Category Archive: Reshoring

Reshoring – All You Need to Know

Over time, manufacturing industries shifted production from the United States to countries like China. Offshoring, the practice of moving a company’s manufacturing facilities overseas, began in the late 1970s. Many companies made the move to capitalize on lower labor costs and lenient environmental regulations in foreign countries, thus enabling them to generate higher profits for shareholders. However, manufacturers are bringing manufacturing services back to the land of opportunity to strengthen the U.S. economy and help balance trade and budget deficits. Learn more about the concept of reshoring and how this decision benefits the U.S. manufacturing industry.

What Is Reshoring? male engineer operating power tools with sparks in industrial factory

Reshoring refers to returning manufacturing services from foreign countries back to domestic facilities, closer to the target consumers. This migratory process is also referred to as inshoring and backshoring. When companies reshore their manufacturing services to the U.S., this is an optimal way to strengthen the economy domestically, quickly creating well-paying domestic manufacturing jobs. It can also reduce the total cost of production and make manufacturing more efficient.

Recognizing the importance of domestic manufacturing, in the year 2010, Harry Moser established the Reshoring Initiative with the specific purpose of bringing quality manufacturing jobs back to this country. This industry-led effort aims to help companies understand how local sourcing and manufacturing affect the U.S. economy, and how reshoring can greatly benefit their business.

How Does Reshoring Affect the Manufacturing Industry? 

While a number of the factors that initially tempted manufacturing companies to offshore their production still exist, a variety of considerations have led companies to return to American soil. Labor costs, while still typically cheaper, are rising overseas. Some companies found that less expensive labor and more lax regulations also equated to lower-quality products or materials. Also, innovations in automation have drastically improved since the offshoring trend began, meaning that American manufacturers can generate products faster, cheaper, and in higher volumes.

Whatever the reason, by bringing manufacturing facilities back to the U.S., those companies are having a positive impact on the U.S. economy while also benefiting their own bottom line. Reshored companies can lower production costs, simultaneously increase profits, have more control over product innovation, and streamline the logistics of procurement, production, and distribution to make their business more effective on the whole.

Advantages of Reshoring 

More specifically, reshoring manufacturing in the U.S. comes with the following benefits:

  • Improving the quality of a product and increasing control over quality management and intellectual property
  • Encouraging the development of a skilled workforce while providing domestic jobs
  • Increasing responsiveness to consumers’ wants and needs with reduced lead times and modified products
  • Minimizing import tariffs, freight costs, logistics headaches, and compliance concerns associated with international regulations
  • Gaining an advantage over the competition, primarily by selling to consumers attracted to locally produced or “Made in the USA” products
  • Reducing the risks associated with the global supply chain for improved control

Ultimately, the primary benefit of reshoring is to improve the country’s economy. Reshoring directly affects the lives of Americans and makes the country more self-reliant. COVID-19 and the resulting supply chain interruptions have only reinforced the importance of domestic production.

Manufacturing in the USA at American Industrial Company 

As a Chicago-based American manufacturer, American Industrial Company has proudly offered quality-driven precision manufacturing services in-house at our ISO 9001:2015-certified 25,000-square-foot facility since 1981. We specialize in comprehensive prototyping, design, tooling, metal stamping, laser cutting, and many more value-added services in the U.S for customers both domestic and international. Contact us today to learn more about our turnkey solutions and precision metal stamping capabilities.

U.S. Production Costs Becoming Competitive With China

A new report has shown that over the past 10 years, manufacturing in the United States has started to become more competitive compared to many low-cost rivals- the most notable one being China. Today, U.S. factories are able to produce goods at cheaper prices than many of those produced in Eastern Europe. According to the Boston Consulting Group (BCG), it is now less than 5% cheaper to produce goods in China compared to the United States, which is quite good considering that the U.S. wasn’t even on the map prior to this.

The Problem with Outsourcing

One of the biggest conversations surrounding American manufacturing these days is reshoring; companies of all sizes are bringing business and jobs back to American soil. It’s welcome news for the industry.

As some companies still make the decision to outsource—and as many of us focus on the reshoring trend—what many people are not talking about is whyoutsourcing is such a bad decision, not just for the country, but for those individual companies.

Outsourcing is complex and often fraught with problems.  The actual process of moving manufacturing overseas, and then making sure it is being done correctly and efficiently, is even more complicated than it sounds.

The Rebirth of Made In America

For many years, Made In America became synonymous with higher labor costs and declining quality. Company after company took their business overseas looking to boost profits. Without question, this mass exodus was devastating to the economy, as it stripped once proud towns and cities of jobs, factories, and pride. Thankfully, the trend of outsourcing is starting to reverse itself.

So, what has brought about this shift towards reshoring? As with any economic movement, a number of different variables are driving manufacturing back to American soil, as seen in this article. There are a couple that really standout.

Labor Costs: When reshoring first became a trend, costs of labor were much cheaper in places like China and Mexico than they were here in the U.S. Now, according to this article, those wages have grown 15-20% annually, making the wage discrepancy much shorter. As a result, companies are bringing manufacturing back to the States.

Quality: There is little question that the quality of American-made products outstrips those from most countries. We have an amazing pool of workers with superior training and education on every level of the manufacturing process.

Things are changing so quickly, that even the undisputed champion of low-cost, outsourced retail, Wal-Mart, recently pledged to buy an additional $50 billion in U.S. made goods over the next decade. It is a perfect sign that there is not only an emotional desire to bring manufacturing back to America, but also one built on profit margins.

At American Industrial Company, we have never strayed from our commitment to American made products. Since 1981, we have proven that you can manufacture high quality precision metal stampings in America, with American workers, and still compete on the world stage. From the look of things, more and more American companies are starting to come back around to our way of thinking.