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Introduction
With continuous disruptions, it has become crucial for companies to review their production and supply chain strategies. Reshoring is more than just replacing your global suppliers and partners with domestic ones. In fact, there is a broad transformation around reshoring that now allows companies and third-party groups to collaborate.
Reshoring also depends on whether or not organizations have heightened visibility, quick access to the correct information, and solid insights to make decisions in real-time. Reshoring offers the best outcomes only when leveraging and reimagining your supply chain.
Let’s dive into the fundamental perks and limitations of reshoring and how organizations can navigate reshoring in 2023:
Pros of Reshoring
Short Lead Times
Reshoring condenses lead times in the manufacturing process, sales cycle, and procurement. In fact, reshoring improves the responsiveness of companies to their market demands. It allows businesses to minimize their order cycle timelines and boost speed-to-market. And that’s because reshoring cuts out the need to engage in extensive and complicated international transportation.
With shorter lead times, companies can bump up their flexibility across production processes and planning. It also allows companies to quickly adapt to new changes in market trends, unforeseeable events, and changing customer preferences.
Improves Quality Control
When companies move to domestic manufacturing, reshoring makes it easier to monitor quality control across production processes. With increased proximity and direct oversight, companies can track and spot defects and take corrective measures faster.
Reshoring allows manufacturers to put solid quality control processes in place, improve communication with the internal team, and perform regular inspections efficiently. Reshoring influences manufacturing quality, leads to lower product recalls, improves brand reputation, and higher customer satisfaction.
Saves Money
One of the best long-term aspects of reshoring is that it helps companies save a lot of money. With reshoring, organizations can minimize shipping costs related to long-distance imports and exports, inventory holding, and shipping. Proximity to customers and suppliers also brings down transportation costs.
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Cons of Reshoring
Disruptive Supply Chain
Reshoring can disrupt your supply chain in the early stages. However, once companies gain some transferable experience, it becomes easier to spot and leverage new patterns and avoid/address operational errors. Reshoring is ideal for developing and roll out custom supply chain practices that businesses ordinarily would never consider.
High Labour Costs
In manufacturing and supply chain, the major pitfall of reshoring is arguably higher labour rates than offshore locations. When businesses move back their production home, they incur more labour costs in benefits and higher wages, which impacts profit margins. Companies should leverage automation technology to reduce costs in reshoring manufacturing processes and operations.
Is It Difficult to Navigate Reshoring?
One of the best practices to navigate reshoring is to develop and follow a new plan for operational strategy. Bring together operations planning and sales teams and create future-proof operational plans. Companies should reach out to their previous suppliers they already trust and can benefit the most from.
Final Thoughts
If you’re wondering whether or not reshoring works for you, review factors that extend beyond material costs and labour. Companies need to run a total cost analysis, consider IP protection, comply with local compliance regulations, and review the market proximity. In hindsight, the benefits of reshoring outweigh its limitations and disadvantages. So, companies shouldn’t look for a one-size-fits-all solution.
