Often, you’ll read on these pages reports that there is a trend toward reshoring, bringing manufacturing back to home shores. I’ve written a few such reports myself. And almost as often, you’ll read that there is no such trend, that there is only anecdotal evidence. Sometimes, you’ll read both claims in the same story, and for good reason. The research is mixed and the evidence for one conclusion or the other can be in the eyes of the beholder.
There certainly is a lot for CPOs to think about regarding offshoring and outsourcing. You can read the latest Procurement Leaders research here. But if we are looking for a trend in manufacturers’ sourcing decisions, it could be this: an emphasis on what makes good business sense. It’s part of the ongoing maturation of procurement. CPOs are looking at all the elements of cost–the total cost of ownership (TCO)–rather than just a few costs in the quest to achieve corporate objectives. In other words, goodbye and good riddance to the practice of going exclusively for the quick and easy savings and hello to a more strategic view of the long-term implications of sourcing decisions.
I read last week’s news that Nissan was shifting away from low-cost country sourcing in that light. A goal for the automaker was to reduce risk, which is certainly part of a long-term, total-cost strategy. There are many other elements too, including shorter lead times, improved product quality, better intellectual-property protection, lower travel and logistics costs, and the opportunities for innovation when manufacturing and design engineering are more closely located. The Reshoring Initiative includes those and others in its Total Cost of Ownership Estimator, which it offers free of charge to interested manufacturers.
There are are a growing number of examples in North America of the tilt toward TCO. The state of Mississippi, for example, has been hosting reshoring workshops, with another one scheduled for 23-24 September 2014. The state’s Make It in America program recently received a federal grant for its workshops on reshoring. Similar efforts, boosted by the Reshoring Initiative, are being discussed or are underway in Pennsylvania, one county in New York state, and other localities. North of the US border, reshoring interest is evident in Canada, according to consultancy KPMG.
Reshoring does not have to mean bringing manufacturing all the way back to the home country, as enticing as that may be. It can mean simply bringing it to a different, closer shore, or, as Flextronics CPO Tom Linton has said, as close as possible to where products are consumed. That makes for good business sense. And isn’t doing the things that make good business sense the mark of maturity for any function?
Source Article from http://www.procurementleaders.com/blog/my-blog–paul-teague/2014/08/11/the-real-trend-in-reshoring
