Why Should You Consider Reshoring Your Manufacturing Business?

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The founder of the Reshoring Initiative, Harry Moser, wrote an article last year for Industry Week detailing all of the benefits companies could have if they move producing and sourcing products to the US shores. He hits costs over time right away.

Localization, producing near the consumer, often reduces total cost due to shortening supply chains and contributing to a lean and agile strategy. The savings on non-manufacturing costs as a result of producing in the market in which the products will be sold can often overcome a 15-20% manufacturing cost gap caused by an 80% wage gap.

Manufacturing companies especially are seeing the value in reshoring thanks to localization. Moser cites the following reasons that reshoring is looking more attractive to manufacturers:

  • rapidly increasing emerging market wage rates,
  • low US energy costs,
  • productivity gains, and
  • the economic benefits of localization itself.

Moser also points out that bringing the manufacturing closer to the customers improves quality control, flexibility, and time to market the products. In addition, when bringing manufacturing closer to the engineering departments, the companies can more easily improve product design, reduce waste, increase quality, and increase productivity.

Use TCO to Make the Reshoring Decision

Companies often look to how much it will cost them at present to reshore instead of the total cost of ownership (TCO) for offshoring versus reshoring. Moser urges companies to look at the TCO instead to evaluate how reshoring will benefit the company overall and for the future. He cites that current research suggests companies can reshore about 25% of what they offshore and improve their profitability if they use TCO instead of price to make their decision. Do note that 25% of offshoring equates to roughly 1 million manufacturing jobs.

Manufacturing has the “highest multiplier effect of any sector,” meaning that creating manufacturing jobs creates the most jobs in other departments as well.

Read Moser’s full article on Industry Week.

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