To Reshore or Not to Reshore – That Is the Question
Supply chains shellshocked by the COVID-19 pandemic have continued to be battered by a variety of interruptions, including the blockage of the Suez Canal, the ongoing war between Ukraine and Russia, inflation and currency exchange-related issues, and other political uncertainty. And while virtually every industry has been affected, for some, the impact has been devastating.
The efficiency and cost savings from a well-run just-in-time supply chain can also leave it more susceptible to those interruptions. To combat future disruptions and protect supply chains, more and more organizations are revisiting reshoring.
Also referred to as onshoring, reshoring is the process of bringing segments of the manufacturing or production process that were previously taken offshore back into the United States, either bringing them in-house or aligning with domestic suppliers.
Reasons for reshoring
Here are a few things to consider when evaluating whether reshoring is a fit for your business. Reshoring can:
- Shorten delivery lead times by avoiding overseas shipping
- Reduce transportation and shipping costs exacerbated by a shipping container shortage and backups at major U.S. ports
- Avoid or reduce tariffs on imports (but beware – some costs are unavoidable, and will still find their way into supply costs downstream)
- Provide tax incentives for relocation at the state and local level (connect with our Tax Credits & Incentives team for more insight)
- Generate goodwill and brand recognition from customers for bringing jobs and production to the U.S.
Reasons to continue offshoring
While there are many great reasons for onshoring, there are potential downside issues as well:
- Higher domestic labor and production costs
- Upfront capital investment if production is in-house
- Uncertainty with future U.S. tax policies and rates – capital investment and supplier changes can require multiple years of lead time to execute, though the rules and regulations that informed the decision are at risk of changing every election cycle.
- The needed resource or product is geographically limited and not readily available in the U.S.
Whether or not you’re considering whether or not reshoring is right for your business, get in touch with our manufacturing and international specialists for a free consultation – we’re here to help!