American manufacturing is back and it's here to stay. In recent years, more and more companies have begun to reshore their manufacturing capacity back to American shores.
The question is "why?" Why would a company move its production capacity from the traditionally "cheap" foreign labor centers back to America? The short answer is that there are tangible benefits that offset the cost difference in the labor that cannot be ignored.
What are the benefits of reshoring your company's production capacity to America in 2016? Here's a short list:
1. It Puts Your Products Closer to American Markets
For many manufactured goods, time to market can make or break the product's success. Trends in the modern world change at a breakneck pace, and overseas shipping moves with all the haste of an arthritic tortoise.
Between waiting for available cargo space, the weeks-long transatlantic or transpacific voyage, and customs processing, several months can be added to the time it takes to get your completed product to where it needs to go. In this time, a product could be rendered obsolete, or a competitor with locally-based production could beat your product to the market, cutting deeply into your market share.
By reshoring production to the USA, you can put your production capacity close to the lucrative American market, vastly reducing your time-to-market for completed goods. This saves time, helping you get manufactured goods to where you need them before they become obsolete or competitors can flood the market.
2. You'll Be Working with Employees That Speak the Same Language
One of the biggest operational hurdles that is faced by companies who outsource production to foreign countries is the language and cultural barrier. Even when employees in overseas factories have learned English, it is as a second language, so many of the phrases and colloquialisms that are common here in America may confuse these employees since they're not immersed in our culture.
These barriers to communication can slow down the production process, and even increase the risk of severe production errors that can render a manufactured product unusable.
When American companies reshore their production to facilities in the U.S., they benefit from having a workforce that speaks the same language and shares the same culture.
3. You Have More Control Over Production Processes
When you outsource your company's production capacity, you're relying on that other agency to meet your company's quality standards and production tolerances. The issue here is that many overseas manufacturing plants that rely on cheap labor to market their production services might not have the tools needed to consistently meet tight production tolerances.
By reshoring your production capacity to the U.S., you can get increased control of the production process. The manufacturing workers in these plants report to you, not some foreign company. Plus, these workers are more likely to have the tools they need to meet tight production tolerances because of the heavy investments American manufacturers have made into production automation.
This allows you to set tolerance goals and guidelines with a real expectation for them to be met.
4. Reduced Total Cost of Ownership
One of the major reasons why companies outsourced their production in the past was to cut costs. The labor overseas was cheaper than labor in the U.S., so it made sense to move production across the ocean to where labor costs were a fraction of the cost of American labor.
This should save money, right? Not necessarily.
The truth is, overseas labor has a lot of hidden costs attached, ones that can vastly outweigh any benefit gleaned from cheaper labor. From the aforementioned slow shipping, to extra red tape, to reduced production team responsiveness, outsourcing overseas can cost a lot of money, increasing the total cost of ownership (TCO) for every product you make.
By reshoring, your company can actually reduce TCO. The exact amount varies, but you can check out the Reshoring Initiative's TCO calculator to get an estimate of how much reshoring can save your company.
These are just a few of the benefits that companies can enjoy by reshoring their production capacity to the U.S. in 2016. The important thing is that as more manufacturers bring production capacity, and thus jobs, to the United States, the American economy and the middle class will become stronger for it.
This is why Marlin Steel wholeheartedly supports efforts and initiatives that bring manufacturing jobs to America. We are a country of builders and innovators, and it's time to build a better future.