How Reshoring Can Bolster Your Bottom Line
- Finance 101

How Reshoring Can Bolster Your Bottom Line

What is reshoring? Essentially, it’s the opposite of offshoring, meaning companies are bringing manufacturing jobs and other employment opportunities back to their country.

Today, more and more companies based in the United States and the United Kingdom are reshoring. And it’s easy to see why when one considers the many benefits of reshoring. For example, reshoring boosts employment, improves consistency and quality of input, enhances the ability to respond swiftly to customer demand, and even reduces ownership costs. But, most importantly, it can also help you increase company profits. Here’s how:

Economic Changes

As our economic climate changes, it becomes more costly to house factories and produces goods in other countries. In addition, other factors, such as fluxes in wages, have dramatically impacted the cost of business abroad, especially in countries throughout Asia. In fact, according to data released by the International Labour Organisation, wages have increased rapidly each year, between 7.1 and 7.8 percent, from 2000 to 2008. As a result, it has become increasingly more expensive to do business abroad over the past decade, which is why many companies have begun reshoring.

Shipping Costs

In addition to rising labor and production costs, another factor looms that can hurt your bottom line: shipping costs. As time has passed, savvy shipping companies have noticed a much greater potential for profits, thus, increasing their shipping prices. Unfortunately, these increased shipping prices, partnered with rising fuel costs to ship goods and products, have made offshore manufacturing even more expensive.

Complications Cost Money

There are more issues related to offshore business than shipping costs, fuel costs, and increased labor and production wages. When doing business in another country, it is easy to run into problems and obstacles due to the distance. Some of these issues include delays in product delivery, the need for international trips to meet with producers in other countries, and time differences that can make vital communication difficult. Reshoring your business might save you dollars, time and complication.

Incentives

In some cases, companies that do business in the U.S. may be offered incentives such as government tax breaks. For example, Select USA puts forth that companies that do business in the U.S. can benefit from a range of programs and incentives from energy-efficiency grants and workforce development programs to industry-specific benefits.

Success Story

Amway, a U.S.-based company, works both at home and abroad. It simply works for their business, as they have consumers in all areas of the world. For example, Amway produces products in Asia, rather than in the U.S., distributed to the Asian markets, which shrinks production and shipping times by up to 25 days.

But not all of their manufacturing and production is outsourced. For example, the direct selling company has many significant facilities here in the U.S. In an article published by Forbes, Dr. George Calvert, Chief Supply Chain and R&D Officer at Amway, noted that over the past decade, these types of strategic production decisions have saved Amway hundreds of millions of dollars while maintaining or improving quality and even reducing production lead times.

How Reshoring Can Bolster Your Bottom Line

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