The topic of reshoring is hot on the minds of many U.S. manufacturers. ReshoreNow.org has reported that the tide is now turning. In their latest report, this organization, which helps companies assess their total cost of offshoring, estimates that reshoring exceeds offshoring by 27,000 jobs. This is good news for American manufacturing.
Manufacturers might consider reshoring for various reasons, as reported by ReshoreNow.org:
- Shorter lead time
- Higher product quality and consistency
- Rising offshore wages
- Skilled workforce
- Freight costs
- Image of being Made in USA
- Lower inventory levels, better turns
- Better responsiveness to changing customer demands
- Minimal intellectual property and regulatory compliance risks
- Improved innovation and product differentiation
- Local tax incentives
We've seen a lot of new business from companies looking to reduce the total cost (and the headache) of using offshore suppliers. In one case a commodity buyer worked with PFI Precision Machining to develop a solution that resulted in significantly lower total procurement cost and improved assembly cell uptime.
In this cell, the assembly process is highly automated. The component parts are fed into automatic feeders and the assembly machine produces a complete final assembly in seconds. This commodity buyer was directed by their customer to reduce costs. Focusing only on lowest part price, they were ulitmately led to an offshore source. Unfortunately, the assembly machine frequently shut down because of undersized parts. Attempts to have the offshore supplier implement a permanent fix were not successful. Reshoring production to the US was the only solution.
Eventually we were given an opportunity to get involved with this project. We worked with the buyer to develop an effective manufacturing process to improve part tolerance and size consistency, as well as the quality of the surface finish. We also found a different raw material supplier who delivered a more consistent product.
Our team worked to offer the total lowest cost solution. Now their shop operations enjoy a very high uptime on the assembly cell, in addition to quick response to design or volume changes. The process engineer said that the total cost of the offshore sourcing attempt was several hundred thousand dollars:
“It is difficult to say exactly how much because so many of the costs were difficult to measure. To be honest, I don’t think management really wants to know, I am just glad it is over.”
Considering the total procurement cost (including occasional downtime, overseas freight, duties and expedited shipping) the customer’s overall total cost was much less and the quality of PFI’s finished part much higher. Reshoring also eliminated the cost of having a three-month lead time, which slows down design improvements and the ability to adjust to market volume increases or decreases.
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