Benefits of Reshoring to North America
In today’s competitive environment, OEMs are looking for opportunities to strengthen their supply chain while maintaining product quality. To achieve this objective, many companies are relocating manufacturing closer to home – a process known as reshoring. Over the past several decades, many North American OEMs transitioned manufacturing offshore, typically to locations in Asia such as China, to take advantage of perceived lower costs and other anticipated benefits. Reshoring is the opposite of offshoring; and is simply bringing manufacturing back from overseas. While some costs such as labor may be lower with offshoring, many OEMs are realizing that reshoring is a much more competitive and attractive option when total cost of ownership and brand reputation are considered.
On-going global trade tensions, geopolitical instabilities, and the COVID-19 pandemic, have resulted in significant disruptions and strains on supply chains. To address these uncertainties, OEMs are seeking more localized suppliers to create a more robust supply chain with fewer risks – and reshoring is an ideal solution.
There are many advantages to reshoring manufacturing to North America. The following highlights the main benefits and makes the case for partnering with a proven and experienced manufacturer like ABS, who has 6 state-of-the-art facilities serving OEMs across North America. All of the advantages below result in production efficiencies and cost savings as well as lower risk for OEMs.
- Superior Quality: offshore manufacturing is known for its less expensive labor. However, offshoring often involves raw materials, tools, and equipment that are also cost driven, often leading to quality issues. A growing number of North American OEMs are looking for reduced quality risks and are seeking an alternative to offshore manufacturing. Reshoring offers North American OEMs more reliable and higher-quality products, which translates to a higher value manufacturing solution with reduced risk. North America has strict standards, and has earned a reputation for manufacturing very high-quality products for various industries, including highly technical and precise sectors such as aerospace and medical devices.
- Excellent Proximity to U.S. and Canada: this is the most obvious benefit of reshoring to North America but it cannot be overstated. OEMs must maintain control over manufacturing and it is much easier to oversee production when manufacturing is closer to home. You can easily travel to most locations in North America in a few hours to check on the status of production whereas most flights to Asia take a day. Additionally, the time differences across North America are very manageable, allowing similar work schedules between personnel and the manufacturing location. This is a huge advantage compared to manufacturing in Asia where there is around a 14-hour time difference, especially when dealing with any urgent matters that cannot afford a delay.
- Streamlined Logistics: reshoring means that finished goods often only take hours to arrive in the U.S. or Canada compared to weeks from most Asian countries, resulting in transportation costs that are much lower as well as a lower risk of delays or damage during transit. This benefit has only been amplified in recent years, especially during 2020, as there have been significant travel and logistics delays with goods from Asia. Shipping costs skyrocketed in 2020, specifically container freight rates, due to logistics disruptions caused by the pandemic. Reshoring streamlines logistics for OEMs, reducing the risk of logistics delays and cost spikes as well as securing brand reliability and consumer trust.
- Less Inventory on Water: as with all supply chains, reducing the inventory throughout the chain is key. For example, goods transported by ocean freight often have a lead time of at least 8 weeks, 6 weeks of which are spent on the water in transit. This scenario results in two big issues: 1) a discovered defect would require the recall of all the product in the supply chain, including the inventory on the water, and 2) volume adjustments due to demand fluctuations are slow and lag by around 8 weeks. A real world example of these issues is playing out at ports across the globe; as a result of logistics disruptions caused during the COVID-19 pandemic, ports are observing huge pile-ups of container ships that will take months to resolve, resulting in massive product delays. Reshoring solves the inventory on water problem by dramatically decreasing the amount of time goods spend in transit - improving speed to market and the ability to rapidly respond to changing market conditions and customer demands.
- Responsible Business: over time, companies have continued to put more emphasis on responsible and sustainable manufacturing where importance is placed on the conditions of the factory and the origin of raw materials. One of the advantages of North America is the value it places on its workforce and keeping them safe. Law labors are enforced and there are limits on how many hours personnel can work each week and restrictions that ensure a safe work environment. Additionally, there are laws to ensure the quality and traceability of raw materials for manufactured products. Unfortunately, the same cannot be said for many countries in Asia. Therefore, companies can do business in North America knowing the workforce is taken care of under the local laws and their reputation is not at risk.
ABS – Americas Reshoring Partner
Established in 1971, ABS Machining has grown to become the recognized global leader in large machining, fabrication, and assembly for OEMs. We offer CNC machining and fabrication services at our state-of-the-art facilities that serve markets across North America including several locations throughout the United States.
The key to our success has been exceptional people, unparalleled facilities, and an unwavering commitment to quality. Our people are experts in their given field. Their expertise is matched only by their passion for serving our clients. We continue to invest in our people with education programs, cross training and in our internal accredited apprenticeship center. Our facilities are equipped to serve our
Our massive fleet of machines and automated welding systems has delivered solutions to the most technically challenging projects. Our commitment to maintaining unparalleled facilities is evidenced by our renowned continuous capital reinvestment initiatives. Our commitment to quality goes well beyond our ISO 9001:2015 Registration. From the inception of all programs, ABS quality professionals work closely with each customer to ensure all their unique requirements are met or exceeded. It is this commitment that has positioned ABS as a strategic supplier to leading OEMs worldwide.
Contact us today to see how we can help with your next project, or give us a call at 1-844-227-6224.
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