Bringing It Back: 4 Tips
From CEOs and other experts, here are some pointers for considering and executing reshoring, onshoring and nearshoring initiatives:
• Lead with strategy. “It can’t be a reaction but rather part of a primary strategy for the company,” says Bill Pellino, lead managing partner for consultant BDO’s manufacturing-industry practice. “Include a profitability analysis by SKU or product and identify the biggest exposures for disruption events. For most companies, 20 percent of SKUs generate 80 percent of the revenues, so focus on those.”
Rosemary Coates, head of the Reshoring Institute, suggests adopting “a China-plus-1 strategy, maybe leaving some manufacturing in China for the time being and developing an alternative site in Mexico that is cost-competitive for labor. China-plus-2 would be adding a U.S. manufacturing site.”
• Consider half a loaf. At first, Pellino suggests, “Take a safer, easier approach, like shifting a product line or some of your SKUs, and manufacture them somewhere else, but leave a lot of the Asian supply chain in place for now. Getting things to customers on time is really important, and customers are willing to pay more for that, so you’ll be able to pass on some costs. But it all has to work as a math problem.”
Commercial Vehicle Group “didn’t move our equipment out of China—we dual-implemented” it by tooling a U.S. factory as well, says Harold Bevis, CEO of the New Albany, Ohio–based company. “Let’s say everybody loves each other again and the pendulum swings back: We still have our tools there.”
• Embrace suppliers. “You have to play the ‘Team America’ game and get engaged with suppliers and not treat them as the enemy or as someone to squeeze, but to develop and invest in and partner with, so everyone can do better, and we can do more in the region,” advises Ambrose Conroy, CEO of the Seraph business-restructuring consultancy.
That’s the approach being taken by Zenni Opticals as it reshores production and distribution of eyeglasses. “See if you can get suppliers to onshore some of their supplies and pick up the cost of warehousing and holding all that material on hand themselves,” says Rob Tate, director of U.S. manufacturing for the Columbus-based outfit.
Jamestown Plastics continues to take on reshored production of plastic packaging for a variety of U.S.–based customers. “The whole networking thing, having an extended, domestic, highly skilled supply chain, has so many benefits that you can’t quantify on a spreadsheet,” says Jay Baker, CEO of the outfit based in Brocton, New York.
• Tap into subsidies. The federal Inflation Reduction Act, as well as the CHIPS legislation, can provide a helping hand “if you’re building capital infrastructure that is reducing emissions or touching a renewable-energy resource,” says Bryan Halpin, business-development manager for Baker Tilly.
