Is Reshoring Right For Your Company?

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As a savvy business owner, you’re always trying to stay one step ahead. Currently, there is the question of reshoring and whether this is something worth pursuing. While you recognize that moving your operations back to North America would shorten supply lines and likely increase customer satisfaction, you wonder whether the vision matches the reality. Reshoring might be the right move for other businesses, but is it right for you?

Before hastily shopping around for quotes, you must lay the groundwork for your stateside operation. Successful reshoring depends on thorough planning and future-oriented thinking. You can reap the benefits for your company (and the country at large) by clearly defining the scope of the project. The first step of making your reshore efforts an unqualified triumph is to realize there’s a lot more to the process than simply packing everything up and moving your equipment back home.

If you turn on the news tonight, chances are you’ll see a story about supply chain shortages for raw materials, pharmaceuticals, industrial parts—almost every high-demand product. At the same time, you’re surrounded by statistical chatter that reshoring is bringing scores of manufacturing projects back to the United States, and as a result, business is pivoted to boom for the foreseeable future. Just this summer, the Thomasnet 2021 State of North American Manufacturing Annual Report found that 83% of manufacturers are poised to bring their projects to the U.S., a sharp increase from the 54% reported at the start of the pandemic. How are these companies setting themselves up for success?

Reshoring Manufacturing Projects at a Glance

When clients come to Vollrath® Manufacturing Services for help to reshore their projects, they seldom think beyond moving production but they do need to consider that doing so will also reinforce their business outlook, create new jobs, and balance trade deficits, says Jean Horvath, VP of Custom & Specialty Products at VMS. 

Horvath believes that VMS best practices steer clients toward a realistic and balanced approach to their reshoring efforts:

“People have a tendency to devalue what they don’t know. Our sales team is trained to hone in on key aspects of costs and logistics that can make or break a company’s future.”
JEAN HORVATH, THE VP OF CUSTOM AND SPECIALTY PRODUCTS AT VOLLRATH® MANUFACTURING SERVICES.

Consider Manufacturing Capacity

There are quite a few moving parts to reshore a project, not the least of which is what the manufacturer at home is capable of doing for you. Timeline, scope, and experience level all play into how quickly and effectively the reshore is completed. The best thing you can do is start your reshore groundwork now. 

Jean Horvath explains that there’s no shortage of companies who want assistance with reshoring and come to VMS for quotes, but there is a limit on how many can be effectively relocated:

“We’re running pretty hot. We already have a lot of projects that are in the pipeline, not specific to reshoring. Reshoring projects often have longer timelines than anticipated. It’s not as simple as moving tooling and going right into production as tooling might need to be modified. Parts may have to be PPAP and materials resourced. But there are certainly times when a reshoring initiative is the start of a long-term partnership between us and the manufacturer, and those are the types of projects we pursue.”
JEAN HORVATH, THE VP OF CUSTOM AND SPECIALTY PRODUCTS AT VOLLRATH® MANUFACTURING SERVICES.

Time is a huge factor when it comes to reshoring. If your project can’t handle simultaneous production and relocation, then it’s likely a better idea for your project to stay where it is.

Establish New Product Operations

If reshoring was as simple as moving all the parts, tools, and equipment from one country to another, companies would do it all the time, and profit from it. The hard truth is that it’s not a cheap undertaking, so it’s critical that you balance the costs of the move with your upstart costs in North America and your profit margin. The more you can anticipate and plan ahead in this stage, the more likely your reshore is to succeed.

 You’re probably thinking that it didn’t seem like as much of a massive undertaking when you decided to operate in another country. Why is it so hard getting reset at home? When we saw the mass exodus of manufacturing projects from North America in the late 1970s, it was because lax environmental regulations and labor laws balanced the heart-stopping shipping costs against unheard-of profits so that companies and their shareholders came out ahead. The playing field of advantages because of lax regulations has diminished over time because customers expect socially responsible partners. 

Reshoring reverses this process, meaning that companies now have the added challenge to revamp their operation to meet western standards. This can entail reconciling costs to get domestic warehouses and factories back to code, opening new locations, training a new workforce, not to mention creating an inclusive decision-making process that synthesizes data and expertise from all your company leadership and stakeholder groups. The good news is that once you’ve completed these steps, you’ll see a clear path forward to manufacturing in the United States.

Implement Small Factories

One of the biggest questions you will have to answer as a manufacturer is where your tooling will go once it’s back on U.S. soil. Remember: It’s not a matter of fitting everything into a new facility or simply remaking new products here for immediate use. Your factory in the U.S. is unlikely to have the same configuration as your overseas operation, and the building parameters for your tooling are almost certain to change depending on location. Fortunately, this doesn’t have to be a problem; it can be an opportunity if you take advantage of it.

Since you will likely have to innovate a new solution anyway, consider using smaller factories to localize your efforts, thus preventing a bottleneck. Smaller warehouse and factory lines can more effectively meet supply demands, decrease transportation costs to fulfillment stations, and reduce lead times.

Companies Need to Look at Manufacturers That Utilize Automation

Before choosing a location for your new production facility, you should investigate which parts of your operation can be automated. Automation saves you on overhead costs for labor, quality assurance, materials, and more, but it has to be set up for success to return value to your investment. Moreover, automation levels the playing field for companies that want to reshore their business. According to the Reshoring Initiative, North American manufacturing costs are 20% higher than Europe and 40% higher than China. Automation helps mitigate those costs, but there is a tradeoff. 

As seen with the production crises caused by the pandemic, companies who embraced automation and artificial intelligence were more resilient to workforce and funding shortages. But for reshoring purposes, companies who are not already operating at modern tech standards will have to pivot and do so quickly so that their production costs are reasonable to their profit margin. Otherwise, the massive cost to reshore a business could wind up compounded by the costs of keeping it running. Automation, however, is an investment that will make you back your money several times over in the long run.

Close Workforce Skill Gaps

For your business to run effectively, you need a stable workforce. Due to high demand and low supply, manufacturing companies are experiencing a labor shortage that shows no signs of slowing, despite the high unemployment rating caused by the pandemic. Deloitte and the Manufacturing Institute predicted 2.1 million unfilled manufacturing jobs by 2030, resulting from what’s been coined the “generational skills deficiency.” 

How can you close the gap between the workforce you need and the candidate pool you have available? Investments in training and mentoring. Before your gear ever gets to the United States, you’ll need someone who can expertly use it, a professional to manage them, a projector overseer, etc. Growing your operations is not only a matter of launching your production, but also utilizing a team that can drive quality, high production, and offer improvements, all at a higher yearly salary than you would pay for your overseas team. Much like investing in technology, investing in your workforce makes for a stronger business with a hefty profit margin.

Final Thoughts: Make Your Reshore A Success

Reshoring isn’t about bringing your operation home and starting from scratch. It’s about innovating and synthesizing your efforts into a model that optimally functions in the new location. No two manufacturers will ever face the same combination of challenges. At VMS, we believe that a successful reshore is a matter of managing expectations, taking a comprehensive approach, and collaboration between the leadership.

“Our ideal customer isn’t just a buyer. Our ideal customer is an engineer, a manufacturing specialist, or an industry professional looking at the project on a strategic level. They have a complex problem to solve, and that’s the type of client we’re interested in. We work on specific problems that need to be overcome, not one-size-fits-all manufacturing,”
JEAN HORVATH, THE VP OF CUSTOM AND SPECIALTY PRODUCTS AT VOLLRATH® MANUFACTURING SERVICES.

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