Reshoring Your Supply Chain Isn’t Just an Idea—It’s a Moral Imperative
At Alchemy Industrial, we’ve seen firsthand the impact that reshoring manufacturing operations can have on American companies and are proud to be on the forefront of this trend. As market demands continue to evolve, it’s becoming clearer than ever that localized manufacturing is more than just a nice idea. It’s a moral imperative for all of us as we work toward a better manufacturing future.
Not only does reshoring address climate considerations and domestic supply chain problems, but it also takes steps toward minimizing human rights abuses that take place all over the world.
Soon, certain offshoring practices might even pose legal challenges to manufacturing companies that rely on foreign labor. The good news is that Alchemy Industrial can help you prepare to bring your manufacturing home.
The Problems with Offshore Manufacturing
Before we get into potential legislation regulating offshore manufacturing and production, you should understand how the world has evolved to get us here.
For one thing, outsourcing labor is no longer the cheap solution that it once was. The cost of foreign labor—specifically Chinese labor—has increased substantially.
Furthermore, financial drawbacks like tariffs and the additional costs required to maintain overseas production eliminate much of the cost-saving advantage that made offshoring so attractive in the first place.
And let’s not forget the host of intellectual property concerns that businesses are vulnerable to when they work with offshore partners.
But the time has come to recognize that the issue of offshoring is about far more than what’s best for manufacturers. The conversation around offshore labor has always revolved around what we gain and what we lose. . . but what about what we owe to one another?
Human rights violations and ESG (environmental, social, governance) considerations are worth your attention as you configure your supply chain. Right now, 25 million people globally are subjected to forced labor, and 75 million children work in exploitative conditions. It’s time to say, “enough is enough”—and many businesses are leading the charge by reducing their reliance on foreign labor.
Larger, publicly traded companies that face ESG pressures in their markets are understandably uncomfortable with the humanitarian crises that offshoring can fuel. Apart from human rights violations, offshoring generates a significant carbon footprint, which further discourages companies committed to ESG considerations.
Efforts to Bring Production Back Home
Legislative efforts to discourage offshoring are already underway. Whether you agree or disagree with such regulation, it’s best to be prepared to navigate impending changes as smoothly as possible.
Conversations about offshoring and reshoring can get political quickly, but it’s important to remember just how material they are. We aren’t discussing hypotheticals; we’re talking about real supply chain choices that have deep impacts on our world.
Here are some of the efforts underway to incentivize reshoring:
- The Supply Chain Act. Germany passed this law in 2021 and it will go into effect in 2023. The Act on Corporate Due Diligence in Supply Chains criminalizes human rights violations in supply chains by setting up systems of reporting, documentation, and risk management regarding supply chain employment practices. It affects any company that employs more than 3,000 people in Germany.
- Executive Order on America’s Supply Chains. President Biden implemented an executive order this year in response to COVID-19 supply chain disruption centered around critical goods like ventilators and PPE. This act establishes yearlong reviews for six sectors: public health, defense, information technology, transportation, food, and energy. It aims to make supply chains more resilient while also diminishing American reliance on foreign suppliers, particularly China.
- Solar Supply Chain Act. A Pennsylvania Congressman has introduced a bill that invests in increasing the nation’s manufacturing capacity for solar components. Currently, China makes up 80% of the world’s solar manufacturing supply chain. The bill would fund an influx of solar manufacturing domestically.
Efforts to regulate and localize supply chains will surely only continue into the future. But if reshoring your manufacturing operations hasn’t been a priority yet, it’s not too late to start.
Next Steps for American Manufacturers
Preparing your company for reshoring requires some strategic thinking, but you don’t have to do it alone. Alchemy Industrial is here to help. We even detailed a series of steps for transitioning to local manufacturing in one of our recent blogs. Here’s a brief overview of each one:
- Understand your supply chain. Becoming well acquainted with your supply chain as it currently is, from your suppliers to the outsourced manufacturing those suppliers rely on, helps you to account for every element so you can create a supply chain map.
- Evaluate costs and risks. Every chain has a weak link, and your supply chain is no different. The weak links are great places to start when you’re in the process of reshoring because you’ll likely see immediate savings there.
- Model the future state of your supply chain. Take time to model out what it would look like to completely localize or reshore your supply chain. Doing so will show you where you want to be and what needs to change for you to get there.
One of the best steps you can take is developing manufacturing partnerships in the United States. Alchemy Industrial has done extensive work evaluating international supply chains and bringing them back to America—especially to machine shops in the Houston, Texas area.
Let’s start our partnership today. Give us a call to discuss reshoring your manufacturing operations!