The global manufacturing industry has long been characterized by centralized mass production of finished products and linear supply chains. However, events over the past few years have exposed the weaknesses in this model. The pandemic revealed the need to prioritize stabilizing the supply chain by creating an interconnected network rather than a linear chain.
In addition to supply chain issues, recent political events such as the imposition of new tariffs have caused many companies to look towards reshoring — relocating production closer to home. For many businesses, this is a strategic rather than an emotional decision, given its numerous advantages such as improved lead times, increased flexibility, and enhanced communication.
Manufacturing in the United States has declined significantly since the 1970s. While new policies hope to reverse this change, there isn’t likely to be a wholesale change that returns all elements of manufacturing — from the production of raw materials to the construction and assembly of finished products — anytime soon. Instead, you’re more likely to see companies moving parts of the production process back to the U.S. A larger shift will take many years to fully implement.
Reshoring production can help businesses achieve a competitive advantage in several critical areas. Long, fragile supply chains can easily collapse under pressure. Shorter lead times, reduced shipping delays, and the ability to respond quickly to changes in demand are strategic imperatives for companies that need a competitive edge.
During and after the pandemic, businesses have faced severe production delays and stoppages due to shortages of critical components from overseas suppliers.
In the automotive industry, decreased production led to a chain reaction that began with fewer cars available, resulting in higher consumer prices and lower revenue.
Although it’s unrealistic for most companies to produce all raw materials domestically, those who work with U.S.-based manufacturers will have an advantage in delivering products and responding to market changes.
Although COVID-19 first exposed the fragility of overseas supply chains, in the years since the recovery, supply chains have remained vulnerable. COVID-19 merely highlighted and magnified the issue. Since the pandemic, the overseas production method has been hit by a string of disruptions, including geopolitical tensions, labor shortages, surging tariffs, and port bottlenecks.
As a result, companies are working to build more resilient networks by taking a multi-pronged approach. Reshoring is moving from a fringe strategy to a top priority. Companies that produce their products closer to home gain control, agility, and predictability.
U.S.-based teams offer significant advantages to companies seeking to build more resilient supply chains. When design, production, engineering, and decision-making occur in the same country, products are completed faster. Changes don’t have to go through extensive communication delays before they can be implemented. A shorter communication loop accelerates all aspects of production.
Cultural alignment is another advantage of reshoring. When you’re working with U.S.-based teams, they have a better understanding of the domestic regulatory environment and market expectations.
Modern companies have to manage an incredibly complex interplay of design, development, production, and logistics. When you work with U.S.-based teams, you have more control and visibility over the entire process. You can visit the factory in person and meet with the teams face-to-face to discuss issues.
If you’re only considering labor, overseas production will almost always be cheaper. Hourly wages in countries such as China and Venezuela are far lower than those in the U.S. However, when you factor in other costs, it’s often more expensive. With expenses such as transportation, tariffs, quality control, rework, delays, and lost opportunities, the price of overseas manufacturing markedly increases.
Transporting goods across the ocean is expensive, particularly when you factor in fluctuating freight rates, geopolitical conflicts, volatile fuel prices, and port bottlenecks. Tariffs and trade barriers are also increasing the cost of overseas manufacturing. Although U.S. tariff policies are still in a state of flux, there’s no doubt that they’ll remain in force at some level and increase the cost of overseas manufacturing.
Quality control issues can also plague production in other countries. With communication barriers and inconsistent standards, working with foreign facilities can lead to subpar quality production that requires rework, resulting in delays and unexpected expenses.
Despite the increased expenses and looming changes, choosing between reshoring and offshoring isn’t always a clear-cut decision. However, buying American can save you money, with restoring delivering the biggest payoff in:
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