Don’t Miss the Boat …Unless it is the Offshoring Boat

Reshoring has become an international phenomenon. Companies worldwide are recognizing the value of producing goods on their home soil, both for local consumption and to export to nearby countries (nearshoring). Rising offshore wages, higher shipping costs, and expensive situations like the west coast ports dispute are making potential cost savings from offshoring much smaller, or non-existent. In addition to the subsequently better and more localized sourcing decisions being made by companies, national governments in developed countries are also realizing the advantages of onshore production and implementing strategies to revitalize it. Reshoring is the most efficient way to achieve it – by eliminating costs associated with offshore production, companies can save up to 40% of total cost.

A recent article in Want Chinese Times listed some of the national strategies to regain competitiveness in manufacturing and stimulate economic growth through technological breakthroughs and adjusting manufacturing policies. “The US came up with its "Manufacturing Reindustrialization," "Manufacturing Renaissance" and "Advanced Manufacturing Partnerships," while Germany came up with the idea of Industry 4.0. Japan, meanwhile, has begun to implement its "Japan Revitalization Strategy," South Korea has developed its "New Growth Engines Strategy" and France has proposed a plan to form a "New Industrial France."”

The WC Times notes that despite a good deal of success, China’s current manufacturing engine contains some holes, including low returns, a toll on resources, and low innovation. In contrast, Germany’s Industry 4.0 implements smart technology that will “affect each step in the industrial chain from raw materials to retail, endowing each with its own software, self-monitoring capabilities and communication systems.” This strategy leaves no holes, and will make it difficult for China to compete.

Despite these concerns, China still intends to compete. According to Premier Li Keqiang, the implementation of their manufacturing plan "China Manufacturing 2025" also involves harnessing innovation and smart technology and strengthening China's manufacturing base and green technology to quicken the pace of China's transformation from being a "manufacturing powerhouse" to being a "manufacturing superpower."

Manufacturing sourcing has become vastly more complex, as low wage countries continue to compete with developed countries, which are achieving cost savings through lean and high tech models.

While the effectiveness of these strategies remains to be seen, there can be no doubt of a global focus on keeping more manufacturing on home turf, wherever home is. A final point to drive the correlation between economic health and home turf manufacturing - Bloomberg reports that of the three factors indicted in the demise of U.S. middle class wages – unions, technology and China, the most evidence points to offshoring: where imports are higher, wages are lower - across the board.

The not-for-profit Reshoring Initiative focuses on the U.S. and N. American markets but also has been presenting in other countries interested in reshoring. In March Sandy Montalbano spoke at the ISLI Supply Chain Forum 2015 at KEDGE Business School, Bordeaux, France. Harry Moser will be speaking on reshoring and TCO at the National Manufacturing Debate 2015 at UK’s Cranfield University and then meeting with the UK national Reshoring Office, which has had notable success, especially with the reshoring of automotive components.

For help contact harry.moser@reshorenow.org.

To see all resources, visit reshorenow.org.

To find out how to leave China, visit chinareshore.com.

Look for the full reshoring and FDI data report coming soon!