Why Reshore? Secure Your Supply Chain

Secured & Shortened Supply Chain, Rapid Innovation, Responsiveness, Collaboration & Closeness to Consumer

Reshoring is the trend of bringing manufacturing from overseas back to its local origin – here, the United States. The tariffs on China, Canada and Europe imports were to both level the global trade playing field and incentivize U.S. companies to bring manufacturing back to America. Now, it seems that the COVID-19 pandemic may have accelerated this trend.

Supply continuity risk, rapid innovation, responsiveness and technological collaboration are now critical considerations for sourcing along with costs, quality and lead time.

Changing consumer behaviors demand rapid and iterative innovation which can be more effectively achieved by shortening supply chains and bringing producers closer to final consumers.

At Franklin Bronze, we offer speed to market and close collaboration with our customers, an advantage for those looking to reshore.  Since we utilize automation and our processes are in-house, from tooling to machining, we can get parts out fast.  By working with customers close to home, we are able to partner for joint design development and can customize projects to meet specific needs.  We also leverage 3D printing for rapid innovation and small lot production.

 

The Movement’s Origins – Offshoring to Reshoring

Outsourcing or offshoring started to trend in the 1970s when corporations moved production to foreign factories. By the 1990s and 2000s, China became the epicenter for this outsourcing. Lured by cheaper labor and operations, production costs were lowered and profits were maximized.

However, in the years following the 2008 recession, companies began to reassess their production locations,  and many were attracted to come back to the U.S. – creating jobs for unemployed Americans. Benefits such as shorter delivery times, higher quality, and responsivity to customers became attractive to reshore. [1]

Remarkably, between 2010 and 2017, 757,000 manufacturing jobs were moved from overseas back to the U.S. In 2018, a record level was seen with 145,000 jobs returning from 1,389 different companies. [2] The increases are largely based on greater U.S. competitiveness due to corporate tax and regulatory cuts, rising wages and prices overseas, and increased recognition of the total cost of offshoring.

From Reshoring Initiative®, nearly 60% of reshore jobs in 2010-2016 came from China. [3]

Reshoring Today

Bringing Back Domestic Manufacturing

About 1 in 2 North American manufacturers (47%) are now looking to source domestically due to the disruptions caused by the recent coronavirus outbreak. [4] This is in addition to the ongoing trade dispute with overseas partners, and the heavy use of tariffs has caused more reshoring by companies wanting to produce or source within the U.S. tariff walls. [5]

The COVID-19 pandemic has disrupted complex global supply chains from logistics (closed borders, idling ships, and reduced routes) to operational capacity concerns which impact production schedules and order fulfillment.  Manufacturers are looking to secure their supply chains through simplification, diversification and localization.

Patrick Van den Bossche, from the global manufacturing consulting firm, Kearney, sums up the offshore to reshore movement and its influences, “Three decades ago, U.S. producers began manufacturing and sourcing in China for one reason: costs. The trade war brought a second dimension more fully into the equation―risk―as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs. COVID-19 brings a third dimension more fully into the mix­, and arguably to the fore: resilience―the ability to foresee and adapt to unforeseen systemic shocks.”

Kearney’s seventh annual Reshoring Index, released in April 2020, revealed a dramatic reversal of a five-year trend, as domestic U.S. manufacturing in 2019 commanded a significantly greater share versus the 14 Asian low-cost countries (LCCs) tracked. [6]

The CPA Reshoring Index (CRI) reports that the share of American-made manufacturing goods consumed in the U.S. market jumped significantly in 2019. The CRI focuses on the success of manufacturing in winning or losing share in the U.S. market.  The CRI hit 59 last year, its first positive jump since 2009. This reflects a growth in U.S. manufacturing output of 0.8% in 2019, with manufacturing imports falling at the same time by 1.0%. Since America’s gross manufacturing output is worth $6.3 trillion, even small percentage changes like these translate into significant overall effects for individual industries, employment, and the U.S. economy as a whole.  [7]

Made in America

About 78% of American prefer products that are made in the U.S. [8], with 60% willing to pay extra for these products. [9] Many cited their reasoning to retaining American jobs and keeping manufacturing strong on the world front.

