“Reshoring”, also known as onshoring, has never been a hotter buzzword, leaving many to ask what is reshoring and what could it mean for your business?
The definition of reshoring is “the practice of bringing manufacturing and services back to the U.S. from overseas”1 Reshoring as a supply chain initiative has been around for over a decade, but as ports are bottlenecked and transportation costs continue to climb, companies and customers are frustrated and beginning to see it as a more attractive option than ever before. Add in extended lead times and shortages in consumer products and you have what seems to be the foundation of a reshoring strategy.
Yet the thought of reshoring some or all of the supply chain for a small or mid-sized manufacturer who may already be struggling with limited resources can seem to be an overwhelming task. Conceptually, it makes sense. Reshoring can solve problems, mitigate risk, lower costs, provide a ‘greener’ solution, and even create jobs. Catching this vision, especially now, is easy, but putting a plan in place to achieve this goal may seem impossible.
One approach is to focus on a few key starting points to research and analyze the advantages and disadvantages of reshoring, while conserving your valuable resources and giving your team the information they need to make strategic decisions.
Go back to why the decision was made to move the supply chain offshore. Dust off the presentations and pull those old Excel files from the archives. Answer these questions:
- What was it that drove this decision?
- What has changed since the decision was made?
- If you used current data with the same criteria, would the evaluation yield the same recommendation?
- What have been the positive results of this move?
- While recent challenges have magnified the disadvantages of offshoring, when was the offshore supply chain working well and why?
- Are there reshoring disadvantages that should be evaluated?
There is a reason that reshoring wasn’t seriously considered until now, and you have to find that reason to make an informed decision.
Problem Statement and Solution
Once you understand why the supply chain went offshore in the first place, you must quantify the current problem, or problems, you are trying to solve. Reshoring cannot be a solution in search of a problem – that approach won’t be sustainable. This is where narrowing the focus to match your available resources becomes critical. Write a problem statement to help you discover:
- Are there a handful of components that are driving the majority of your problems?
- How will reshoring, specifically, address the problems and provide a more workable solution than the current supply chain?
- Are there solutions other than reshoring that could also address these problems?
Focus on real, tangible issues and start small, otherwise your problem statement will become so large or general that it’s meaningless or unattainable.
Evaluate your current supply chain technology and determine how it can be leveraged to support reshoring.
The supply-chain industry has understood that it can no longer treat technology as an isolated service, i.e., as a means to an end. Technology will inevitably become the backbone of the supply-chain industry. 2
While this backbone will be critical to successful reshoring, the key to success is to keep it simple. Utilize what you have, while in parallel beginning to build a longer-term vision and supporting strategy.
Many small to mid-sized manufacturers have much of their supply-chain data in Excel files downloaded from an ERP system of some type. If that’s the case, build a visual of these siloed Excel databases and determine your starting point, then ask these questions:
- Will the technology and data you are using to support offshore suppliers have to change in some way to provide the supply chain visibility you need for reshoring?
- Can you leverage the suppliers’ technology and/or integrate it with yours easily?
- What benefits would there be to implementing new technology?
- Does your team have the bandwidth to take on a new technology implementation right now?
Make sure you are measuring apples to apples as you evaluate costs. If your analytics have not evolved over time to keep up with global supply chain evolution, this needs to be addressed before any final recommendations regarding the solution to your current supply chain problems can be made. In this regard, evaluating these questions can help get you started:
- How are you measuring your supply chain?
- Are you considering all parts of the landed cost equation?
- Are you factoring in cost predictability, possible import tariffs, carbon offset costs, or what you may have to spend to react to a late or cancelled delivery?
Take a big picture approach to evaluating costs for both onshoring and offshoring. While you can’t necessarily predict future unknown costs or disruptions, you can account for possible or likely risks and weigh them as part of the overall equation.
Management and Team
Assess your overall supply chain management and team bandwidth, strengths, and weaknesses. This is in many respects no different than any other organization-wide project that you may pursue: it’s the team on the ground that will have to make it happen and change management will likely be a significant part of the overall project.
As noted in Supply Chain Management Review: Supply chain and business leaders must model High Performing Organization (HPO) culture, not only embracing new behaviors like adaptability, emotional intelligence and diplomacy, but also abandoning leadership behaviors that reduce employee engagement, inclusion and empowerment. Leadership must anticipate the resources employees need and make them feel safe to openly discuss mistakes and lessons learned to encourage smart risk-taking and agility.3
Consequently, you will need to ask questions like:
- What is your supply chain management organizational structure and how would it need to change with reshoring?
- Does your team have the resources they need to establish new suppliers and ensure these suppliers’ success?
- Is your current team environment one in which the challenges of major supply chain changes can be openly discussed, measured, and acted upon?
As you determine the role your team will play in your new supply chain ecosystem, be sure to consider potential partnerships with suppliers. Partnerships can effectively expand your own team in addition to providing a real-time link to your most critical suppliers.
Completing your reshoring plan will require far more work than the starting points listed above but the initiative may have substantial benefits that help your company achieve long-term success. If you are struggling with how to make the leap from vision to project, these key points can help kick-off the process and give you the information you need to start a reshoring project.
With project managers located within two hours of any manufacturing plant in Georgia, the Georgia Manufacturing Extension Partnership at Georgia Tech, can help you locate the suppliers you need to reshore, assess the ability of your organization to support a reshoring strategy, and advise you on your analytics and technology. Contact us for more information on supply chain services or help with other aspects of your business.
2 “Supply Chain Trends to Watch – 2021”, www.sourcingandsupplychain.com
3 “Developing High Performance Leadership”, Supply Chain Management Review, www.scmr.com
By: Dean Hettenbach, Project Manager, Georgia Manufacturing Extension Partnership