Friendshoring as a strategy to mitigate supply chain risk arising from geopolitical and economic uncertainty comes with as many challenges as it does opportunities, a global supply chain authority says.
The practice of friendshoring is when supply chains are shifted to countries that are seen as being politically and economically safe, and the strategy came to prominence in the wake of the pandemic, Russia’s invasion of Ukraine and a succession of economic crises.
Jonathan Colehower, Global Supply Chain Practice Lead at digital transformation specialist UST, told Supply Chain Digital that, despite the undoubted benefits of friendshoring, the practice “requires a high level of trust and alignment between nations”.
He adds: “It involves not only economic but also political and strategic cooperation, and establishing and maintaining such relationships can be complex and time-consuming.”
UST is a US-based organisation, and it is the US that is leading the friendshoring charge.
Last year, US Treasury Secretary Janet Yellen spelled out the country’s rethink on trading in an uncertain world, when she said it was diversifying its suppliers “rather than being highly reliant on countries where we have geopolitical tensions and can’t count on ongoing, reliable supplies”.
Yellen added that friendshoring means the US is deepening ties “to a group of countries that have strong adherence to a set of norms and values … to make sure we can supply our needs of critical materials”.
Major US companies are also turning to friendshoring. Apple recently relocated some of its iPhone production to India from China. At present, just 5% of Apple products are made outside of China, but this could rise to 25% by 2025, according to Reuters.
UST: friendshoring 'pragmatism, but comes with challenges'
Colehower says that, while friendshoring might seem like a pragmatic approach “it comes with its own set of considerations and challenges”.
As well as issues of complex political and strategic cooperation he says it can also raise concerns about “dependency on specific allies”.
He adds: “Over-reliance on a limited set of geopolitical partners for labour outsourcing could leave supply chains vulnerable to unforeseen disruptions, such as political tensions or policy changes.
“Moreover, friendshoring can also face opposition domestically, especially if it’s perceived as compromising job opportunities for local workers.”
Colehower points out that balancing the interests of domestic labour markets with the benefits of friendshoring “requires careful navigation and transparent communication”.
But he concedes that, in times of crisis, the ability to mobilise support from geopolitical allies through friendshoring “can provide crucial resilience to supply chains”.
“It enables rapid response and mitigation of disruptions,” he says,”ensuring continuity of operations and minimising the impact on businesses and consumers.”
He adds: “Overall, friendshoring should be approached strategically and with a long-term perspective.
“While it can offer significant advantages in crisis situations, it also requires careful planning, relationship management, and a thorough understanding of both the economic and geopolitical dynamics involved.”
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