Reshoring your supply chain means you decrease your dependence on countries in other parts of the world. For example, if you’re building an automobile, you might assemble it in America, but if the bolts for the engine come from China, you’ll have to wait for them to ship across the Pacific Ocean. This could result in disruptions to your production schedule.
And, with production so far away, how could you ensure that the quality is up to par?
If this isn’t enough reason to reshore your supply chain, here are four more:
1. Reduces the total cost of ownership.
According to Harry Moser, the cost of ownership can add another 20% to the cost of your product. When taking into consideration the shipping, quality issues, and intellectual property concerns, this can quickly add up.
2. Decreases cost of work.
Without even factoring in shipping costs, since 2000, the cost of labor in China has skyrocketed 320%. Where it was once quite cost effective to go overseas, that’s no longer the case.
3. Eliminates Waste:
When it can take months to get orders from China to the United States, you need to project how much of something you really need. If your projections are wrong, you might wind up with far more than you require. And after months of waiting, if the product isn’t quite what you had in mind by the time it arrives, you’ve wasted time, money, and other resources.
4. Meeting customers’ demands:
The opposite of waste, not having enough of a product is a very real concern. If you are a custom fenestration manufacturer who normally sells 1,000 windows per month, but suddenly get an order for 2,000, you can’t afford to wait months for materials to come from another country. By reshoring your supply chain to local suppliers, you have a much better chance of keeping up with unexpected spikes in demand.
As overseas wages increase, transportation and fuel costs grow, and responsiveness continues to lag, it is becoming more apparent that reshoring is a necessity. If you still need more examples of how reshoring benefits industrial production, just take a look at the manufacturing powerhouses below that are serving as a model.
General Electric moved their production of water heaters and high-end refrigerators from China to Louisville
Ford is investing $168 million in its Ohio Assembly Plant
Wal-Mart plans to increase its sourcing of America-made products by $50 billion over 10 years
These companies are just a sampling of the thousands of businesses bringing manufacturing back to the U.S. If they are doing it, why aren’t you?