What's the point of reshoring?19th May 2022
In the past, component manufacture moving abroad was the obvious move. Once the manufacturing process had matured, and demand had become predictable, it was deemed both safe and sensible to look for a cheaper way of getting components made. But over the last ten years or so, more and more businesses are seeing the benefits of reshoring their manufacturing. Sometimes it’s simply because of the natural progression of the product lifecycle. Sometimes it’s an opportunity to take advantage of cutting edge manufacturing techniques. And sometimes it’s down to inconsistent quality or problems with supply, where bringing the process closer to home gives you more control.
Whatever the reason, there are multiple benefits to reshoring the manufacture of your machined components. Take a look at my top four, below.
1. Stable supply chains
For companies producing products on a large scale, or operating continuous production lines in critical industries, having multiple suppliers for the same component in different parts of the word is a highly sensible move to help avoid downtime on the production line.
But some global disruptions can knock out even the most robust supply chains.
For example, when the Evergiven ran aground in the Suez Canal in March 2021, the resulting blockage halted all shipping traffic for a week, causing massive disruption to supply and long delays in deliveries to Europe from other parts of the world.
Although the Suez Canal isn’t blocked regularly, disruption is inevitable, and having a UK-based supplier will help to spread the load and reduce vulnerability to overseas crises.
Of course, there is still risk of disruption within the UK – the Covid-19 pandemic and fuel shortage in 2021 are obvious examples of this. But any steps taken to reduce supply chain complexity will help to minimise the risk and reduce exposure.
2. Shorter lead times
Another benefit of reshoring your machined component manufacture is to benefit from better certainty of delivery dates, and shorter lead times. It could be that a smaller, UK-based machine shop will take a little longer to get your work started on the machines, but the delivery times will be significantly more favourable. It can take 6 weeks (or more) for sea freight to reach the UK from the Far East, and if your alternative is to pay for air freight, you’ll quickly see any cost benefits of manufacturing abroad disappear, particularly if you’re shipping heavier metals or large components.
3. Better payment terms
Cheaper prices in the Far East or other lower wage economies is the number one reason that companies choose to offshore their manufacturing. In recent years, many of these countries have (thankfully) increased their minimum wage and improved working conditions, meaning products are not manufactured at such a low price as before. While there is still a way to go in some manufacturing locations, this is a crucial step forward.
When it comes to paying for your machined components, you may well find that you’re able to negotiate better payment terms by using a domestic supplier. For components manufactured in the Far East, it is common to pay the entire balance upfront – that’s before you even see a component. The wait for the first order to arrive can be quite nerve-wracking!
However, you will probably find that if you speak to a UK-based machined component supplier, you’re able to negotiate better payment terms – perhaps you’ll need to pay a deposit, then pay the balance on delivery, or you may be able to set up an account where no payment is due until your order is despatched. This can make a big difference to your cash flow, put you in a stronger financial position, and reduces risk too.
4. Faster communication and stronger relationships
To me, the biggest benefit of reshoring is the improved communication with your machined component supplier. Being in the same time zone makes answering questions quicker. Sending samples to reverse engineer and create drawings or to demonstrate finishes is cheaper and quicker. And visiting your supplier to see what their manufacturing facility is really like is easier and quicker.
Things are quite simply, faster, and for time-poor buyers, a quick solution is like gold dust. Regular communication makes it easy to build relationships too, and while there is lots that can be done through Zoom, the in-person experience is truly valuable when it comes to the understanding between a supplier and a customer.
Get Penta involved
And so, manufacturing overseas may not be the best bet after all. Reducing cost was a major driver for offshoring in the first place, but if you consider this in combination with the simpler supply chain, shorter lead times, better payment terms, and easier relationship building of a domestic supplier, reshoring the manufacture of your machined components becomes a very attractive opportunity.
If you’re looking to reshore your machined components, get Penta involved, and find out how our focus customer experience could make the difference for your business.