Manufacturers claim it’s harder to do business now than during the pandemic. This comes as 83% of manufacturers reveal that the past six months have presented significant challenges, including interest rate increases, upward pressure on wages and increasingly complex global supply chains. Here Thomas Lobert, solutions consultant at Descartes Systems Group, explains why these challenges are reshaping the landscape for manufacturers and what strategies they can employ to navigate this evolving business environment effectively. 

Key Takeaways

  • Manufacturers face increased interest rates, wage pressure, and complex global supply chains, making business harder now than during the pandemic.
  • 58% of manufacturers are reshoring production to their home countries to reduce costs, speed up sourcing, improve product quality, and enhance supply chain reliability. 
  • Reshoring requires thorough jurisdictional and entity-level due diligence, considering legal, regulatory, and geopolitical factors. 
  • Transitioning production domestically necessitates rigorous compliance checks on local vendors to ensure they meet legal and ethical standards.
  • Effective reshoring demands robust compliance strategies, like Visual Compliance, to streamline due diligence and ensure regulatory adherence.

The research carried out by Censuswide, in a survey of 1,002 business leaders and financial leaders in the UK and US manufacturing industry, has also revealed how manufacturers are responding to the current complex landscape.  

A further 58% of manufacturers have started to reshore their supply chains, the process in which companies move production from overseas to the countries where goods are sold.  

As a result, manufacturers expect to see several key benefits over the next two years. Cheaper products from reduced business costs, the ability to source products faster and receive higher quality products are all anticipated, but the arguably most critical factor is the opportunity to have enhanced reliability as well as security within their supply chains.  

To become a beneficiary of these factors, a compliance strategy must supplement reshoring operations.  

Two types of due diligence  

Due diligence in business involves a thorough investigation and assessment of various factors before engaging in transactions or partnerships. Here, companies must conduct two dimensions of due diligence — jurisdictional and entity.  

Jurisdictional due diligence involves comprehending the legal landscape of a country where a business operates, covering laws, tax regulations, trade policies and compliance requirements. Understanding these aspects, companies ensure adherence to regulations and maintain compliance.  

As for the latter, entity level due diligence focuses on assessing the integrity and reputation of the specific entity or company involved in the transaction. This examines financial health, business practices, ownership structure and any past legal issues or sanctions. Put simply, conducting entity level due diligence ensures companies can assess the reliability and trustworthiness of their potential partners or counterparts.  

However, companies must also consider geopolitical factors, like uprisings, social unrest and corruption, even if they comply with legal requirements. These factors can significantly impact business operations, with geopolitical volatility providing substantial risk for companies that need to be mitigated for.  

Supplier selection 

Transitioning production back home can present specific compliance challenges. Despite the familiarity of the home jurisdiction, companies cannot overlook due diligence on partners and suppliers. Even in domestic operations, there could be bad actors or non-compliant entities involved.  

And while selecting local vendors may seem less complex, they can also be subject to restrictions, sanctions or debarment if found violating laws. Compliance checks should, therefore, verify that vendors meet legal and ethical standards, ensuring that the products or services procured uphold quality and integrity.  

Such need for compliance comes as only 33% of European and 24% of U.S. CEOs are confident in their supply chain resiliency. That’s according to the 2022 ISG Smart Manufacturing Survey, which demonstrates manufacturers concerns about their supply chain, reinforcing their need to reshore.   

But, as explained, reshoring operations still present significant challenges that require a robust compliance strategy. Here, our Visual Compliance solution offers a centralised platform for conducting streamlined due diligence activities during the reshoring process.  

By integrating government published lists and custom-built specialty lists from reputable research firms, the software tool ensures comprehensive screening of local partners and suppliers.  

At a time when manufacturers find it difficult to do business, this unified approach allows companies to efficiently assess potential risks and ensure adherence to regulatory requirements, facilitating a safe and seamless transition to local operations.