What is in this article?:
- Rethinking Reshoring
- No satisfaction
- Reasons for reshoring
- Total cost accounting
- Staggering stats are no surprise
Robert Brooks, Editor-in-Chief
For several years U.S. manufacturers and those of us who watch them have been encouraging each other with the effects of “reshoring” — the term that has settled around the apparent phenomenon of domestic manufacturers and OEMs choosing domestic sources of manufactured parts and systems. It’s a positive vibe that has transferred beyond the manufacturing world, into research centers, media, government, and so on.
The development describes cases involving manufacturers or OEMs who previously have sourced products for lower-cost foreign markets, but now find that the transportation costs, product quality, production times, and/or customer service are not acceptable to their supply chains, regardless of any unit cost savings that may be achieved.
We should all be glad for the jolt of confidence that reshoring provides domestic manufacturers, and no one should dispute the factors that contributed to various successful examples. Transportation costs and delivery schedules obviously are a problem between the Pacific Rim and North America. Quality control can be difficult to ensure from 10 time zones away. Changes in designs or production schedules must be verified instantly these days, and that’s a problem of communication as well as distance.
And, consider too that each of these problems represents an affirmative case for domestic manufacturers: they are resourceful, available, responsive, and increasingly cost-competitive. They have worked hard to get their organizations to that point.
But, to see these individual developments as a trend is a harder case. It’s more plausible that each reshoring success story represents an instance of a domestic manufacturer and a potential customer coming to some new understanding about the terms of supply, an understanding premised on affordability. Indeed, the most persuasive case made by the The Reshoring Initiative — the group that has done so much good work to spread the message about the opportunities for coordinating domestic manufacturers and buyers — is the one about cost-competitiveness. The TCO Estimator it developed and hosts on its website (www.reshorenow.org) customizes the reshoring argument for potential partners.
And so, rather than some virtuous trend confirming the resurgence of domestic manufacturing, I see the reshoring phenomenon as part of the development of a global industrial market, a market in which buyers of manufactured parts and other products are free to roam the world looking for the best price. By making their operations more affordable, more competitive, more available, domestic producers who land reshored purchase orders are doing these customers an enormous favor. But that doesn’t mean they’ve gained any loyalty: the next time that contract comes up for bid it may go back to the Pacific Rim, or to South America, or wherever the TCO Estimator directs it.