July 25, 2019
Reshoring was at record levels in 2018! Manufacturers are starting to return as they see the total costs of offshoring combined with the rising costs in China and improved competitiveness of the U.S. According to an Industry Week article by Harry Moser, almost 1400 companies announced the return of 145,000 jobs in the last year. This trend was starting to occur prior to the tariffs; however, the tariffs are expediting the return. Manufacturers are also realizing they can gain a competitive edge with rapid customization close to their customer base.
Additionally, even in commodity products, companies are reevaluating how to remain competitive and diversified. Hasbro is the latest company to look at diversifying away from China. According to Industry Week, Hasbro, the largest toymaker globally, said that it planned to move from 75% to 50% production in China by the end of 2020. They are looking at Vietnam and India. There is a transformation occurring. Executives are more concerned about relying on any one source of production (China), and are diversifying. Intel is reviewing its global supply chain, and there are rumblings that Apple and Amazon are working on a plan B.
What Should We Consider and/or What Impacts Could Arise?
Speed and agility are critical to thrive in today’s marketplace. Start thinking about how you can radically reduce lead times while accelerating cash flow (reducing inventory levels) and increasing profitability. It is no easy task yet it is what is required to thrive in today’s Amazon-impacted world. What can you do to get ahead of this curve?
Like the big dogs from the Industry Week article, should you be thinking about diversification? Or should you be re-shoring? Or should you buck the trend and offshore while everyone else is re-shoring? There are many companies who would be in far better shape if they had taken that approach 10-20 years ago when every Board member wanted to see an increase in outsourcing. There are no perfect answers except to be thinking about these impacts on your industry, your supply chain partners and on your company so that you can take a proactive stance instead of a reactive one. What will you do to successfully navigate these waters?
Certainly, re-shoring, near-shoring and diversifying are topics related to creating a resilient supply chain. If you are interested in an assessment of your situation, contact us. You’ll find more information on these types of topics on our resilient supply chain series.
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