There has been a recent trend where North American based manufacturers are bringing their operations back to North American soil. Why is this? The traditional argument has been that lower costs of labour have moved manufacturing to the East, but increasing demands for quick inventory turnover has created opportunities for North American based manufacturing.
Although outsourcing to China or India may seem like a cost effective option, there are a number of hidden costs involved, such as shipping, lack of quality control, lack of oversight, longer supply chains, and possible delays. If the assembling of products is done on home soil, many of these drawbacks can be eliminated.
The Case for Reshoring
There are a number of benefits to reshoring, and it need not be as expensive as you think. The weakening Canadian dollar has made manufacturing in Canada a more attractive option.
So what exactly are the benefits?
- Real time product deliveryIf individual components are manufactured locally to where assembling takes place, deliveries can be scheduled based on the assembly timeline forecast. This eliminates the needs for expensive warehousing costs, and the need to bring in entire production lots instead of timed release quantities.
- Formation of business networksThe use of the cloud network has created disparate enterprises into a single production unit. This has caused an increase in business networking and real opportunities for businesses in the different parts of the supply chain.
- Speed and FlexibilityReal time inventory increases the speed and flexibility of the production cycle. There is also an increase in quality control as travel distance is reduced, allowing companies to address problems as they arise.
- Job CreationThe return to local manufacturing means that US and Canadian nationals have more job opportunities. This would certainly help to reverse the alarming trend of corporations shifting jobs away from North American soil. It would also improve the overall image of US and Canadian manufacturers, and would reduce the political tension that has been built up over the years surrounding this issue.
- Improved Cash FlowWhen companies are able to turn over inventory quicker there is greater cash flow, allowing companies to reinvest in other enterprises such as marketing or public relations.
- Protection of Intellectual PropertyThe use of foreign manufacturers has complicated the issues surrounding intellectual property. North American manufacturers can have an easier time protecting patented products and they will have greater control over design.
- Government incentivesGovernments are making it easier for manufacturers to return operations to home soil. Reshoring can bring government benefits to the process making the transition back to local operations smoother and less risky to do so.
For more information on whether or not this is beneficial to your team and your company as a whole, contact the Bayview experts today!