More and more US companies are performing cost-benefit analysis of overseas vs. domestic manufacturing. Experts agree that reshoring is a growing trend, but there is no single justification. Many factors are influencing companies to reevaluate their supply chain and understand the true cost of outsourcing. Agility, high operational costs such as labor, and quality management are just a few of contributors that CEOs are pointing to as a reason to come home.
Companies who choose to produce in the US can be more nimble, carry less inventory, and react quicker to shifting markets or trends. Consequently, clothing manufacturing in particular is starting to see an uptick in domestic production. More sophisticated manufacturing techniques available here are making US apparel factories more competitive.
Labor may still be less in China, but production demands are often solved by additional workers instead of employing automation to reduce labor time. The net cost of labor is then not so dissimilar. Labor is also becoming a smaller percentage of total cost as expenses such as shipping increase. There are a number of other ancillary operation costs, like overhead, corporate strategy as well as other internal and external business costs now being considered part of the equation.
Managing consistency and quality can take its toll on smaller companies who have no choice but to send key personnel to deal with issues. This time out of the office and extra travel days required of the distance is taken away from critical revenue producing activities. But if these issues are not dealt with then opportunity cost due to delivery and quality (lost orders, slow response, and unsatisfied customers) will have a bigger impact on the bottom line.
Considering coming home? Then it is a good time to partner with a design company that is experienced in US manufacturing and the strategies for navigating domestic sourcing and component cost challenges. Gyre9’s team has worked with a number of small and medium-sized companies, who have successfully produced and profited from products made right here in the US.