Reshoring Definition Explained: Why the International Company Back Home

What is Reshoring?

Reshoring refers to the process of bringing manufacturing functions back to a country where they were previously outsourced or offshored location. The reshoring trend has become increasingly popular in recent years as companies face rising costs, supply chain disruptions, and geopolitical risks associated with offshore production.

The trend of reshoring is a response to the trend of offshoring, which involves moving production to other countries to take advantage of lower labor costs and other factors. The decision to reshoring is influenced by a variety of factors, including changes in global trade patterns, rising costs of offshore production, and concerns about supply chain resilience and geopolitical risks.

These are a few examples of companies that have chosen to reshoring production to their home country for various reasons:

• Apple: In 2012, Apple announced that it would invest $100 million to build a Mac computer assembly plant in the United States, marking the company’s first major investment in domestic manufacturing in many years.
• General Electric: In 2012, General Electric announced plans to invest $1 billion in the United States over the next four years to reshoring appliance production from China and other offshore locations.
• Ford: In 2015, Ford announced plans to invest $9 billion in US plants over the next four years, including $2.4 billion to build new engines and transmissions in Michigan and Ohio.
• Adidas: In 2017, Adidas announced plans to open a new high-tech factory in Germany that would use automated production methods to produce running shoes, bringing production back from Asia.
• Boeing: In 2020, Boeing announced that it would shift all production of its 787 Dreamliner to its South Carolina factory, consolidating production from two other facilities in Washington state.

Why the International Company Reshoring

The decision to reshoring production is a complex one that depends on a variety of factors, including:

Cost savings: Offshoring to countries with lower labor costs can save money in the short term, but rising labor costs, transportation expenses, and other factors can erode those savings over time. Reshoring can help companies reduce costs and improve profitability by bringing production closer to home and reducing transportation costs.

Political and economic stability: Offshoring can expose companies to political and economic risks in an offshore location. Reshoring can help companies reduce their exposure to these risks and ensure greater stability in their operations.

Supply chain resilience: The COVID-19 pandemic has highlighted the risks of relying on a single offshore location for production and leading to delays or shortages in the delivery of goods. Reshoring can help companies diversify their supply chains and reduce the risk of disruptions due to geopolitical instability, natural disasters, or other factors.

Improved quality control: Reshoring can help companies maintain better quality control over their products, as they have greater oversight and control over the production process. This can help improve product quality, reduce defects, and enhance customer satisfaction.

Access to skilled labor: In some cases, companies may find that it is more difficult to find skilled workers in offshore locations, or that the quality of the workforce is not up to their standards. Reshoring can help companies access a higher-quality workforce and ensure that they have the skilled workers they need to succeed.