There’s a dramatic shift taking place in the manufacturing industry - especially in the US - where manufacturing companies are beginning to focus their efforts on reshoring their business. Reshoring is also known as onshoring, inshoring, or backshoring, and, as you’d imagine, it’s the opposite of offshoring.
Many manufacturers are re-evaluating their production and sourcing locations and are taking a closer look at the benefits of reshoring. This results in their manufacturing operation being moved from more far-flung locations (such as the far east), back to the company’s original country.
With the COVID-19 pandemic having changed the way we buy, sell and produce, many companies in the UK are calling for a nationwide reshoring effort to bring key product manufacturing back into the UK.
Despite the increased cost of labour in Europe and the USA, the ability to improve profit margins simply by reshoring manufacturing is becoming increasingly evident.
Some of the advantages of reshoring include higher product quality, shorter delivery times, rising offshore wages, lower inventory, and the ability to be more responsive to changing customer demands.
By bringing manufacturing back to the homeland of the business, you can easily reduce lead times because you’ll no longer have to factor in long shipping times that often take several weeks via boat. The increase in global shortages has been widespread.
You also end up with a guaranteed supply of the product itself, because everything is manufactured on-site, instead of waiting for it to arrive on your shores from a far-flung land, with longer delivery times.
In addition, businesses that reshore their manufacturing are able to pivot faster and shift their processes to meet the individual demands of the market, thus allowing for flexibility that would not be possible when communicating with offshore manufacturing locations.
Reshoring manufacturing also enables businesses to protect their intellectual property more comprehensively without having to handle foreign jurisdictions for protecting assets.
It’s important to bear in mind that, although the cost of manufacturing within overseas countries has increased in the past few years, the same thing has happened, albeit at a slower pace, in western nations.
This is why, if you’re considering reshoring your manufacturing, it’s a great idea to start forecasting the potential savings, with a focus on time saved, rather than the direct impact on costs. Time is money, after all!
Offshore factories have also had years to perfect their craft and, every year, the quality of products produced in overseas countries are getting better and better.
There’s a common misconception that you can only produce high quality products locally, but that can also have a direct, negative impact on overheads and profit margins – particularly if higher labour costs are involved.
There’s always a balance that needs to be addressed when making significant changes to your manufacturing operations.
By developing a common product with a qualified, local steel manufacturer, you’re practically guaranteed a quality end result that’s fully compliant with the local market – because it was created in that market. This also reduces other costs such as shipping, inventory management (no need to hold bulk supplies of items!), and customer returns.
It’s important to remember that costs can also be reduced with stringent quality control (QC). Instead of having to wait for long lead times to see the product and assess its quality, by reshoring your manufacturing, you’ll reduce that wait time and increase the speed of QC.
Also, the more businesses reshore, the more competitive the market becomes, which eventually leads to price stabilisation. This should result in more nearshore, high-quality products, at similar prices to those that have been manufactured elsewhere.
If we’ve sparked any questions today, don’t forget you can contact the Flowdrill team directly - we’d love to hear from you.