For decades, companies were drawn to offshoring their manufacturing operations to enjoy greater cost savings. By sending production to Asia, for example, they could benefit from lower labor expenses and guarantee competitive pricing on their final products.
In recent years, this trend appears to have been turning around and it's become increasingly common for businesses to shift their production back to the U.S. Time reported for the first time in more than 10 years, the number of American factory jobs has jumped rather than declined. There are a range of benefits associated with more domestic manufacturing and assembly, and corporations are looking to take advantage of these perks.
Shorter supply chains help companies
One of the major drawbacks associated with having facilities located overseas is the extraordinary length of the supply chain and subsequent lack of control over operations. A business that has its products made in China, for instance, could face longer wait times after it asks to slow down or speed up production. In addition, businesses may endure lengthy waits for more products to be shipped from the factory to the U.S. This can result in serious delays for companies that deal with strong consumer demand, as forcing customers to wait may lead clients to have a negative impression of a business.
Having domestic manufacturing facilities allows businesses to quickly ship their products wherever they're needed in a more timely fashion, whether they're necessary in a warehouse, store or consumer's home.
Costs also a major concern
While it used to be cheaper for a company to move its production overseas, for most this is no longer the case. Rising labor costs in Asia, once a low-wage manufacturing hub for many businesses, have made the region less competitive. That, combined with growing overseas transportation costs, makes it more expensive than ever to complete production internationally.
Nearshoring operations is just another way for companies to further reduce expenses and increase productivity. Companies that offshore manufacturing must pay for shipments from overseas, wait for them to arrive and then have them distributed across the U.S. This is a costly and time-consuming process, especially when compared to the techniques of domestic producers, who merely have to send their product across the country, rather than across the world. When these companies choose to use route optimization software to determine the best delivery schedules, they can further increase productivity and cost savings, making domestic production a worthwhile investment for many businesses.