The reshoring advantage: 4 reasons to bring your manufacturing back home8th Jan 2024
Remember the allure of offshoring? It used to feel like the logical step forward. 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.
And for many, that looked like seeking solutions in distant corners of the globe.
Fast forward a decade and the tide is turning. Companies are embracing a new normal: reshoring.
This strategic pivot can be attributed to several factors, ranging from the natural progression of the product lifecycle to the desire to leverage cutting-edge manufacturing techniques.
Issues related to inconsistent quality and supply chain challenges have also played a pivotal role, prompting companies to bring manufacturing closer to home for greater control.
Let's dive into my top four reasons why bringing your manufacturing home might be the best move you make…
1. Stable supply chains
Remember the Suez Canal blockage of 2021? The Ever Given ran aground, with the resulting blockage halting all shipping traffic for a week, causing massive disruption to supply and long delays in deliveries to Europe from other parts of the world.
More recently you may have heard the news about Houthi rebels targeting commercial vessels passing through the Red Sea, disrupting that critical maritime route.
These examples expose the fragility of far-flung production.
Of course, 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 world is a highly sensible move to help avoid downtime on the production line.
However, some global disruptions can knock out even the most robust supply chains.
Although the Suez Canal isn’t blocked regularly and the Houthi rebel commercial ship attacks may not have a long term significant global impact, disruption is inevitable, and reshoring with a UK-based supplier will help to spread the load and reduce vulnerability to overseas crises.
Of course, the UK isn’t immune to hiccups – 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
Perhaps the most obvious of benefits, reshoring can bring a significant reduction in lead times.
Perhaps 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.
As an example, Nucor Corporation a steel and steel products company has won big in North America after reshoring it’s manufacturing due to the high costs of shipping steel from China.
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.
The global landscape has evolved and many of these countries have, thankfully, increased their minimum wage and improved working conditions. This shift means that products cannot be 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.
Automation technology is also playing a big part in decreasing the overall labour cost globally for manufacturing, which is levelling the playing field.
Some great news about choosing to reshore is that you might be able to negotiate better payment terms with a domestic supplier.
For components manufactured in the Far East, it’s common to be expected 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!
Conversely engaging a UK-based machined component supplier often provides greater flexibility in negotiating payment terms. It’s common to pay a deposit and then pay the balance on delivery. Or another option is being able to set up an account where no payment is due until your order is despatched.
I don’t need to tell you that this can be a game-changer for your cash flow, putting you in a far less vulnerable financial position and minimising risk.
4. Faster communication and stronger relationships
To me, the biggest yes most underrated benefit of reshoring manufacturing 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. 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.
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.
Get Penta involved
If you’re considering reshoring your machined components, the strategic involvement of a partner like Penta can be a game-changer. Discover how our customer-focused approach can make a positive difference in your business.
Speak to my team on 023 9266 8334 or .
We also love it when existing or prospective customers visit our facility here in Portchester, Hampshire, so if you’re interested in arranging a visit please get in touch.
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