While “offshoring” has been the word common to manufacturing for some decades, changes in the economic environment are making “homeshoring” more and more attractive, with a number of manufacturers actively moving their offshore operations back to the home turf.
“Total Cost of Ownership” (TOC), a new holistic view of manufacturing, takes into account costs of quality, delivery, transportation, consumption of oil, monitoring of labour, carrying stock, freight, packaging and all other aspects of production and companies are finding it less expensive and more certain to manufacture onshore instead of offshore.
A report from Reynders, McVeigh Capital Management shows how Chinese labour costs are rising 15% to 20% per year compared to only 2% in the US, while increasing oil costs have raised transportation costs dramatically.
Closing the distance from the point of production to the point of sale coupled with automation to reduce labour costs can reduce production costs to the point that offshore production is becoming less attractive. In addition, new domestic energy sources such as shale gas and Canadian oil make future energy costs look set to lower if sourced domestically.