Many major manufacturers are moving their productions from one country to another all at the same time. And this is due to the following reasons: the labor cost, skills of the laborers and the market access.
Although reshoring is now a major move on most companies who have decided to offshore certain operations in the previous years and now trying to bring other activities in their home country. According to many logistics experts, the move is not huge but it is prevailing on some manufacturing companies.
Considering the factors aforementioned, logistics expert view these reasons as a driving force for many US manufacturing companies to go reshoring. And it’s not surprising that a lot more companies will look for greener pastures on developing countries that have low labor cost, high-quality workers, and bigger market access.
However, for the reshoring expert Rosemary Coates, who is also the executive director of the Reshoring Institute – reshoring is not as simple as turning the lights off from one locale and setting up in another location for the reason that there are certain considerations that manufacturing companies should give attention. And upon considering the following key takeaways, that’s the time companies should decide whether reshoring is the right thing to do or not.
1 – The Total Cost of Ownership – Manufacturing companies can’t just leave one location for another unscathed. There are certain conditions that have to be met before they could move out. In some countries, reshoring companies has to apply for an exit as this serves as the protection of the citizens in the country. For instance, one or two-year agreements should be provided to the local workers so that in case you want to reshore, you could buy out their contracts.
Another is IP investments. The equipment that has been brought overseas for manufacturing will automatically be considered as a gift unless otherwise the serial numbers are clearly stated in the contract. In case the IP on the equipment and tools had expired, expect that these will be used for manufacturing purposes by the others with no brand of yours on it.
2 – Availability of Skilled Laborers – This has been one of the major dilemmas of some companies like General Electric or GE, a white appliance manufacturing company have encountered when they reshore to another location but opt to hire Americans to do the labor. However, the problem occurs after three days where the workers they hire are eventually got fired for the reason that they want to do the labor task or is not that skillful to perform the task. Finding skilled workers and retaining those are some of the dilemmas that GE had encountered plus the fact that there’s also a big issue when it comes to labor cost. In fact, to enable the GM to hire people that will accept the wage rates that is lower than the usual; the union has made major concessions.
3 – Readiness to Automation – The wage gap between the US and China has indeed got narrowed, but it never disappeared. Even so, if your aim is to get low-cost labor out of the production, this can be done by automating the processes used in manufacturing through robotics, 3D printing, and other automated technologies. Companies should aim at the cross-over between the manufacturing and engineering for the reason that reshoring could not bring back the 100% of the jobs that was lost from off-shoring. Yet, reshoring is not that a bad thing if worst case scenarios have already been anticipated in the decision-making stage.