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

Published On: December 30th, 2013|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-in-investment (ROI) on 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.

Ultimately, the system will find balance. The idea of “right-shoring” is being tossed about and it is the most logical solution to sourcing out there. If your customers are in another region, perhaps you should source there. If you have the support structure in place to remote source, certainly take advantage of that if it is an advantage. If you have neither, working with your 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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