What Is Reshoring?

Many companies are shifting globalization into reverse. Whereas they used to save money by moving their manufacturing offshore or sourcing goods overseas, the savings don’t always add up anymore, given the recent rise in labor costs in countries overseas, trade barriers, shipping delays, and other difficulties. This has given rise to a trend called reshoring.

What Is Reshoring?

Reshoring means bringing some or all of a company’s production and supply chain operations back to its home country after they’d been moved. A recent Chief Executive survey of US executives showed that 58% of their companies are considering reshoring, with 18% looking to repatriate at least three-quarters of their overseas operations. Also called onshoring, this move is often part of a multifaceted supply chain restructuring. For example, a US company may leave some supply chain links in far-flung manufacturing centers in Asia, bring others closer to home in Mexico, and locate yet others in the United States. The main driver behind each decision remains the ongoing quest to lower costs, according to Boston Consulting Group (BCG), though many executives are willing to pay slightly more for benefits such as greater supply chain stability, ease of doing business, and shorter lead times.

Reshoring Explained

Reshoring is a difficult process, and not all companies or industries benefit equally. For instance, small to midsize companies might be hard-pressed to make the upfront investment in infrastructure and technology for domestic production. US producers of low-cost goods, such as textiles, may not be able to undercut imports from abroad—and even those that could may be subject to import tariffs. For one thing, US labor costs are higher. Still, increasing automation and incentives from state and federal governments can tip the scale in favor of reshoring.

BCG recommends weighing the need for change, in terms of avoiding trade restrictions and other global supply chain challenges, against the difficulty of change in categories such as capital expenditure, technology challenges, and local costs. The consultancy’s research shows that reshoring success isn’t guaranteed; only about half of the respondents to its survey reported meeting goals for lowering costs, shortening lead times, or improving sustainability when restructuring their supply chains.