Professional Documents
Culture Documents
Nearshoring Reshoring
Nearshoring Reshoring
NEARSHORING
Articles:
1. North American Supply Chains: Will reshoring actually happen?
2. Mexico’s nearshoring potential: Weighing opportunities and risks
Outsourcing Models - Offshoring
01
OFFSHORING
Moving manufacturing out of
the country where the resulting
goods are consumed.
Aim:
• Lower operational and
labour costs.
• Gain access to new
markets.
• Access to a wider network
of knowledge.
• Delegation of routine and
mundane tasks.
[1] Onshoring and Nearshoring will Redraw the Shipping Map. (2023, January 31). Retrieved from Old Dominion Freight Line:
https://www.odfl.com/us/en/resources/freight-knowledge/odfl-blog/onshoring-and-nearshoring-will-redraw-the-shipping-map.html
[2] 4 key reasons companies use offshoring for their business. (n.d.). Retrieved from Time Doctor: https://www.timedoctor.com/blog/companies-use-offshoring-in-order-to-do-what/
Outsourcing Models - Onshoring
02
ONSHORING
Keeping production in the same
country where the products are
consumed, regardless of the
country's location.
Aim:
• Cost-saving.
• Improve product quality.
• Reduce lead times.
• Foster innovation.
• Promote efficiency, and
better coordination and
communication.
[1] Onshoring and Nearshoring will Redraw the Shipping Map. (2023, January 31). Retrieved from Old Dominion Freight Line:
https://www.odfl.com/us/en/resources/freight-knowledge/odfl-blog/onshoring-and-nearshoring-will-redraw-the-shipping-map.html
[2] Maximizing Efficiency: Harnessing the Power of Onshoring in Manufacturing. (n.d.). Retrieved from Praxie: https://praxie.com/manufacturing-onshoring/
Outsourcing Models - Reshoring
03
RESHORING
Returning the production and
manufacturing back to the
company's original country.
Aim:
• Bring manufacturing jobs
back home.
• Enhance resilience with
respect to essential supplies.
• Decrease vulnerability
against strategic competitors.
• Enhance the security of
intellectual property.
• Improve customer service.
[1] Onshoring and Nearshoring will Redraw the Shipping Map. (2023, January 31). Retrieved from Old Dominion Freight Line:
https://www.odfl.com/us/en/resources/freight-knowledge/odfl-blog/onshoring-and-nearshoring-will-redraw-the-shipping-map.html
[2] Rahul, K. (n.d.). Reshoring. Retrieved from Wall Street Mojo: https://www.wallstreetmojo.com/reshoring/
Outsourcing Models - Nearshoring
04
NEARSHORING
Moving manufacturing to a country
close to where the resulting goods
will be consumed.
Aim:
• Reduce overall costs.
• Streamline production and
expand market potential.
• Provide cultural and time zone
advantages.
• Eliminate inefficiencies caused
by long distances and time
differences between continents.
[1] Onshoring and Nearshoring will Redraw the Shipping Map. (2023, January 31). Retrieved from Old Dominion Freight Line: https://www.odfl.com/us/en/resources/freight-knowledge/odfl-blog/onshoring-and-nearshoring-will-redraw-the-shipping-map.html
[2] Nearshoring: Unlocking the Benefits of Proximity and Cultural Alignment. (2023, December 12). Retrieved from Faster Capital: https://fastercapital.com/content/Nearshoring--Unlocking-the-Benefits-of-Proximity-and-Cultural-Alignment.html
Reshoring
[1] Is Reshoring Manufacturing Back to the U.S. the Next Industrial Revolution? (2023, April 24). Retrieved from Interpower:
https://blog.interpower.com/infopower/is-reshoring-americas-second-great-industrial-revolution
Live Poll
Scenario #1: Ford sets up a manufacturing unit
in China to benefit from the low cost of labor
and access to certain automotive raw materials.
