How do you know if the time is right to consider reshoring some of your manufacturing?
Offshoring manufacturing today is hardly the economic slam-dunk that it may have appeared to be 5 or 10 years ago. Today, you need to consider your global alternatives. US companies such as GE, Ford, Caterpillar, Apple and Wal-Mart are reshoring part of their production and the list of US companies continues to grow.
Several of the important factors in your original offshoring decision have dramatically changed. Have you reached the tipping point where it is time to rebalance your Global Supply Chain? If you have a well-defined offshoring strategy with measurable objectives and key performance indicators, then as the tipping point approaches you will be alerted. If not, consider these 5 factors as the initial step in determining your need to rebalance.
1) Cost Increases – Not only has the wage gap in China significantly eroded, several other categories of cost such as local energy, materials and transportation are on the increase. Do you know your Total Landed Cost and the trigger point when other manufacturing locations should be considered?
2) Innovation – The pace of innovation in new materials, increasingly sophisticated digital electronics and manufacturing technology such as 3D printing, has never been faster. How has your manufacturing choice enabled or inhibited the innovation you need to remain competitive?
3) Market Access – Manufacturing locations such as China are rapidly emerging as major markets for US goods. Gathering large amounts of market data and, through analytics, seeing key trends is critical to manufacturing location and localization decisions. Are you able to quickly recognize then capitalize on new market trends in different locations with a customized and localized product?
4) Skills – As your manufacturing was outsourced, the skills and knowledge of manufacturing processes offshored also. As your internal skill ladder continued to shrink, do you have the skills necessary to sustain innovation through collaborative iteration from design to manufacture to support?
5) Political Environment and Public Sentiment – The tide of public sentiment towards outsourcing has sifted as a result of the economic downturn and lingering unemployment. Do you know how your manufacturing can take advantage of federal and local incentives and the current labor market?
Over the next 5 weeks our blog will explore each of these areas in more detail to uncover the factors driving reshoring.