GA Manufacturing Extension Partnership (GaMEP) Georgia Tech

Reshoring Your Supply Chain: Starting Points for Small to Mid-Size Manufacturers

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Shipping Containers at a Port.

“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.

History

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.

Technology

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?

Analytics

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.

1www.reshorenow.org

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

Why Is There a Shortage of Baby Formula?

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Empty shelves at a grocery store during the baby formula shortage of 2022.

By now, everyone’s heard about the shortage of baby formula in the United States. It stems from the fact that over 90% of U.S. infant formula is made by only 4 companies: Abbot, Mead Johnson, Nestle, and Perrigo. But, how did this happen? There are three, primary causative factors:

  1. There has been a lot of consolidation across the food industry over the past few years, with big corporations buying-up other companies.
  2. The governmental food safety regulations for infant formula are extremely strict. Only companies with access to money and resources can produce these types of products. In addition, the FDA placed strict restrictions on imported formula, despite the fact that many countries have food safety standards that meet or exceed domestic standards. Because of this, the U.S. now manufactures 98% of our formula supply.
  3. About 50% of infant formula sales go through the federal Women, Infants, and Children (WIC) program, which equates to about 1.2 million infants. WIC contracts utilize a sole-supplier methodology, so two companies (Abbot and Mead Johnson) account for about 90% of WIC contracts in the US.

Beyond the reasons listed above, baby formula manufacturers are currently facing the same supply chain and workforce issues faced by manufacturers across the world. Interruptions in the baby formula supply chain, coupled with the fact that the FDA shut down a major producer earlier this year due to an extensive recall, created a perfect storm for the shortage.

Read more about reasons for the baby formula shortage and what actions have been taken to help alleviate the problem, in this recent article that I contributed to in the Washington Post: US safety, savings rules set stage for baby formula shortage.

What can manufacturers learn from this and what actions can be taken by companies to guard against future shortages of other products?

  • Food manufacturers can take steps to put food safety and quality first, to avoid consequences such as recalls or shutdowns. Learn more about the food safety training and implementation services provided by GaMEP at our food and beverage industry page.
  • All manufacturing companies can review their supply chain and use strategies to diversify and mitigate risk. Contact us for more information on how GaMEP can help.

By: Wendy White, GaMEP Food Industry Manager

How Food Supply Issues May Affect Your Thanksgiving Table

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GaMEP Food Industry Project Manager, Wendy White, discusses how food manufacturers have had to pivot to beat supply chain challenges & meet Thanksgiving demand. Learn More About GaMEP Food Industry Training and Services.

Wendy White Headshot

This month, many are marking their calendars and planning to gather around the Thanksgiving table with family and friends. But with supply chain concerns, there might be some added anxiety around rustling up all the ingredients for a feast this year. Many of us may not understand how complicated it is to get cranberries from the bog to the processor, then cooked down and into a can and shipped to a distribution center and finally a store so we can buy it and have it on hand beside the turkey.

“Supply chains are convoluted,” explains Wendy White, a nationally known food safety and supply chain expert who works with the Georgia Manufacturing Extension Partnership at Georgia Tech. Before joining academia, White spent 17 years focused on safety and regulatory compliance in the food manufacturing and distribution industry.

“Formulated foods encompass a lot of ingredients, and shortages can be caused by breaks in the supply chain for any of those ingredients,” she says.

These issues are not always apparent to the public, but we may feel the effects. Supply chain concerns can mean grocery stores aren’t getting shipments on time, and manufacturers don’t always have all the ingredients needed to make their products.

“We have a large global market, and shipping something from another part of the world has become so easy for us in this day and age. Sourcing cheaper and different ingredients from different parts of the world has become commonplace,” says White. “Now, we’re seeing bottlenecks in the shipping and logistics segments of our food supply and it becomes apparent how we sometimes are reliant on those imports.”

So what can shoppers expect and how can they be prepared this holiday season? White, who watches the food industry closely, shares her insights.

Don’t freak out.

White says the American food industry is robust and resilient. Throughout the pandemic, manufacturers have had to continuously pivot, and have done so with surprising success.

“We are lucky to have a wide variety of raw agricultural products here in America — the breadbasket in the Midwest, or tropical climates in California and Florida where fruit can be grown. We’re not quite so dependent as other nations on foreign imports,” she explains.

While there will be some changes in prices and availability, there’s no need to panic, White says.

Expect higher prices across the board.

According to White, there are two primary drivers of price increases right now: labor shortages and higher transportation costs. This isn’t limited to the United States, the United Nation’s FAO (Food & Agricultural Organization) Food Price Index states that across international markets, we’re seeing the highest food prices in 20 years. Domestically, some food manufacturers are having trouble staffing their facilities. To attract workers, they increase wages, which in turn increases price tags on products. Also, when oil prices rise, the cost of transporting products to stores increases. That gets passed on to the consumer at the grocery store as well. White says that while prices will go up, she’s optimistic that it won’t be enough to break the bank.

Watch out for specialty items, especially from abroad.

The challenges of unloading and shipping items at many of America’s ports will affect the food industry. “We’re going to see some disruptions with food ingredients and components that are only available overseas,” says White.

Specialty products that are typically imported may be more difficult to find, or more expensive. Think imported Parmesan cheese or cinnamon shipped from Sri Lanka. Often these products are transported by ships, and congestion and backups at America’s ports may mean delays or scarcity.

Sometimes a shortage is created by frenzy.

“We had a run on paper goods during the heat of the pandemic,” White explains. “There was no shortage in supply. This was a fabricated increase in demand.” A rumor circulates that may send people running to the grocery store and hoarding products. “It’s hard to predict what the next crazy in-demand item is going to be that works consumers up into a frenzy and artificially inflates demand.”

Right now, White says, the food supplies are there, but there are complications with processing, packaging, and transportation capacity to meet rising demand. Some spice companies like McCormick have announced a shortage of glass bottles, meaning their gourmet spices are on hold right now. A drought in the Midwest has wheat prices soaring. Some meat and poultry plants aren’t operating at full capacity due to fewer employees on hand and fewer truckers available to transport items.

Food companies are preparing for the holidays.

“The food and beverage industry is versatile and very good at contingency planning,” White says. Turkey companies are processing birds and freezing them now to build up a surplus in anticipation for demand. Many companies are holding extra inventory — keeping three or four months of supply on hand instead of the more typical one or two months.

White describes the versatility of the American food manufacturing industry as “incredible.” She says this may mean consumers will see different types of packaging or different products this holiday season as companies pivot to handle supply chain issues. How might consumers see this? Fewer boneless, cured, or smoked hams, for example, where processing companies had fewer employees available to do the extra processing work.

To save costs, be flexible if you can.

If you’ve got time to shop around, check different retailers and grocery stores in person.

“They are continuing to use specials and deals to entice shoppers,” White says. “During the pandemic, many shoppers making grocery purchases online have actually been spending more because it’s a bit more difficult to make selections by brand.”

By perusing a store shelf in person, you may see six different types of canned green beans — and you can choose a store brand or a lower-cost item to save money.

Buy shelf-stable items such as canned cranberry sauce, boxed stuffing, and pumpkin pie filling ahead of time if you are feeling concerned. Planning in advance will help you make sure you’re not part of a last-minute, frantic search if supply chains become more disrupted than they already are.

Wendy White is one of America’s leading food supply chain and food safety experts. As project manager at the Georgia Manufacturing Extension Partnership at Georgia Tech, White helps food manufacturers improve their food safety and quality systems. She is also on the editorial board of Food Safety Magazine.

Learn More About GaMEP Food Manufacturing Training and Services.