Domestic products are also synonymous with quality. U.S. manufacturers are able to pick up on quality issues and packaging flaws before shipment. [8]

Total Cost of Ownership (TCO)

Key to successful reshoring is to perform comprehensive Total Cost of Ownership (TCO) calculations, which reveal the true cost of offshoring.

TCO analyses help manufacturers see the benefits of bringing jobs back to the U.S., especially when compared to rising costs, shipping costs and wages overseas, and the resurgence in popularity of American made goods.

The Reshoring Initiative® offers a free TCO calculator so you can aggregate cost and risk factors into one cost.

When factors such as shipping costs, timeliness of delivery, and reliability of sourcing are also considered, the decision to bring parts-sourcing closer to home often can be demonstrated.

“When evaluating a local supplier, companies should look at total cost, including transport, duty, freight, carrying cost of inventory, quality and delivery, rather than simply labor costs, as happened in the 1990s’ offshoring wave.  Having suppliers close to home, eliminates much of this “extra” cost and logistic headache – and provides opportunities to customize products,” explains Kevin Weaver, Industrial Sales Manager.

Impact of TCO from Reshoring Initiative® TCO User Database. 

Interestingly, International Maritime Organization (IMO) is implementing a new emission reduction initiative to reduce the shipping industry’s greenhouse gas emissions by 50% from 2008 levels by 2050 – banning ships using fuel that have a sulfur content of 0.5% or higher. This change is estimated to cost the shipping industry an additional $60 billion per year, about a 25% increase in fuel cost. This cost will more than likely be passed onto the customers – i.e. manufacturers shipping product. [5]

Influencing factors for Reshoring + FDI (foreign direct investment), 2010-2018. [6]

Reshore with Franklin Bronze – Speed, Reliability, Partnership & Innovation

Customers want a responsive local partner to collaborate with to meet the market challenges of rapid innovation and product development.

“Here, at Franklin Bronze, we offer speed to market and close collaboration with our customers, an advantage for those looking to reshore. With robotic processes, in-house tooling and castings machining, we are able to react and deliver parts fast.  By working with customers close to home, we are able to technically support in designing and developing parts that are manufacturing friendly to minimize cost and maximize performance. 3-D printing is available to produce prototypes as well as small lot production in the shortest time possible,” explains Kevin Weaver, Industrial Sales Manager.

With highly qualified engineers on staff, we work in partnership with our customers for joint design development, flexibility and customization. We pour non-ferrous investment cast components, up to 30 pounds (13.6kg) in an array of alloys from stainless steel, nickel, brass and bronze. Our in-house metallurgical engineer can propose alternative metals and treatments that minimize cost without compromising the function or performance of the component

Franklin Bronze Precision Components is located in Franklin, PA, USA, a 90 minute drive from the Pittsburgh airport.

Let our engineers work with you.

 

References

[1] https://reshorenow.org/what-is-reshoring/

[2] https://www.industryweek.com/the-economy/article/22027880/reshoring-was-at-record-levels-in-2018-is-it-enough

[3] https://www.vox.com/2017/5/26/15656120/manufacturing-jobs-automation-ai-us-increase-robot-sales-reshoring-offshoring

[4] https://www.thomasnet.com/insights/increasingly-concerned-about-price-surges-half-of-u-s-manufacturers-looking-to-source-domestically

[5] https://www.tradeandindustrydev.com/industry/how-will-tariffs-impact-reshoring-2019-15693

[6] https://www.forbes.com/sites/kenrapoza/2020/04/07/new-data-shows-us-companies-are-definitely-leaving-china/#656938f40fee

[7] https://www.industryweek.com/the-economy/competitiveness/article/21132971/the-us-finally-saw-some-reshoring-action-in-2019

[8] https://www.consumerreports.org/cro/magazine/2013/02/made-in-america/index.htm

[9] https://smallbiztrends.com/2018/09/60-of-americans-would-pay-more-for-made-in-america-report-says-infographic.html