Shoring discussions and choices involve more than just hourly rates and shipping costs. It's pertinent to discuss the pros and cons that accompany each option. So, what are the "shoring" options for modern American businesses?
Onshoring means you're working with a vendor within the same country where the goods are being consumed. Presumably, for American companies, this means hiring an American manufacturer.
Starting off on the right foot with your product can mean the difference between success and failure. Manufacturing your product in America allows you to respond quickly to market trends, consumer demand, and economic shifts.
Plus, Americans as well as foreign citizens are willing to pay higher prices for American-made items. The authors of a study on the "Made in the USA" label state, "Our findings show that consumers not only prefer and assign a higher value to branded products from a country of origin with a favorable country image, but are also willing to spend more money to obtain them."
Offshoring refers to outsourcing your manufacturing to a country other than the one in which your target market is located. Offshoring naturally leads to longer shipping times, higher transportation costs, and decreased flexibility and responsiveness to consumer demand.
There are many other hidden costs of offshoring that can cripple your supply chain (and sometimes your entire business). Some unexpected issues include changes in foreign economies, energy prices, and real estate costs. Check out this eBook for more information.
The main benefit to offshoring your manufacturing is the cost of labor. Many countries overseas haven't caught up with America's high cost of living or minimum wages. However, as foreign countries industrialize and modernize, many are shifting to adopt policies that increase wages and improve quality of life - which means those low manufacturing costs won't stay low forever.
Reshoring refers to companies that have or had a vendor offshore, but are looking to switch to an onshore vendor. We're currently seeing a trend towards reshoring as U.S. energy prices fall and consumers express a greater desire for American-made goods and services.
If you're looking to reshore your manufacturing due to rising costs overseas, supporting the local economy, decreasing lead times, or many other reasons, now is as good a time as any. Energy costs are low, real estate is a steal compared to India or Japan, and Americans are hungry to bring jobs, goods, and manufacturing back to the States.
Near-shoring is technically a form of offshoring. You're outsourcing to a nearby country (Canada or Mexico) to benefit from shorter lead times and increased flexibility while taking advantage of lower labor costs or some other benefit.
Near-shoring may be appropriate for companies who are located close to the borders, who are struggling to find an adequate native manufacturer, or who are targeting an audience that prefers goods produced in those locations.
What's your "right-shore"?
Every company is different. Some American-based businesses truly benefit from offshoring or near-shoring their manufacturing. For most, however, offshoring isn't nearly as beneficial as it used to be.
While many countries that offer outsourced manufacturing still keep wages much lower than American wages, that's truly the only benefit to an American company who markets their goods to the American public. Wages are increasing, disaster is striking, and Americans prefer home-grown products. Onshoring or reshoring your manufacturing is simply a smarter move for most modern businesses.