Throughout the early 2000s, companies moved much of their manufacturing and sourcing to countries overseas, mostly to cut costs. Since then, however, international trade tensions, transportation disruptions, and rising costs have undermined the business case for such offshoring, making onshoring a more attractive alternative.
What Is Onshoring?
Onshoring refers to when a company pulls its sourcing and manufacturing operations back to its home country after having moved them overseas. (In this context, onshoring is also referred to as reshoring.) In other situations, it’s a strategy that a business sets on Day 1. Either way, onshoring is part of a worldwide reconsideration of supply chain management that also incorporates approaches such as nearshoring to countries that are closer to home.
Onshoring Explained
Many companies are onshoring part or all of their global supply chains as the labor cost benefits they initially experienced overseas are compromised by proliferating tariffs, logistical delays, and other risks. For other US businesses, there’s a growing appeal to onshore their supply chains to closely control quality, benefit from government incentives, or adopt “Made in America” branding.
However, onshoring also presents challenges. Domestic labor costs can still be higher, and finding qualified workers may be difficult in some industries. Companies may also need to invest in new infrastructure and technology to establish domestic production facilities. Of note, the US Chamber of Commerce says it hasn’t seen a mass exodus of US companies out of manufacturing centers in Asia. More often, onshoring represents part of a supply chain rebalancing in an increasingly complex and uncertain global business environment.
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