Editor’s Note: Today’s blog is from our friend Allison Wilkinson, a freelance writer in the industry, who shows us why Reshoring or Insourcing Manufacturing can boost your profits.
While reshoring has always been a debated topic in the manufacturing industry, the subject earned the national spotlight in the 2016 presidential election. And rightly so, as millions of Americans have been affected by companies’ decisions to outsource manufacturing abroad.
But while the decision to outsource abroad was often tied to boosting profit margins, it now seems as though reshoring — that is, bringing manufacturing back to the U.S. after it had been outsourced abroad — can actually provide even more lucrative benefits.
Minimize Costs of Business Abroad
The basic costs to conduct business abroad can vary greatly from one country to another. However, no matter what country you have outsourced to, you are still gambling on the vulnerability of their currency, the strength of their real estate market and the stability of their government’s infrastructure. There is a multitude of headaches that companies run into when conducting business abroad, such as rising energy costs, soaring tax rates and duty fees and the volatility of the local labor force in countries prone to frequent strikes.
It’s also worth considering the money that you spend to employ a team of people who are tasked with keeping up with all of these international rules and regulations to keep things running smoothly. That kind of expertise rarely comes cheap, and by reshoring, you can eliminate the need for such a refined level of international business expertise.
By bringing manufacturing back to the U.S., you can also put an end to all of the frustration and communication breakdowns that can occur because of language barriers and different time zones.
Save on Logistics
Getting finished products from point A to point B is a massive expensive of outsourcing manufacturing. Thanks to increased energy costs, production trends and the political climate, we’ve seen international shipping prices rising. This cuts deeply into the increased profit margins that many businesses outsourced for in the first place.
If you have to ship any raw materials or parts abroad as a part of your outsourced manufacturing process, this is doubly costly for your business. Reshoring can help you significantly cut your shipping expenses, savings which can be reinvested into your company for new technology to better streamline U.S.-based manufacturing processes.
Improve Product Quality
Insourcing manufacturing allows companies to have greater oversight of their products through every step of their fabrication, which can add up to a higher quality finished product. You can make more frequent visits to the production facilities to conduct spot checks and ensure quality is being prioritized through every step of the manufacturing process.
And by eliminating the need for international shipping of the finished products, your business can see less waste from products that are destroyed or damaged during shipping. Not only does this help ensure a higher quality deliverable, but it also requires less lead time for customer orders, which can boost customer satisfaction.
Consumer preferences must also be considered when deciding between outsourcing and insourcing manufacturing. For instance, if your company manufactures beauty products, customers may be more trusting of your brand if your products are manufactured in the U.S., France or Korea, as was found by researchers at direct sales giant, Amway. Much of this is due to product standards and regulations in the mentioned countries, which help to ensure that the finished product is of high quality.
Boost Manufacturing Efficiency
By bringing manufacturing closer to home, you can more closely monitor the entire manufacturing process from start to finish. This affords you a unique perspective from which to identify ways to improve the efficiency of your production process. This kind of oversight adds a level of flexibility to the manufacturing process so you can test out a variety of new strategies and techniques to boost production efficiency.