"Reshoring"—the next supply chain trend?

California has a reputation in the United States for being the place where new trends often start. If past experience holds true, then manufacturers may soon adopt the example of several California businesses that are in the forefront of a trend that some are calling "reshoring."

The San Francisco Business Times reported in July that in recent months, four Northern California companies pulled some or all of their production out of China and switched to Wright Engineered Plastics in Santa Rosa, California. The chief executive officer of one company that "reshored" its plastics production was quoted as saying that for some products, manufacturing in the United States is now "cost comparable" to that in China.

The news article noted that although labor costs are generally cheaper in China than in the United States—and the cost of shipping containerized goods from Asia is now at a four-year low due to lower oil prices—"reshoring" allows U.S. manufacturers to make products closer to consuming markets. Proponents say that reshoring also helps with cash flow, as Chinese manufacturers generally require full payment for orders prior to shipment. Moreover, locating production near the consuming market makes it easier to effect order changes and saves time because the product doesn't sit on a ship for weeks. Finally, as the U.S. dollar weakens in value, China's cost advantage may decline for American manufacturers.

Source: "Some Manufacturers Find California Cheaper Than China," San Francisco Business Times, July 24, 2009