Global manufacturing supply chains keep businesses functioning around the world. In leading economic countries like the U.S., companies have long sought to find new models such as outsourcing to decrease costs while also expanding their pool of resources. Because of this, offshore manufacturing has exploded within the last few decades.
However, with the global COVID-19 pandemic, shipping bottlenecks, and increased political tensions between the U.S. and China, many businesses are rethinking their offshore manufacturing strategies. Here is a deeper look at the benefits of moving your supply chain closer to home and how your company can still compete on a global scale.
Offshoring, Onshoring, and Nearshoring: What’s the Difference?
There are three main categories that outsourced manufacturing falls within – offshoring, nearshoring, and onshoring. Whether your company handles its own global supply chain or it works with an outsourced manufacturing industry partner, each setup makes a big difference in how your company runs.
Offshoring
With major advancements in global supply chain communication, transportation, and manufacturing, many U.S. companies have their products produced overseas in places like
- China
- Indonesia
- Pakistan
- Vietnam
- Japan
- India
- Taiwan
- Korea
In other cases, companies buy the resources that they need from these countries. Raw materials like wood, steel, iron, diamonds, oil and oil products, rare metals, and other options can easily be purchased and shipped around the world. It’s also very common for a U.S. company to source sub-components globally, and conduct final assembly and inspection in the U.S.
Some of the many benefits of offshore manufacturing that companies enjoy include inexpensive labor, a highly skilled workforce, and less expensive raw material costs.
However, global outsourcing does not have to be the default way to manage your entire manufacturing supply chain. There may be benefits to choosing to manufacture some of your components and products closer to home.
Onshoring
As the opposite of offshoring, onshoring is moving your manufacturing back to your home country. Despite the growth of overseas manufacturing over the past few decades, companies are taking a close look at diversifying part of their supplier-base onshore.
Companies considering this change might be looking to avoid import tariffs, simplify their supply chain, or reduce the overall carbon footprint of their product. However, they may be met with significant increases in overall cost, so a full analysis of the potential impact of the move should be considered.
Many companies lack the resources, time, or desire to establish and manage a diversified supplier base. One option to consider is partnering with a manufacturing supply chain expert within their home country that can analyze options, set up, and manage the perfect balance between offshore and onshore manufacturing.
