Reshoring continues to be a hot topic in manufacturing. Manufacturers should regularly evaluate their manufacturing strategies as they relate to their factory locations. Many of our clients work with us to determine if reshoring is a good option for their business. Lego, Adidas, and Newell have all made public decisions to move their operations into their served markets.
Each of the five categories below represents some of the talking points that our clients and partners have shared with us as we continue to help them navigate these issues.
Financial Implications
One of the foremost considerations in reshoring operations is the financial impact. While the initial costs of setting up factories in North America may be higher due to land, labor, and regulatory expenses, the long-term financial benefits can be substantial. COOs should conduct a thorough cost-benefit analysis that includes tax incentives, potential subsidies, and reduced shipping and import costs. Additionally, proximity to the domestic market can lower transportation expenses and the risks associated with currency fluctuations and tariffs, ultimately contributing to a more predictable financial forecast.
Operational Efficiency
Reshoring presents an opportunity to streamline and enhance operational efficiency. Modern manufacturing technologies, such as automation, robotics, and advanced data analytics, can be more readily adopted in the U.S., driving productivity and reducing labor costs. COOs should evaluate their current operational processes and identify areas where cutting-edge technologies can be implemented to optimize production. Furthermore, operating within the same time zone as the headquarters can improve communication and decision-making speed, fostering a more agile and responsive manufacturing environment.
Market Proximity
Understanding where the product is sold is crucial in the reshoring decision. For companies with a significant customer base in the United States, manufacturing closer to the market can provide a competitive advantage. Reduced lead times and quicker response to market demands can enhance customer satisfaction and loyalty. Just take a look at Bed Bath and Beyond’s decision to manufacture in Ohio. COOs should analyze their sales data and customer demographics to determine the potential benefits of local manufacturing. Additionally, being closer to the end-user allows for more effective quality control and faster product iterations, aligning production more closely with consumer preferences and market trends.
Supply Chain Stability
The supply chain landscape has been increasingly volatile, with disruptions caused by geopolitical tensions, pandemics, and natural disasters. Reshoring can mitigate some of these risks by creating a more resilient and localized supply chain. COOs must assess the availability of raw materials, components, and skilled labor in the United States, ensuring that their supply chain can support the reshored operations. Building strong relationships with domestic suppliers and investing in supply chain visibility and flexibility will be key to maintaining stability and minimizing disruptions.
Time To Market and Tariff Considerations
The ability to bring products to market quickly gives a significant competitive edge. Reshoring can shorten the production cycle and reduce time-to-market for new products, allowing companies to capitalize on emerging trends and consumer demands more effectively. Additionally, COOs need to factor in tariff considerations, as ongoing trade tensions and tariff policies can significantly impact the cost of importing and exporting goods. By manufacturing domestically, companies can hedge against unpredictable tariff changes and enjoy smoother trade relations.
One Last Thought
LNS Research has published a chart that helps companies determine their operational strategies. This chart matches the products that they produce with the core market differentiators. Combining the ideas in this chart with some of the considerations above can get you closer to a reshoring decision. Click here to view the webinar that discusses this framework.
How can MTG help you navigate tariffs in the trade landscape? Click below to learn more.
