Take Back Manufacturing

Shorter supply chains, not these long, global ones; technology adoption; and lean manufacturing principles are keys to reshoring. af_istocker/iStock/Getty Images Plus

In my recent book Take Back Manufacturing: An Imperative for Western Economies, I describe how we may soon see a universal acceptance at the political level that reshoring manufacturing is a national imperative that is economically desirable to achieve shorter, safer, cleaner, more controlled, more reliable, more secure, and more productive local supply chains that will support a recovery of our national prosperity.

So, the political ask, with maybe some economic inducement and encouragement, will be for business to get on with it.

Here are the key things to remember as you look at your business options for future reshoring:

Run the Numbers

First, you need to understand and be comfortable with the economics of any source change. Onshore versus offshore landed costs need to be reviewed, compared, and indexed looking forward into the future.

It’s clear that, depending on the product, the shipping footprint of long supply chains and the associated costs of transportation and other border/trade activities is much more expensive than we realized.

Certainly, increasing interest rates operating on weeks of inventory in long supply chains that must cross many borders, versus only days of inventory for local supply chains, increases the cost difference in favour of shorter supply chains.

Also, don’t forget the additional transport packaging and associated docking effort that may be needed if shipping is across a sea or through many transit points. All of this can be minimized if the supply chain is local. You must also consider the cost of packaging disposal if it’s necessary to stage or repack for the end customer.

There can be additional costs in the form of the storage space that you may need to hold the transit inventory when sea containers arrive and have to be unpacked and redeployed into your business.

Many business risks are associated with long supply chains, including inventory obsolescence and product shrinkage, as well as the potential of delivery delays that need to be factored into the costs.

Supporting a long-distance supply chain in a different time zone and culture also may incur an added support cost delta.

In Take Back Manufacturing, author Nigel Southway explains how a globalized manufacturing approach, with supply chains supported by liberalized free trade agreements, has caused the “hollowing out” of local manufacturing.

For these reasons, shorter and more localized supply chains now typically are less expensive than long supply chains, but it will always depend on many factors, so it is prudent to seek help from experts in building a validated cost structure.

Experts have developed reshoring cost models that can assist you in getting real and accurate numbers and include all of the many cost factors, so you gain confidence when making your sourcing decisions.

Process Improvements

When you increase local capacity and perhaps start spending capital, it’s important to make sure you have a clear grip on lean principles so you don’t automate or tolerate waste in your new processes and operating structures. This means you need a whole organization and workforce that is perhaps re-educated and trained on lean concepts.

Optimizing New Product Quality

If you are designing new products, make sure the new product introduction design process uses Six Sigma and design for manufacturability principles to ensure a high degree of compatibility between the product and the process of manufacturing so that its inherently defect-free and highly productive.

New Technologies

Although it is anticipated that in most cases the future cost of long supply chains will tend to outweigh any low-cost labour advantage gained offshore, it’s still advantageous to minimize local labour content with new automation technologies and systems.

Not only will this reduce costs, but it avoids recruiting and training labour that probably is going to be in short supply in the local economy as we see growth in reshoring manufacturing. And, of course, it further helps reduce any sensitivity to local versus low-cost labour difference.

Future products destined for local manufacturing may not be the exact same products that were offshored. Inevitably, there will be new technology in both the products and the manufacturing processes that may demand new facilities, equipment capital, knowledge, skills, and systems. And these must be fully integrated using an Industry 4.0 strategy.

The real purpose of Industry 4.0 is to move your whole process to a cyberphysical state so that human interaction and effort in managing and undertaking the business process is eliminated or minimized.

This Industry 4.0 strategy requires that you follow a well-planned road map that involves partnering with your business system and process equipment providers to develop a specific Industry 4.0 evolution plan. This must also be front-ended with a lean transformation journey to ensure waste is eliminated and not part of the final solution.

Partner With Local Supply Chain

You need to look at your local supply chains down to the raw material level to fully understand if you can rebuild local clusters of supply capability, even if this means you need to partner or invest in such relationships where practical.

As said, it’s important to look at your supplier’s own supply chain, and, if needed, the chain feeding it to help ensure the whole end-to-end supply chain is localized as much as practical for optimum short-cycle delivery and lowest inventory. This will help the whole business supply chain reach optimum cost and delivery performance.

Support and Funding

It’s worth the effort to research and connect with organizations that provide local technical support and maybe financial funding support. Don’t be shy. You don’t have time to reinvent the wheel, plus, if you’re entitled to assisted support funding, why not access it?

I did not call my book “Welcome Back Manufacturing” because it certainly needs to be “taken back.” And, yes, it takes significant planning and effort by everyone, but it’s worth it for our future prosperity.

Nigel Southway is an author, consultant, and past chair of the Society of Manufacturing Engineers in Toronto, nsouthway@bell.net, www.nigelsouthwayauthor.com.