A Fresh Look at Reshoring to Meet Manufacturing Needs

In this time of great uncertainty marked by COVID-19, business leaders need to reevaluate many of their prior decisions to determine if those choices are still in their best interest. One of the decisions they should reconsider is offshoring their production and manufacturing processes.

In the 1990s and early 2000s, offshoring was a popular business decision that boasted, among other attributes, a cheap labor force. However, a shift over the past decade or so, amplified by the current global pandemic, is increasingly bringing back manufacturing production and sourcing to the U.S.

Here are 3 reasons why many manufacturers are considering reshoring:

1) Halt disruptions that cause production delays/shortages

The COVID-19 global pandemic is a prime example of how overseas disruptions can wreak havoc on supply chains. Maintaining a domestic supply chain will help reduce the risk of parts shortages when suppliers are physically closer to the final market. It can also strengthen the quality control process because of closer physical proximity and more readily accessible oversight. Additionally, in the event that factories overseas shut down and products are no longer being manufactured (think China and the recent PPE shortage), domestic production will help ensure those goods will still be available to consumers with little to no delay in the production process.

2) An increase in overseas labor rates and a less expensive U.S. labor force

Any prior cost advantage to outsourcing labor overseas has drastically diminished, as wages in Asia continue to rise. Reshoring enables shorter lead times, faster responses to customer orders, and the ability to meet shorter delivery timetables, without the added expense of overseas shipping.

3) Technology and a skilled workforce provide for many growth opportunities

The U.S. labor force is enthusiastic and plentiful. Now more than ever, innovation is essential for companies to stay afloat. Bringing operations back from overseas addresses significant supply chain issues while yielding more employment opportunities for the U.S. workforce. Additionally, in the event that factories overseas shut down and products are no longer being manufactured (think China and the recent PPE shortage), domestic production provides another source of the goods for consumers.

According to a study done by the Reshoring Initiative, the cumulative number of manufacturing jobs brought to the U.S. from offshore between January 2010 and December 2018 totaled 749,000. Looking ahead, we can expect many additional manufacturing companies to implement reshoring initiatives. If your business has significant manufacturing operations overseas, then reshoring may be a strategy your manufacturing business should consider today.

Marcum’s Manufacturing, Retail & Distribution advisors are dedicated to providing manufacturers with the most current information on their industry. If you have questions about this article or other manufacturing topics, contact your Marcum professional for assistance.