Offshoring and reshoring—what's really going on?

Every day, more U.S. manufacturers consider moving a plant back to the United States or to a nearby country, or expanding operations in the U.S. The idea that the United States can be globally competitive as a manufacturer appeals to most people, but it is difficult to sort out what's really going on, and why.

To help supply chain leaders gain an understanding of some of the trends related to reshoring—bringing production back to the United States or relocating it to different geographical locations—the Council of Supply Chain Management Professionals (CSCMP) has published a new book, Best Practices in Offshoring and Reshoring. The book, based on a study conducted by academic researchers, examines the key factors affecting companies' manufacturing location decisions: how the importance of these factors has changed, and how important they will be the future; what the perceived risk associated with these factors is; and what the perceived trends related to manufacturing location are in specific industries. The study results, organized by industry, are provided in a series of supplementary online appendices.

The study examined the factors that influence manufacturing location decisions for 319 companies that currently do some manufacturing offshore. Forty percent perceived a trend toward reshoring in their industries. That trend appears to be strongest in the aerospace and defense, industrial parts and equipment, electronics, and medical and surgical supplies industries.

From a logistics perspective, the key findings included that more than 60 percent of respondents said that the stability of transportation costs would become more important in their location choices in the next three years. Transportation availability and reliability as well as the availability of knowledgeable logistics service providers also are expected to become more important. The relative importance of these factors varies by industry.

In making the manufacturing location decision, the companies in this study also place increasing importance on where their customers want them to locate, as well as how a location could help them expand into new markets. Competitors' location choices are also an increasingly important factor in the manufacturing location decision.

The research further revealed that companies are reexamining their manufacturing location decisions in an effort to go beyond cost and are considering risk combined with a total cost perspective. While the respondents indicated that the cost of moving to a different location was an important consideration in choosing a location, they are approaching that decision with a longer time horizon.

For more information about Best Practices in Offshoring and Reshoring, including how to order, click here.