When choosing your supplier, you want to make a well-informed decision. While the manufacturer’s history, knowledge, communication, and quality are highly influential factors, every company is faced with the initial choice: onshore or offshore?
Companies have many choices when it comes to manufacturing suppliers. Therefore, this guide will help you weigh the pros and cons to onshoring and offshoring.
Onshoring is production within your home nation.
Pros of Onshoring
- Communication – With onshore manufacturing, you won’t need to overcome any language or cultural barriers. Communication often affects quality, so it is imperative that expectations are clearly understood across the board.
- Proximity – In early negotiations or if a production problem ever arose, it is nice to have the option to visit the manufacturing facility to witness operations. If the supplier is in your home country, face-to-face collaboration is a plausible option. This is a valuable benefit when factoring travel time and expenses.
- Support – Onshored jobs support your country and local community. Local manufacturing positively affects the economy and employment.
Cons of Onshoring
- Cost – Onshored manufacturing is often more expensive than offshored manufacturing. For example, in the USA, higher costs can be attributed to labor laws, employee benefits, and cost of living.
- Limited Labor – Hiring is a struggle for many US manufacturing companies. Manufacturing facilities may not have a large enough talent pool to take on high production runs. Additionally, many Americans have misconceptions about USA manufacturing, which discourage them from applying for manufacturing careers.
Offshoring is production outside of your home nation. The pros and cons are the opposite of the pros and cons of onshoring.
Pros of Offshoring
- Cost – Cost is the most influential factor when companies choose to offshore. Offshored products may be cheaper to produce because you are sometimes able to get around your home country’s environmental laws, taxes, and employee protection laws. In general, labor is cheaper outside of the US due to lower salaries and lack of common US employee benefits.
- Talent Pool – Offshored facilities often have larger talent pools, making it easier to find labor.
Cons of Offshoring
- Shipping – Shipping becomes more expensive when exchanging product between countries. Therefore, most offshored products are small, lightweight, high volume parts. You risk longer shipping times and the possibility of products being lost at sea (yes, that really happens).
- Time Zone – Communication is already more difficult due to language and cultural differences, but time zone differences add another layer of complexity. It can be hard to set up meetings within business hours, and you may not receive immediate responses when contacting for assistance.
- Legal Systems – While the change in legal systems can work to your advantage, it also can lead to complications. You must familiarize yourself with different laws and regulations, tax systems, and tariffs.
Why are so many businesses reshoring?
Reshoring, or bringing manufacturing back home, has gained popularity in recent years. After spring of 2020, many business models were restructured. Considering labor shortages, shipping lag, border closures, and political complications, many companies decided it was time to reshore.
Other common reasons to reshore include local tax incentives, increased emphasis on sustainability, and pride of local business.
Which one is right for you?
Looking to manufacture your product in the USA? Batesville Products has been a proud USA supplier for over 75 years. Give us a call today to see how BPI can help you produce high-quality castings.