Why More OEMs are Reshoring Manufacturing Through COVID-19Comments Off on Why More OEMs are Reshoring Manufacturing Through COVID-19
COVID’s developments are changing the landscape of manufacturing in the United States. With international trade becoming more challenging and a still-recovering job market, many OEMs are reshoring their operations to accommodate.
69% of manufacturing companies are looking to “reshore” production to North America, according to a recent Thomas Industrial Survey. By reshoring manufacturing production back to the United States, OEMs in aerospace, automotive, electronics and other industries could see major benefits to costs and turnaround time.
A History of Reshoring
10 years ago, China offered manufacturing services at a 30% lower cost than the U.S. — a deal that American companies were hard-pressed to ignore. For years, scores of U.S. manufacturing jobs were suffering the same fate from projects being outsourced overseas.
Then things started to change: domestic energy costs decreased, Chinese wages increased, and the manufacturing market in the U.S. began to rise. Evolutions in automation technology also allowed for a resurgence in reshoring, as it allows manufacturers greater flexibility, scalability and reliance on machines rather than human resources.
Reshoring is now quickly becoming the preferred option for manufacturers — especially in metal stamping. In addition to the closing cost gap, there are other important reasons why once-overseas projects are starting to come back home.
Reshoring Generates Faster Lead Times and Increases Warehouse Space
Because stamped metal part delivery from overseas manufacturers takes between 10 to 14 weeks, customers must make a steep investment in their inventories when opting for offshore manufacturing.
Modern consumers expect faster delivery than ever before — to stay competitive, companies must keep vast stores of products on hand at all times.
Keeping inventories stocked at these levels can be taxing. Besides taking up valuable warehouse space, storing large numbers of products runs the risk of stolen, lost, damaged, obsolete, or wasted goods. Working with domestic manufacturers dramatically shortens lead times, allowing for just-in-time delivery while freeing up valuable warehouse space.
Offshore Manufacturing Can Bring Quality Concerns
Quality cost remains one of the most common offshore problems. According to the Reshoring Initiative’s 2017 Data Report, quality is the most frequently cited reason for reshoring manufacturing to the United States.
Manufacturers cited a number of negative offshore factors, including:
- – Transportation costs
- – Communications
- – Rising wages offshore
Quality costs prove to be critical, and U.S. manufacturers have access to the industry’s highest quality materials and automation technology. Most domestic metal stampers adhere to stringent quality standards to maintain ISO, AS, or even IATF 16949:2016 certification.
(See samples of the high-quality stamped metal parts we produce in our Sample Gallery)
High-quality materials and strict product quality standards result in extraordinary accuracy. Using cutting-edge machine vision technology, US-based manufacturers regularly produce, assemble, and inspect large volumes with almost no defects.
In addition to problems with offshoring, the benefits of domestic production were noted in the report as well. One major benefit included the company brand value of promoting “Made in the USA” — 8 out of 10 American consumers reported they would prefer to buy American-made products over imported ones, with 60% stating they’d be willing to pay ten percent more for Made in USA products.
Additional benefits of domestic manufacturing included:
- Availability of a skilled workforce
- Proximity to customers and faster time to market
- Government incentives for reshoring
New Trade Agreement Stabilizes Tariffs
The recent U.S.-Mexico-Canada Agreement (USMCA) also promotes domestic manufacturing by committing to tariff-free trade. This agreement is expected to increase annual exports by $2.2 billion and spark reshoring efforts in agriculture, automotive and other industries.
In addition, the trade agreement calls for more stringent rules of origin requirements, which can make global sourcing more complex. Compared to NAFTA’s previous rules, USMCA will require manufacturers to invest in visibility tools so their supply chains can quickly qualify and onboard suppliers to trace materials and production.
Domestic Production Can Provide Greater Flexibility
Working with an overseas metal stamper creates serious limitations in flexibility — if consumers need changes in design, engineering, or volume, turnaround times increase significantly. Once the manufacturer finally completes the work, customers must either pay higher shipping fees to expedite delivery or wait weeks for their final products to arrive.
U.S. metal stamping companies can perform virtually any product revision more quickly and efficiently than their overseas counterparts. Domestic manufacturers are typically involved earlier and more heavily throughout production than overseas companies, providing local consultations about improved processes and better material options to improve the quality and cost-effectiveness of their clients’ projects.
Working with Domestic Metal Stamping Suppliers
In this month of Independence Day, now is the time to consider the benefits of returning manufacturing opportunities to our shores.
Customers no longer need to rely on overseas fabricators for the best prices; by working domestically, they can procure high quality, cost-effective parts with fast turnaround times.
ESI’s team of metal stamping experts, located in North Branford, Connecticut, has worked with OEMs across the country and the world. To learn more about how ESI sets the standard for accuracy in manufacturing, check out our case study detailing our use of cutting edge technology to produce high part volumes with zero defects. Or, feel free to contact our team today.