The re-shoring of manufacturing from China to the West is happening “to some extent,” says Dominy. A Gartner survey from the previous year found 30 percent of companies in the process of either re-shoring or near-shoring.
The primary reason for the switch was the need to boost supply-chain agility and responsiveness. Transferring some manufacturing to the U.S. or Mexico brings production closer to consumer markets, allowing suppliers to react more quickly to changes in demand patterns.
The recent spate of natural disasters in Asia is another reason. The flooding in Thailand and tsunami in Japan were “a wake-up call for many manufacturers,” said Dominy.
When it comes to weighing the cost of sourcing in China, companies today are looking at more than just wage rates. Their analyses include factors such as segmentation and the total cost to serve particular customers.
In addition, said Dominy, manufacturers need to consider the benefits of keeping production in China, so as to serve that nation’s growing domestic consumer market.
For production that is coming back to the Western Hemisphere, the U.S. isn’t the only alternative – and is far from the least expensive. In addition to Mexico, companies are exploring options in other parts of Latin America, and even Europe. In Gartner’s survey, the number-one destination for manufacturing leaving China was India, and the second was Eastern Europe.
The ultimate decision on where to manufacture varies by industry and product type. Dominy said companies need to examine their overall business strategies and determine precisely how they intend to compete in the marketplace – whether on price, quality, service or through customer segmentation. “That will dictate the kind of manufacturing environment that’s needed.”
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Keywords: supply chain, supply chain management, supply chain planning, inventory control, retail supply chain, supply chain risk management, re-shoring