[1] Top Companies That Offshore Operations Abroad & Their Success Stories. (2022, January 10). Retrieved from KDCI Outsourcing:
https://www.kdci.co/outsourcing-blog/post/list-of-companies-that-offshore-their-operations-abroad
Survey Results
Survey results conducted by the Reshoring Institute based on a sampling pool of 500
Americans.
• Americans prefer products that are Made in the USA
• Americans say they are willing to pay up to 20% more.
• Americans believe American products are better/higher quality.
• Americans appear to be unaware of global counterfeiting. Walmart is leading with a $350 Billion
investment in US-Made Goods through
Takeaway: Opportunity to charge more for a product made in America. This should be 2023.
considered when analyzing the costs/benefits of reshoring.
Do you prefer products that are Would you pay more for a product MADE in How much more would you pay for
MADE in the USA? the USA? products MADE IN USA?
4%
Not Sure Not sure 3%
17% 19% 10% 10%
20%
25%
No 30%
14% 51% 50%
No Yes
22% 60%
Yes 33%
69%
[1] Coates, R. (n.d.). THE RESULTS ARE IN. Retrieved from Reshoring Institute: https://reshoringinstitute.org/made-in-usa-survey/
[2] Investing in the Future of U.S. Manufacturing, Our Commitment to American Jobs. (2021, March 3). Retrieved from Walmart:
https://corporate.walmart.com/news/2021/03/03/investing-in-the-future-of-u-s-manufacturing-our-commitment-to-american-jobs#
Reshoring Internal Factors – SWOT Analysis
STRENGTHS WEAKNESSES
S W
• Improved cost control • High upfront costs and overhead
• More responsive quality assurance • Investment in infrastructure
• Reduced lead times & transportation costs • Disruption to existing supply chains
• Enhanced IP safeguard • Retraining or hiring a skilled workforce
• Decreased time zone gap • Regulatory and legal considerations
• Job creation and economic growth
• Reduced product emissions
OPPORTUNITIES THREATS
O T
• Rebuild the middle class in America • Global economic and political uncertainties
• Innovation and technology integration • Competition from low-cost offshore
• Competition through localized production • Overdependence on domestic suppliers
• Retraining/hiring local talent • Regulatory requirements
• Currency rate shield
• Government incentives
[1] The Return of Made in [Country]: Manufacturing Reshoring Trends Unveiled. (n.d.). Retrieved from Praxie: https://praxie.com/manufacturing-reshoring-trends/
• Geopolitical tensions
EXTERNAL FACTORS
P • Policies/subsidies
• National Security
Politics
• Cost difference
E
• GDP
ANALYSIS OF THE
• Job creation
S •
•
•
Economic growth
Supply chain resilience
Skills development
Society
• Advanced manufacturing
T •
•
•
Digital connectivity
Reshaping workforce skills
Resilience through Digitalization
Technology
PESTEL
• Environmental impacts
E
• Recycling policies
• Consumption trends Environment
• Production processes
• IP Protection
L
• Trade Agreements
• Tax Implications Law
• Labour Laws
Reshoring Political Implications
Geopolitical Risk
• USA-China Tension over Taiwan
• Russia-Ukraine war
• Red sea crisis
• Israel-Hamas
Government Policies
• Incentivize domestic manufacturing
• Tax breaks, subsidies and tariff on imports
• Trade agreements (e.g., USMCA)
National Security
• Domestic manufacturing of computer chips
• Controlled goods, defense products
• Geopolitical tensions
P • Policies/subsides
• National Security
Politics
[1] Rudge, S. (2024, February 1). The Momentum of Reshoring in American Industry. Retrieved from Supply Chain World:
https://scw-mag.com/news/the-momentum-of-reshoring-in-american-industry/
Reshoring Economic Implications
Cost Difference
• Labor, transportation, material and other costs
• Automation and robotics can make product cost effective
GDP
• Rising GDP increase demand for domestic goods
Exchange Rate
