, especially in fresh, perishable supply chains with tight margins.
Network Shipping, as part of the Fresh Del Monte family of companies, specializes in the transportation of perishables and north/south trade between the U.S. and Latin America. We were built for fast, direct transit times between the regions and use smaller, regional ports to transport quickly and reliably. During Panama’s drought and canal restrictions, Network Shipping’s alternative routes from Peru and Costa Rica’s Pacific coast lessened the impact on its operations and customers.
As companies look to nearshore or reshore their manufacturing and services, these shipping lines will only prove more important. And with increased demand comes the need for a robust regional supply chain, ships to transport goods, and the ports to receive them. It’s a fundamental shift in how the world transports its goods, but one that we need to be ready for.