Re-shoring, right shoring, call it what you want, maybe even common sense.

Published On: January 20th, 2016|Categories: Blog|

There are fashion trends, weather trends and yes even management trends. When a business leader reads something in the Wall Street Journal or a trade publication numerous times, they take notice. Back in the 90’s when offshoring really started gathering steam, more and more companies went searching for lower cost-of-goods-sold (COGS) outside the US borders. In the start, some global footprint corporations thought outside the box about utilizing foreign assets. That led to articles about those corporations lowering COGS using less expensive labor. While manufacturing services were not new, they quickly geared up to offer the same opportunity to those smaller organizations without the global footprint. While foreign companies had manufacturing and some infrastructure prior to this, the influx of US manufacturers created many where there were few. As with many “trends”, the concept went overboard. Manufacturers started sending more and more business offshore, getting more liberal in their assessment of the return-on-investment (ROI) for off shoring. Even when on-shore pricing was competitive, companies chose an offshore source because “sourcing off-shore was inevitable.”

In the last few years, re-shoring has grown in momentum. Again, led by global footprint corporations feeling the brunt of growing labor, shipping and fuel costs, the pendulum began to swing back. As articles in newsprint started to escalate, companies again following the trend, began to embrace the idea that maybe off shore is not the answer to a company’s COGS issues. That the “total” cost of a component or assembly is not what is paid, but the bottom line of cost plus support. Now many articles are talking about business returning to the US in droves. The multinational conglomerates have stepped up their efforts to bring business back. As all pendulums do, this swing back will very likely over swing center.

There have been recent conflicting opinions as to whether reshoring is actually happening or not. Having assessed the data, I am in the camp that business levels in general continue to grow. There appears to be an increase in manufacturing in the US as well as off-shore. Right shoring is indeed occurring and ultimately, the system will find balance. If your customers are in another region, perhaps you should source there, especially if you have resources there already. If you have neither off shore customers or resources, working with suppliers in the region you are in, to maximize your ROI, can make the most sense.

The U.S. has “low cost regions” within its borders. With the advancing state of electronic communication and computing, working with a supplier in a lower cost region of the U.S. can be like having them right down the street. There are well supported pockets of technology in outstate areas throughout the U.S. The Minnesota Composites Cluster is but one example:

As in many situations, a dose of common sense can make many situations more manageable.

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