Why Manufacturers Are Heeding the Call to Reshore Supply Chain Operations
In recent years, we’ve seen a growing number of manufacturers calling to “reshore” supply chain operations. This process involves returning overseas business operations to a company’s home country. The goal of reshoring is to localize as much of the supply chain as possible so the bulk of operations once again occurs close to home.
Manufacturers once believed that they could get a lower cost per part by offshoring operations to companies with low-cost labor. This assumption may have been true a decade ago. But it didn’t account for the additional costs of maintaining overseas operations, like international shipping, import tariffs, and complicated logistics.
It also didn’t account for supply chain risks and vulnerabilities, which have become increasingly clear over the last few years.
6 Reasons Manufacturers Are Reshoring Supply Chain Operations
In the face of mounting costs, unstable geopolitical policies, and events like the COVID-19 pandemic, many manufacturers are taking steps to localize their supply chain. Here are just a few of the reasons to consider reshoring supply chain operations:
- Narrowing labor costs. The main advantage of offshoring operations in the past was inexpensive labor. In recent years, however, the price gap between manufacturing overseas and in the United States has narrowed. Labor costs in offshore countries are increasing, making overseas outsourced manufacturing less financially attractive to businesses.
- The rise of automation. Today’s advanced technology has considerably reduced the need for manual labor, helping manufacturers cut costs. In both additive and subtractive manufacturing, we’ve seen the rise of state-of-the-art machines capable not only of cutting, forming, or punching without human intervention—but also self-cleaning, self-sorting, and even self-monitoring. With automation supplementing manual labor, fewer workers are needed on a shop floor.
- Supply chain disruptions overseas. Risk is a huge factor to consider when weighing the benefits of reshoring supply chain operations. Unpredictable events like the COVID-19 pandemic and the Suez Canal blockage have opened the world’s eyes to just how fragile our global supply chain really is. Manufacturers have taken a financial hit as a result of these and other disruptions.
- Intellectual property (IP) concerns. When you’re creating a new product overseas, you have less visibility into how it’s being made. Because there is no such thing as a true international patent or trademark, there’s a higher risk of overseas suppliers infringing on your IP rights. There have even been cases in which an offshore partner registered a US trademark as their own, making it impossible for the US company to retrieve their products from the offshore location. Simply put, your IP rights are much better protected on home soil.
- Environmental, social, and governance (ESG) considerations. Longer supply chains inevitably leave a bigger carbon footprint. Localizing manufacturing operations reduces emissions, which is better for the environment and reflects positively on your business. Some socially conscious investors will even review a company’s ESG criteria before making a decision to fund them.
- Development of additive technology. Quick and cost-effective additive technology like 3D printing has grown exponentially in recent years. With additive manufacturing, you can customize design and production, reduce inventory on hand, and provide production on demand.
Since its inception, Alchemy Industrial has championed the return to localized manufacturing. If you’re interested in reshoring manufacturing operations and need guidance to help you ease into the transition, stay tuned for our next blog post. We’ll discuss practical steps for bringing your supply chain back home.
In the meantime, if you need a local outsourced manufacturing partner for 3D printing in Houston, don’t hesitate to give us a call!