• Strong currencies make imports more expensive
• Less fluctuations in exchange rates
Inflation
• Rising inflation increase production costs
• Cost difference
E
• GDP
• Exchange rate Economy
• Inflation
[1] Rudge, S. (2024, February 1). The Momentum of Reshoring in American Industry. Retrieved from Supply Chain World:
https://scw-mag.com/news/the-momentum-of-reshoring-in-american-industry/
Reshoring Social Implications
Job Creation
• Bring jobs back home
• Lower unemployment rate in local communities
Economic Growth
• Reshoring could stimulate economic activities
• Every new manufacturing job has a multiplier effect – about 1.4 times
• Job creation
S •
•
•
Economic growth
Supply chain resilience
Skills development
Society
[1] Moser, H., & Kelley, M. (2015, June 01). Reshoring Essential to Manufacturing’s Renaissance. Retrieved from Business Xpansion:
https://bxjmag.com/reshoring-essential-to-manufacturings-renaissance/
Reshoring Technological Implications
Advanced manufacturing techniques
• Automation, AI and robotics
• Upgraded ERP Systems
Digital connectivity
• High-speed internet
• Cloud computing
• Real-time data analytics
Real-World Cases
• Food: 40% reduction in order processing time
• Medical devices :30% reduction in inventory-carrying costs
• Advanced manufacturing
T •
•
•
Digital connectivity
Reshaping workforce skills
Resilience through digitalization
Technology
[1] Reshoring: Bringing Jobs Back Home for Economic Growth. (2024, Feb 13). Retrieved from Faster Capital:
https://fastercapital.com/content/Reshoring--Bringing-Jobs-Back-Home-for-Economic-Growth.html#The-Role-of-Technology-in-Facilitating-Reshoring-Efforts
[2] Reshoring case studies Reshoring Case Studies (reshoringinstitute.org)
Reshoring Environmental Sustainability
Environmental Impacts
Fewer regulations on fossil fuels
Reliance on dirty power
Long-distance transport
Consumption Trends
Electronics manufacturing = 2% of global greenhouse gas emissions
CHIPS and Science Act
Production Processes
Electronic waste in the manufacturing of electronic goods:
Transport Waste
Time Waste
• Environmental impacts
E
• Recycling policies
• Consumption trends Environment
• Production processes
[1] Conklen, R. (2023, August 8). The role of ESG in reshoring manufacturing. Retrieved from LinkedIn: https://www.linkedin.com/pulse/role-esg-reshoring-manufacturing-robin-conklen/
Reshoring Legal Implications
Intellectual Property Protection
Lower risk of counterfeiting and IP leakage
Legal recourse available with a domestic supplier
Trade Agreements
US-Mexico-Canada Agreement (USMCA)
232 and 301 tariffs on imports
Antidumping (“AD”) and countervailing (“CVD”) duties
Tax Implications
Border adjustment tax (BAT) and the Offshoring tax penalty
Made in America tax credit
Labour Laws
69% of the reshoring from 2010 to 2019 due to Right to Work Laws
• IP Protection
• Trade Agreements
L •
•
Tax Implications
Labour Laws
Law
[1] Moser, H. (2021, April 8). Right to Work Attracts Good Jobs From Overseas. Retrieved from National Right To Work Committee:
https://nrtwc.org/right-to-work-attracts-good-jobs-from-overseas/
Reshoring Failure
Automation Reliance
Complete reliance on new
advanced automation to Pilot Testing
18 Months compete with Chinese prices Craftsman did not do any
18-Month timeline announced pilot testing of
in 2019 for full manufacturing manufacturing equipment at
production at the new facility the supplier site
[1] Keilman, J. (2023, July 22). Why America’s Largest Tool Company Couldn’t Make a Wrench in America. Retrieved from The Wall Street Journal:
https://www.wsj.com/articles/craftsman-america-wrench-stanley-black-decker-reshoring-factory-1125792f
Reshoring Success
2,800+
New products launched
from Appliance Park
facility
5 Million KW
Energy saved annually
using efficient lighting
.
