With the commitment to reshoring increasing more and more, buyers have much to consider when evaluating supply chain strategies. Some of the factors buyers weigh include:
- Labor costs
- Supply chain effects (dependence on offshore raw components)
- Logistics and shipping costs
- Inventory management
Often there are trade-offs to consider and final decisions depend on what provides for the best operational advantages. Whether offshore, nearshore or American made, supply chain management plays a key role in end decisions. What might be suitable for one manufacturer may not be for another. Evaluating all the pieces of the puzzle can be challenging for procurement teams. Often the factors being evaluated are moving targets – demand can ebb and flow and wages and shipping costs change.
Based in the heart of the Midwest, Genesis Plastics Welding welcomes OEMs looking to reshore their manufacturing. For many buyers sourcing domestically can simplify the supply chain and remedy pain points for their procurement teams. A recent article on EPS discusses the various factors and strategies that come into play when contemplating reshoring.
Although the trend toward offshoring is believed to be driven by one factor-labor costs-there are dozens of other factors that impact the effectiveness of an offshore manufacturing strategy. One, of course, is the location of the end-customer. Another is the location of suppliers. Recent research suggests that efforts toward reshoring – i.e., bringing manufacturing back to the Americas – may be hampered by the industry’s supply base.
Much of the debate around reshoring has focused on labor costs which, in many parts of the Americas, remain higher than offshore. Although wages in the Far East, particularly China, are beginning to increase, many companies find paying domestic workers still too expensive. Several experts in the electronics industry have long maintained that in electronics manufacturing labor costs are not the biggest factor in site location, but offshoring has nevertheless become the norm.
Onshore manufacturers’ dependence on offshore suppliers may be hampering reshoring efforts, according to the research paper Reshoring Manufacturing: Supply Availability, Demand Updating, and Inventory Pooling. One of the conclusions: using offshore suppliers means that onshoring is less cost-effective than it could be. “The reality faced by many offshoring manufacturers contemplating reshoring [is]: as they extensively sourced from local (offshore) suppliers, onshore supply bases have gradually withered,” the report said. “The limited onshore supply availability may force them to continue sourcing from offshore suppliers even if they reshore manufacturing.” Manufacturers not only have to consider shipping costs, researchers said, but inventory management practices. Relying on offshore suppliers makes it more challenging to procure components in response to demand changes, for instance. It could be viable to take open-source inventory management software such as this provided by ServiceMax and rewrite some code to allow for supply procurement depending on the demand for said supplies but would this be more effort than trying to reshore manufacturing and supply.
Do you have a product or product line you’d like to discuss bringing back stateside for manufacturing? Genesis team member Brad Spencer is happy to discuss options. Click the image below to reach out today.