8 April 2013

Reshoring to Rise in 2013? Understanding the True Costs of Offshoring

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Offshoring has been a source of economic savings for many manufacturing organizations. However, times are beginning to change and more operations would benefit by reshoring their operations.

Sure, it might initially look cheaper and give the company better returns, but as we will see, it’s not always as it seems. Let’s consider some of the ways offshoring impacts manufacturing in a negative way and how advanced discrete manufacturing with reshoring can help manufacturers gain more from their operations.

Offshoring Problems

  • Quality – Offshoring product can mean cheaper materials or less quality of work for the price, all with increased demand on getting the product to market. To me, that’s a losing battle for consumers and manufacturers. With lower quality, more products won’t last as long and the cost to make enough of the product to withstand the windfall will actually go up. For those looking to reshore their manufacturing operations, it can mean higher quality materials and workmanship. This is where advanced discrete manufacturing will offset the need and bring more organization to higher quality products that last longer and bring down the overall costs of ownership.

  • Costs – The initial cost of offshoring might look like a win for business, but after a while, it will surely increase. How might that happen? Well, with communication challenges, many businesses have needed to send over personnel to manage operations – that’s a cost in itself. Another increasing cost is the offshoring government’s economy. With a better economy, they want a bigger piece and will increase costs to manufacture product in that country. In other words, the total cost of ownership offshore product is going up, compared to the alternative. For a better option, again, reshoring will bring in next to the same costs. However, with advanced discrete manufacturing, we will see higher quality, better management of resources and some savings as other countries ask for more of the pie.

  • Jobs – This is one of the biggest hits when it comes to offshoring. More and more jobs are lost in the US with offshoring, but that’s just the beginning. This creates a trickle effect on other businesses that rely on those manufacturers, as customers and even small businesses can’t stay open due to no demand. Again, with reshoring, we see an uptake of jobs for manufacturing and that moves into more resources going into the economy to stimulate other buying.

Many manufacturing operations are keeping their eye on offshoring and what it actually costs their business. For now, reshoring with advanced discrete manufacturing principles makes more sense on quality, costs and jobs for those trying to move product to production.

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Luciano Cunha
Luciano Cunha,
Luciano Cunha,
Chief Executive Officer (CEO)

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