It’s no secret. We’re living in an unpredictable world. Since the collapse of the financial markets in 2008, the business landscape changed forever. Manufacturers have been scrambling ever since to figure out how to keep afloat, remain in business and, if lucky, actually turn a profit. Creating an efficient and agile supply chain has been a key issue for businesses with respect to how to do just that.
First, there was the wave of manufacturers that decided to move offshore to other countries in order to take advantage of cheaper real estate, low cost wages, and fewer regulations. However, as it turns out, offshoring has its own set of problems. With longer supply chains companies face increased risks for disruptions.
Just look at what happened in 2015 with the labor disputes shutting down the West Coast ports for months. Chaos ensued with companies either diverting their shipments to the East Coast or they were faced with just letting their shipments sit idle on the West Coast. Tens of millions of dollars were lost because of product delays and the inability to fulfill orders. Not to mention the complete havoc created on each company’s operations. Just think of the time, the energy, and the stress involved – not to mention the gray hairs that resulted!
The West Coast port shutdown is just one example of the type of disruptions that manufacturers face when dealing with a long supply chain. Disruptions also come in the form of natural and man-made disasters including:
- The 9.03 magnitude earthquake off the coast of Japan and the ensuing tsunami
- Extreme weather
- Political unrest
- Pirates on the high-seas and terrorism
And, now that foreign countries have been benefitting from the offshoring boom, they’re upping the ante. Real estate values have risen, wages have gotten higher, payment in full is demanded before products ship, greater restrictions have been imposed, etc. What once seemed like a great idea for many companies has now become their biggest nightmare.
Companies are now, and have been for a while, rethinking the advantages to reshoring and bringing business back to the U.S. There are many benefits to consider over and above the typical disruptions that come with having a long supply chain. A few key benefits include:
- Increased quality control
- Reduction of delivery and distribution costs
- Inventory control
- The ability to respond to market opportunities quickly
- Having your skilled workforce nearby
- U.S. job creation which is of paramount concern for everyone
With many baby boomers retiring, the need for skilled workers in the U.S. is critical. Creating manufacturing jobs here in the U.S. will help develop those skilled workers, as well as help boost the local and national economies.
What Should You Do?
So, what should manufacturers do -- offshore, nearshore, reshore? Every business is different and there are a myriad of factors that need to be considered when determining what is best for the overall success of a company. However, regardless of what you do, supply chain disruptions will never be avoidable. That’s why developing and implementing strategies and solutions to mitigate supply chain risks are key.
By having an efficient and agile supply chain, manufacturers will be able to adapt to an ever-changing environment and position themselves to emerge as successful leaders in global commerce.