From nearshoring and reshoring to off-shore manufacturing, we talk about the manufacturing trends that are shaping how mid-market wholesalers do business.

1. Post Link: Offshoring vs. Reshoring: Mid-Market Manufacturing Trends
Offshoring vs. Reshoring: Mid-Market Manufacturing Trends
A Legacy of Offshore Production and Outsourcing
For decades, manufacturing trends have been characterized by an emphasis on American
companies sending operations overseas in the name of cutting costs and acquiring new
business in emerging markets.
The exodus began in the late 1970s and 80s, as large multinationals began offshoring
production and outsourcing to foreign contractors in low-wage environments like China and
Southeast Asia, paving the way for mid-market companies to do the same. According to Jack
Welch, former CEO of GE and a pioneer of the practice, it would have been ideal to “have every
plant you own on a barge to move with currencies and changes in the economy.”
Indeed, GE would send more and more of their manufacturing operations abroad, while also
pushing their parts suppliers to make the move. Across industries, production continued its
overseas migration, sparking similar moves among mid-market companies.
According to a 2014 report released by The Keystone Group, the vast majority of C-Level mid-
market executives surveyed reported having experience with offshoring and/or outsourcing.

2. Reshoring Production: A Growing Manufacturing Trend?
The tides may be turning, however, as talk of reshoring production increases in what may prove
to be a real trend among American businesses.
In 2013, appliance manufacturer Whirlpool announced that it would be moving some of its
production from Mexico to a plant in Clyde, Ohio to save on energy and shipping. Last year,
retail behemoth Walmart pledged to buy $250 billion worth of goods made in America over the
next ten years––an unmistakable PR move to be sure, but a PR move with an emphasis on
Walmart’s bottom line. At the 2013 National Retail Federation Expo, Walmart’s U.S. CEO Bill
Simon explained, “manufacturers have...defined the “tipping points” at which manufacturing
abroad will no longer make sense.” Even offshore manufacturing pioneer GE has been moving
production back to the United States.
The reality is, labor and energy costs are increasing overseas, and there’s a growing pressure
to get merchandise into stores faster. According to A.T. Kearney, the industries with the
strongest tendencies toward reshoring include electrical equipment, appliance and component
manufacturing at 15% of total surveyed, transportation equipment manufacturing at 15%, and
the fast-moving, high-turnover apparel industry, with 12%. The top three reasons for reshoring
included faster delivery time, improved quality, and positive effects on brand and company
image.
Considerations for Mid-Market Companies
For mid-market firms, there are unique challenges at play in making the decision to offshore or
re-shore production, requiring a more nuanced approach.
According to the Keystone Group, the “primary rationale for offshoring and outsourcing
initiatives” among mid-market companies “included both cost savings and emerging market
entry.” However, “nearly a quarter of the respondents did not achieve the level of savings
expected prior to beginning the effort. Nearly all respondents reported experiencing increased
costs, especially in the areas of labor, raw materials and freight.”
Indeed, managing overseas production can be an especially daunting challenge for mid-market
companies, who have fewer resources, on-site employees, and established infrastructure than
large corporate enterprises. It requires extremely strong leadership and experienced talent to
maintain quality standards and ensure on-time delivery in a more volatile, less transparent
overseas supply chain.
The decision to reshore production also presents its own challenges to mid-market companies.
Reshoring production is a difficult transition, requiring significant investment and no small
amount of risk. Challenges common to companies of any size include higher domestic taxes
and the prospect of finding skilled labor in a country where it’s been decades since certain types
of manufacturing jobs existed.
Regardless of where the trends are going, commodity prices and labor costs are not necessarily
the biggest concerns for mid-market companies. They require a more holistic approach that
evaluates multiple factors, including quality control, legal frameworks, management needs, and

3. hidden costs and risks.
At the moment, the Keystone Group reports that just 19% of mid-market executives expect
more companies to reshore production in the future, and only 6% have concrete plans to bring
manufacturing back to the United States.
A More Balanced Approach: Nearshoring
Another interesting finding in the Keystone Group report was the fact that 25% of executives
planned to relocate manufacturing operations to other locations abroad. The report does not
provide specifics as to where those operations are going, but it does emphasize that proximity
is becoming a more important consideration for the mid-market.
“Nearshoring” is the idea of bringing production closer to key markets in order to reduce the
time and expense required for management oversight. Nearshoring would allow companies to
build stronger relationships with local teams and vendors and gain more supply chain
control. For mid-market wholesale brands and manufacturers in the United States, this could
mean moving production to Central and South America. It’s an interesting approach that could
provide a more optimal balance between proximity and cost.
In general, when deciding between going abroad, bringing manufacturing back home, or
bringing it just a bit closer to home, mid-market wholesalers will have to thoroughly evaluate
potential risks and opportunities, and consider long-term strategy as well as cost.
Questions about offshoring, reshoring, nearshoring, or any of the other points we talked about
in this post? Experiences to share from the perspective of your own supply chain? Let us know
in the comments below.
Post originally located at: https://www.handshake.com/blog/nearshoring-offshoring-re-shor-
ng-manufacturing-trends/
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