According to Cerasis, a good number of U.S manufacturers who had set up base outside the country have moved back home, a move known as reshoring. A study carried out by a Boston Consulting Group (BCG) established that 54% of companies with revenues of USD$1 billion and above are thinking about reshoring.
The lure of off-shore operations
The main incentive for moving manufacturing operations abroad was significant cost reductions which would give the bottom line a nice boost. The most popular offshore locations are China, India and other Asian and North American locations.
Another huge incentive was finding new markets for their products in these locations. The belief was that goods produced here would be of high quality but affordable because of low labor costs which would appeal to the masses. It may not be practical, but some American manufacturers made the decision to manufacture offshore because they were following the corporate crowd.
Not all that
One reason why U.S companies are reshoring including American injection molding companies is the discovery that the benefits of operating abroad turned out not to be all that they were made out to be. It turned out that there were unexpected costs and risks that were unplanned.
Companies are also reshoring because the economies of the countries that U.S companies relocated to changed significantly. This coupled with the high cost of transporting raw materials and finished products to and from factories located abroad, has made reshoring a compelling option that makes the best financial sense.
10 reasons American manufacturing companies should reshore
Apart from this, Harry Moser who is the Founder and President of The Reshoring Initiative, gives other reasons U.S manufacturers should consider reshoring. They apply to American injection molding companies as well.
1) Cost is the major factor. In the current economy of countries abroad, obscure costs of outsourcing can drive up nominal expenses by 300%. The other high cost is energy which is a concern for 70% of American manufacturers who were or are based abroad. The cost of transporting finished products abroad also drives up the price of a product.
2) Offshore manufacturers also face the risk of quality problems. In most of the offshore locations, the countries require that locals are given a given percentage of the jobs at a manufacturing plant. This includes supervisor and managerial positions. This requirement puts manufacturers at risk of quality problems; those they hire may not deliver up to the expected standards but firing incapable local staff could cause problems.
3) U.S manufacturers have also encountered situations where small local manufacturers make knock-offs. These are typically low quality which compromises the image of a brand.
4) Delays in getting finished products to the American market are also a challenge. These are caused by having to source quality raw materials locally or transport them from where they are available and delays in transporting finished products.
5) When there is so much distance between the point of manufacture and the point of sale, there a lot could go wrong in the supply chain. A break in the chain could affect when and how quality finished goods reach the targeted destination.
6) Manufacturers may also face cultural barriers. One is language where the workers may not understand their American counterparts because English is not their first language. In some countries, manufacturers may also face barriers related to gender and religion where work is not done on certain days which are working days in the U.S or where members of a given gender cannot do some types of jobs.
7) Products made in America also give consumer maximum consumer safety. This is because locally made products have stricter safety standards that products manufactured abroad.
8) Manufacturers who are based locally also enjoy more customer loyalty. Today’s consumer is very conscious about issues like fair trade and supporting local manufacturers. Most Americans have become fiercely patriotic since the 9/11 and other actual and threatened terrorist attacks.
9) Also, thanks to technological developments, automation has become the way to go. Automation reduces the cost of production and preserves the quality of a product. Some of the best automation technology is in the U.S and companies that are using are seeing the big savings in cost that inspired companies to set up base offshore. This is true of American injection molding companies as well.
10) Local production also give a local manufacturer the flexibility to respond to market shifts. When a trend or demand for a particular product suddenly comes up or falls, it is possible for a locally-based manufacturer to respond and increase, decrease or stop production altogether. The unexpected happens in every sector and in every industry including the American injection molding sector and being able to act fast prevents major losses in the form of unwanted merchandise.
GreenLeaf Industries is an ISO 9001 registered manufacturer that consistently adheres to all its standards to provide our clients with consistent, reliable, quality automotive and industrial plastic parts.
We are an American injection molding company, unafraid to compete in the world market and determined to succeed. Established in 1999, we take pride in our high-quality craftsmanship and superior customer service. Contact us to discuss whether your injection molding project may be a candidate for reshoring.
310 Bussell Ferry Road
Lenoir City, TN 37771