How to Transition from Offshore to Local Outsourced Manufacturing

In our previous blog, we discussed how recent economic and geopolitical changes have impacted the global supply chain. Factors like narrowing labor costs, overseas supply chain disruptions, and intellectual property concerns are prompting manufacturers to transition from offshore to local manufacturing. 

If you’ve decided to reshore your manufacturing operations, you might be feeling overwhelmed and wondering how you can ensure a smooth transition. As long-time proponents of localized manufacturing, Alchemy Industrial can help guide you through this process with practical steps for bringing your supply chain back home.

Transitioning from Offshore to Local Outsourced Manufacturing

1. Understand the current state of your supply chain. 

Before making any changes to your supply chain, it’s important to understand what it looks like in its current state so you can account for every element. Create a map of suppliers for your parts, components, materials, and anything else you source overseas. 

Your supply chain map should include any outsourced manufacturing your suppliers rely on, too. 

A partner factory located in Vietnam, for example, might be sourcing hard-to-find raw materials from India or Korea. 

2. Evaluate the costs and risks of the current state of your supply chain. 

Identify and evaluate the weak links in your supply chain to assess areas where localized manufacturing could reduce cost and risk:  

• Price. Know your fixed and variable costs, and understand any price sensitivities that could potentially affect your product. If, for example, a natural disaster were to occur in one of your offshore locations, how would that impact your pricing?
• Logistics. Evaluate logistical factors like shipping rates, lead times, and international customs regulations to determine how each one affects your overall product. If shipments stalled for 6 weeks, would the delay severely impact your production cycle? If shipping rates increased, how much would the higher cost eat into your bottom line? 
• ESG modeling. Review the sustainability and societal impact of developing your product by assessing current environmental/social/governance (ESG) considerations. How many tons of CO2 are emitted as a result of your supply chain? How much will your carbon footprint increase in the next few years if you continue business as usual? 
• Safety concerns or human rights issues. Some offshore suppliers have lax regulations regarding occupational health and safety. Do the offshore suppliers you’re relying on expose you to safety concerns or unethical human rights issues that could harm people, cost you money, and damage your reputation? A vendor we came across in Indonesia had workers wearing flip-flops manufacturing 6-pound parts. If someone had dropped a part and broken their foot, the US company at the end of the supply chain could have been implicated in an ethical nightmare. 

3. Model the future state of your supply chain.

Develop a model to see what it would be like to move your supply chain to the United States (or even Houston!). Determine which operations you could realistically move here. . . and which ones you couldn’t. Examine the projected benefits of localizing your supply chain (minimizing risk, improving safety, reducing emissions, lowering cost and lead time) to the costs and risks of your current supply chain.

You may even uncover some hidden benefits, like the ability to be more agile during product development. It’s much faster and easier to iterate when your supply chain is local than it is when you have to travel to China every month. 

Compare your future model with the current state of your supply chain to come up with a plan for reshoring operations. If you build a comprehensive enough future model, you’ll already have a strong map for execution.

When you’re ready to map your current supply chain, evaluate costs and risks, and create a future model, Alchemy Industrial is here to help. We’re so serious about localized manufacturing that we’re even collocated with some of our customers here at the East End Maker Hub! 

Give us a call and let’s bring your supply chain back home!