Rising wages in what were once low-cost countries, disruptions to trade caused by COVID and adverse political developments, difficulties in supervising remote suppliers, delays in responding to changes in requirements: all of these factors and more are combining to make reshoring – the repatriation of manufacturing operations currently carried out in distant overseas locations – an attractive option for many businesses.
Reshoring means that supplier and customer are geographically close, which brings important benefits. Nevertheless, reshoring is not without its challenges. This article looks at both the benefits of reshoring and the challenges, with particular reference to EMS (electronic manufacturing service) operations.
Benefits of reshoring
- Improved control. With a local EMS supplier, the customer can visit the supplier in person and liaise closely with the supplier’s staff. This makes it easier to optimise designs and to ensure consistent product quality.
- Faster response. Products typically take up to 10 weeks to ship from EMS suppliers in the Far East. To where? Because some final customer are in the far east, so precise for european or American final customer/delivery point. This extends time to market for new products and make it impossible to respond quickly to design changes. With local suppliers, these problems disappear.
- Lower shipping costs. Transport has become increasingly expensive thanks to lack of capacity worldwide and rising fuel prices. Shipping costs from distant locations can, therefore, add significantly to the total product cost.
- Reduced environmental impact. Shipping products from locations far away has a negative environmental impact. Local shipping has a much smaller impact. This is important as end users increasingly consider the environment and sustainability when making purchasing decisions.
- Duties and currency fees eliminated. Local manufacturing means less import duties and no currency exchange losses.
- Stability and resilience. Local supply chains are much better able to withstand and adapt to global events like the COVID pandemic and adverse political developments.
Challenges of reshoring
- Higher labour costs. Labour costs for local production may be higher than those for overseas production. The gap has, however, narrowed in recent years. Also, labour typically only represents 20% of the cost of an electronic product or assembly.
- Product redesign. Product designs optimised for overseas manufacturing may not be ideal for local production. Some redesign work may be required to gain the full benefits of reshoring.
- Automation. To remain competitive with products made in higher cost countries, it will be important choise an EMS supplier that is prepared to invest in robots, cobots and other forms of automation.
- Supply chain disruption. Reshoring will inevitably disrupt the supply chain for a while, but this disruption will only be temporary and is worthwhile for the benefits it will ultimately bring.
Maximising the pros and minimising the cons of reshoring
For many companies that use electronic assemblies, the benefits of reshoring far outweigh the challenges. Nevertheless, if the maximum benefits are to be gained with a minimum of pain, the support of an experienced partner is an invaluable asset when planning and executing a reshoring programme. With its global presence and extensive experience of providing cost-effective EMS services to companies in almost every manufacturing sector, Asteelflash is the ideal reshoring partner and will develop solutions tailormade to suit the needs of every customer.