It’s Not Only Timely, It’s Costly if You Don’t
By Anthony Bracale, Strategic Market Development Manager, (860) 349-1756, ext. 170
It’s topical to write about reshoring in the middle of a global pandemic, but there’s been a deeper discussion underway that pre-dates our current situation. There are many variables that influence reshoring, but the first order of business with today’s competitive landscape: look at the math.
Over the past several years a fair number of goods, previously sourced offshore, have made their way back into U.S. manufacturing companies. This has been a growing trend in the U.S. as an increasing number of OEMs are looking at the math and recognizing that it doesn’t quite deliver the value that it used to. Whether finished goods, sub-assemblies, or component parts, U.S. manufacturers have enjoyed a boost from reshoring in recent years.
Sourcing organizations have become very effective at building sophisticated supply chains that deal with variables like cultural challenges, currency fluctuations, long lead times, and more predictable interruptions, such as Chinese New Year. Less predictable and packing more of an impact, however, are geopolitical influences, such as tariffs and trade wars and natural disasters. These not only impact trade, they can be devastating events that cause supply interruptions, shortages, and stock-outs that really get the meter running on the cost side.
Total Landed Cost
The longstanding benchmark for evaluating the benefit of an offshore supply chain is the “total landed cost.” Simply put: it’s the sum of all costs associated with making and delivering products to the point where they produce revenue. The underpinning of the shift back to U.S. manufacturers in recent years has been a closer examination of that math, and increasingly, the risks associated with offshore supply.
More than ever, the reshoring “trend” is a flashing neon sign that says U.S. manufacturers are open for business. When you factor in the everyday challenges of an offshore supply chain, the resources to maintain it, and worse, the cost of interruption—it raises more than an eyebrow. It, in fact, raises your total cost—and exponentially.
Deeper exploration of these elements should be part of your company’s reshoring assessment. We’ve compiled a Reshoring Checklist to help you wade through them, complete with a next-steps strategy once you’ve satisfied your checklist and scrutinized your manufacturing partner options. Topping the list is revisiting the math, with a number of angles—internal and external—to explore.
Then you need to apply due diligence to vetting U.S. manufacturers on a number of items. You’ll want to research and evaluate U.S. manufacturers on:
- Service Level
- Vertical Integration
- Market Proximity
- Ease of Doing Business
It’s not an overstatement to say that we’re living through a historic time that is having profound effect on all aspects of our lives. U.S. manufacturers—who are usually well-removed from the average consumer’s mindset—find themselves front and center, at an intersection with a stalled global supply chain and everyday Americans who are deeply concerned with having access to products that will help keep themselves and their loved ones safe, healthy, and happy. Prior to this current global upheaval, we went about our days not giving a second thought to the ease at which we can purchase items to make our lives easier or seek the services that keep us healthy. Consumers are more aware than ever of the connection between the everyday goods that provide them convenience, lifestyle freedom, and optimal health.
As manufacturers, we have a responsibility to our own companies, employees, supply chain partners—and ultimately, everyday consumers—to reassess how to mitigate the risks associated with unforeseeable circumstances that threaten to interrupt production. As such, many companies are thinking about reshoring manufacturing. We’ve compiled a Reshoring Checklist to help you wade through the variables that influence reshoring. Deeper exploration of these elements should be part of your company’s reshoring assessment. This checklist also provides a section that discusses a next-steps strategy once you’ve satisfied your checklist and scrutinized your manufacturing partner options. Assess your company with the expanded checklist to see why reshoring adds up.
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