Pluses of friend-shoring business strategy

As a business strategy friend-shoring is added to American trade policy and by extension privately owned businesses that deal in sensitive and/or critical technology most of these mainly engaged in military industrial complex. Lately this has morphed into a vital strategy within America and outside. More follows:

Technically friend-shoring also known as ally-shoring is a business strategy used to develop trade partnership with trusted friends who would not reveal secrets of the manufacturing process to third parties, facilitate surplus chain resilience and toe the line of the granter in terms of geoeconomics balance and perspectives. The bottom line is that supply chain should always remain un-disrupted at any cost even during hostilities in which the friend is involved with third parties.

As a vocal proponent of this business strategy, Secretary of Treasury Janet Yellen foresees friend-shoring as a vital tool in geoeconomics that on the one hand deepens binding relationship with allies of America and on the other builds up supply chain resilience amongst all of them. On this count she considers India as friend but dismisses China altogether.

Broadly in the commercial world friend-shoring is picking on cue. Most businesses in sensitive and/or critical technology have taken this business strategy seriously. Here are main advantages:

Chief amongst the pluses is the reduction of holding cost of inventory in finished and/or semi-finished form. Plainly put this is most suitable one for armament manufacturing where the main body is completed in semi-finished form and allies could add or supplement features that are deemed necessary for them.

By doing so manufacturing firm can avoid bottlenecks arising from catering to individual design parameters forwarded by buying nations resulting in additional cost on the part of him. There is added benefit to the allies who can achieve what we call “indigenisation” that boosts their production capability and capacity along with enthusiasm.

Friend-sharing dictates that technology transfer from the manufacture to the ally is the sine-quo-non. The paradox is that technology transfer has inherent risks as regards to the secrecy of process and proprietary rights of the manufacturer at risk. Conceivably, this transfer is conditional on the allies observing secrecy and shutting out any form of backdooring to competitors. Primary purpose of any business is optimizing the return on investment (ROI) and improving the core business. Needless to say this paradigm requires improved sales to customers, who in this case are allies too.

Finally, friend-shoring builds up team spirit as parties involved in this business strategy are provided with the opportunity in dealing in high-tech. The crux of the matter is “team work is always better than individual job’. For example, F35 Aircraft programme involves America, few NATO allies, Australia, and Israel. Interestingly Turkey is the odd man in and out.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist