Slimming Down for Homecoming

by Todd McDonald on January 30, 2013

By now, it’s common knowledge that the United States is combatting a massive obesity issue. So, in an effort to improve our nation’s health, people are constantly encouraged to find ways to slim down and get lean.

And our businesses aren’t any different.

But, while people are typically motivated by societal pressures and health concerns, companies are more often than not motivated by profit. And in this tough economy, executives everywhere are looking for ways to “trim the fat.”

Of course, just like human beings, businesses can follow several different paths to corporate fitness. The current issue of The Economist includes a special report that details just one of these methods: reshoring.

Originally, the lower costs involved in recruiting and maintaing a labor force abroad attracted big companies to offshore their manufacturing processes, but many executives are now realizing they overdid it. Several firms that previously argued in favor of sending their production abroad (to China especially) are now discovering the hidden costs that come with stretching their supply chains so thin.

Corporate giants like Lenovo, General Electric, Google, and even WalMart are beginning to promote US sourcing. In the past, procurement officers were eager to ship their manufacturing abroad because on paper, the net total was lower than any other alternative. But firms are beginning to take a more sensible look at the entire picture.

While it is certainlty the case that wages for Chinese and other international blue-collar workers is on the rise (which many discourage firms from quickly sending production abroad), the immediate benefits from bringing manufacturing home are much bigger than wages alone.

This is precisely what we found when we took over Kaz’s production of Braun Ear Thermometers. After auditng the existing workflow, we saw that the supply chain was wrought with inefficiencies subject to the restraints, delays and additional costs of overseas shipments and communication as well as the inability to transport finished goods cartridges.

We revolutionized their process by creating a streamlined workflow, entirely in the United States (the country of greatest consumption), which reduced the project’s overall environmental impact and removed unnecessary delays and costs from the supply chain.

Moving manufacturing operations closer to customers can also help reduce waste, decrease transportation costs and delays in production, avoid the expense of excess inventory and underutilized specialized labor and equipment, increase cashflow and (perhaps most importantly) help manufacturers meet customers’ rising demands for agility and speed in an increasingly specialized world.

While it certainly requires some heavy lifting up front, in the long run we think reshoring will create a much healthier, leaner supply chain. What about you? Do you think it’s time for more firms to join the reshoring movement?

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