The Pressing Need to Reshore, Nearshore, or Insource
Kevin Pinner | Business Lead | Manufacturing Tech
How Supply Chain Issues are Magnifying Manufacturing Challenges in 2022
As we begin the second half of 2022, US manufacturers are experiencing a multitude of pressures. Supply chain disruptions continue to plague many industries.
Most of the offshore problems revolve around geographical distance issues like freight, delivery, and inventory. While other challenges are country specific like higher wages, IP risks, and political instability.
The number one problem centers around quality, rework, and warranty issues. Plus, raw material costs are also rising at a rate not seen in several decades.
Due to these and other factors, many US manufacturers are conducting an intensive review of their supply chain. They are exploring all types of reshoring, nearshoring, or insourcing solutions.
- Reshoring is the process of returning the production and manufacturing of goods back to the company’s original country.
- Nearshoring is the practice of transferring a business operation to a nearby country.
- Insourcing uses an organization’s own resources to accomplish a task that was previously outsourced.
According to the Reshoring Initiative 2021 Data Report, “The rate of reshoring plus FDI (Foreign Direct Investment) job announcements in 2021 was up 46% from 2020 and over 4000% from the 2010 rate. The resulting cumulative 860,000 incremental hires represent about 7% of U.S. manufacturing employment. The acceleration of jobs coming back combined with the decline in the rate of offshoring has resulted in a 12-year steady uptrend in U.S. manufacturing jobs. The COVID crisis has revealed the U.S.’s over-dependence on imports. The Ukraine/Russian war and geopolitical tension with China will drive ongoing supply chain shifts, further accelerating reshoring and nearshoring.”
Due to direct labor shortages, US manufacturers are investing in capital equipment, such as automation, in order to implement these initiatives.
“McKinsey says the world is set to see ‘a once-in-lifetime’ wave of capital spending on physical assets between now and 2027 around $130 TN, as businesses seek to decarbonize, renew critical infrastructure, and invest in mitigating supply chain risk by, among other things, reshoring.”
How to Mitigate Supply Chain Risk
As a manufacturer, you may be proactively seeking new ways to remain competitive, self-reliant, and sustainable. As manufacturers investigate options, a common question we hear is “how are we going to implement change when our Project Managers, Manufacturing Engineers, and Supply Chain Analysts are already overloaded?”
Are you struggling with significant supply chain issues that are eating up your profits and ability to serve your customers? Do you have the needed resources (people, expertise, and time) to develop alternative solutions to survive?
DISHER can help your organization not only reduce risk but gain a competitive advantage. Our experienced Project Managers, Manufacturing Engineers, Automation Specialists, and manufacturing/operations professionals love to assist manufacturers with a variety of reshoring initiatives in a diverse set of industries. We work with you to manage your projects and help you reach your long-term objectives.
How you can gain a competitive advantage through reshoring initiatives
Insourcing Project Example
Our client needed to transfer a manufacturing operation from a North American country to West Michigan.
- $10M project budget
- 1,000 finished good SKUs and 600 service kits
- 75,000 sq ft manufacturing space
- 33 suppliers
- Types of processes: CNC machining, flat and tube laser processing, lathe, brake forming, welding, powder coating, router table work, plating, and light assembly
DISHER formed a team consisting of a Project Manager, Manufacturing Engineer, Quality Engineer, and Documentation Engineer. This team worked with the supplier and customer in planning, executing, monitoring, controlling, and closing-out the project.
The insourcing project was executed on time and under budget and supply chain risk was mitigated.
Supply Chain Disruption & Cost Reduction Project Example
Due to supply chain disruptions and higher costs, a set of purchased components needed to be transferred from Supplier A to Supplier B.
Production equipment needed to be moved to a new supplier without disrupting the client’s production.
DISHER formed a team of a Project Manager and a Sourcing Analyst who led 13 related projects for the client.
The project was executed on time and under budget. Annual cost savings exceeded $700K per year and supply chain risk was mitigated.
DISHER Can Help you with your Reshoring Initiatives.
Manufacturers are being forced to deal with their supply chain disruptions with a sense of urgency to remain sustainable. But we are finding that many manufacturers do not have the internal resources to proactively work on reshoring initiatives like the examples cited above.
DISHER can bridge this gap. We can provide the extra capacity, expertise, and technology you need to execute these projects with quality and speed. We promise to make a positive difference with you by making your organization even more resilient and nimble for the long term. Let us know how we can help you.