4,000 jobs
Time reduction to Manufacturing space 23,900+ US supplier jobs
produce dishwasher reduction to produce created to support GE 33%
in the US dishwashers in the US
Fuel
66% 80% 99% Efficiency
Cost reduction
To produce water heaters
in the US
$1 Billion
[1] Hines, Z. (2023, April 10). General Electric’s New Reshoring Efforts. Retrieved from Reshoring Institute:
https://reshoringinstitute.org/wp-content/uploads/case-studies/case-study-ge.pdf
Reshoring from trend to new reality?
2009 2016 2022
Great Recession Trump Presidency Russia-Ukraine
War
2 million The “Reshorer-in-Chief”, Exposed vulnerability of
manufacturing jobs Donald Trump won the countries that depend on
lost in just 15 U.S. Presidential election regions affected by war
months. on the theme of “jobs, (Russia and Ukraine).
jobs, jobs
1990-2019 Beyond the
Horizon
Offshoring to China
was the economic The EIU thinks that most
strategy of US companies will revert to
manufacturer. their pre-COVID-19
practices.
[1] Khan, M. S. (2013, July 24). US manufacturing and the troubled promise of reshoring. Retrieved from The Guardian:
https://www.theguardian.com/business/2013/jul/24/us-manufacturing-troubled-promise-reshoring
Nearshoring
[1] Winterfeldt, L. (2022, November 10). Nearshoring Mexico. Retrieved from WMP Mexico Advisors: https://wmp.mx/en/nearshoring-mexico/
Nearshoring - Do you know?
1) What are the factors you think lead to nearshoring decision other than supply chain / logistics issue?
2) What are the other country options than Mexico you think USA have for nearshoring?
[1] Santos, A. D. (2023, September 12). Retrieved March 2024, from https://unity-connect.com/our-resources/blog/nearshore-outsourcing-examples/
Nearshoring – Is Mexico the New China?
[1] Santos, A. D. (2023, September 12). Retrieved March 2024, from https://unity-connect.com/our-resources/blog/nearshore-outsourcing-examples/
Nearshoring – Operational Challenges People, Social &
Cultural Factors
People, Social &
Cultural Factors
Material
Availability
Methods of Skilled
Access to Raw Labor
Process Standardization Materials Labor Costs and
and Adaption Material Quality Wage Trends
and Reliability
Supply Chain Language and
Key Takeaways: Supply Chain
OptimizationTraining and Cultural Barriers
Disruption
Strategic Partnership Education Program
Tools/Software
Potential & Proactive Operationa
Risk Management Energy Efficiency and Industry 4.0 l
Challenges
Resource Conservation Integration
Performance Metrics
Environmental Sustainability Practices Technological Misalignment
Regulatory Compliance Infrastructure
and Standards Equipment Quality Control
Maintenance and Standards
Reliability
Environment Data Analytics
Capabilities
Tools & Technology
Measurement
Nearshoring Internal Factors – SWOT Analysis
STRENGTHS WEAKNESSES
• Strategic location • Security concerns
• Favorable Business Environment • Infrastructure challenges
• Financing Activities / • Bureaucracy and possible corruption
S •
Government Support
Cultural Compatibility
W •
•
Income inequality and poverty
Lack of Infrastructure
• Reduced carbon footprint due • Otay Mesa Commercial Crossing
to proximity
OPPORTUNITIES THREATS
• Higher productivity and lower operating • Political instability and uncertainty,
cost • Rising labor and rent costs
• US economics sanctions
O T
• Supply chain diversification
• • Chinese companies setting up facilities
Develop renewable energy and
• Security related risks
biotechnology industry
• New opportunities for Mexican e-
commerce companies
• Low labour wages
[1] (2023, November 22). Retrieved March 2024, from xometry.com: https://www.xometry.com/resources/reshoring/nearshoring/
[2] Santos, A. D. (2023, September 12). Retrieved March 2024, from https://unity-connect.com/our-resources/blog/nearshore-outsourcing-examples/
Nearshoring - Mexico Top Industry Sectors
[1] Torres, L. (2023, July 11). Retrieved March 2024, from https://www.dallasfed.org/research/economics/2023/0711
[2] Retrieved 2024 March, from Office of the United States Trade Representative: https://ustr.gov/
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