Executive Briefings

Manufacturing Returns to the West: The Implications

The shift by manufacturers from offshore locations in Asia back to the U.S., Mexico and other parts of the western hemisphere is more than anecdotal, says David Kilzer, senior vice president of supply chain solutions with Idhasoft. He outlines the factors that are causing companies to rethink their supply networks.

Multiple factors are driving the discussion about the "near-shoring" of manufacturing, said Kilzer. In addition to existing concerns about the cost of labor, they include expenses related to components, transportation, fuel, security and insurance. "There's a fair amount of overhead [associated] with security regulations," he said. "They all tend to be speed bumps."

The issue is more than one of just cost. Consumers today are demanding greater variability in their products. The trend has led to an explosion in the number of SKUs, along with the increased segmentation of markets. With that development comes a whole new series of risks, related to inventory expense and the uncertainties of new-product introductions.

The shift of some manufacturing out of China and back to the West isn't merely anecdotal, Kilzer said. "It is a real movement among many companies." The trend is taking a number of different forms, including selective re-shoring back to the U.S., near-shoring in countries such as Mexico, and the in-sourcing of production by companies that had previously ceded that function to outside parties.

Another developing trend is the renewed emphasis on postponement, the practice of delaying the customization of a generic product until it reaches a production site close to its ultimate market. Elements such as consumer packaging can be performed at this stage, for greater efficiency and responsiveness to customer needs.

According to Kilzer, postponement is the most popular practice related to the shift in manufacturing today. "My experience is not universal," he acknowledged, "but the decision is being driven largely by the technology component and the cost of transportation." The implications for consumer goods producers, he added, are "huge."

To view video in its entirety, click here


Keywords: supply chain, supply chain management, manufacturing reshoring, near-shoring, international trade, inventory management, supply management, global logistics, supply chain planning, sourcing solutions

Multiple factors are driving the discussion about the "near-shoring" of manufacturing, said Kilzer. In addition to existing concerns about the cost of labor, they include expenses related to components, transportation, fuel, security and insurance. "There's a fair amount of overhead [associated] with security regulations," he said. "They all tend to be speed bumps."

The issue is more than one of just cost. Consumers today are demanding greater variability in their products. The trend has led to an explosion in the number of SKUs, along with the increased segmentation of markets. With that development comes a whole new series of risks, related to inventory expense and the uncertainties of new-product introductions.

The shift of some manufacturing out of China and back to the West isn't merely anecdotal, Kilzer said. "It is a real movement among many companies." The trend is taking a number of different forms, including selective re-shoring back to the U.S., near-shoring in countries such as Mexico, and the in-sourcing of production by companies that had previously ceded that function to outside parties.

Another developing trend is the renewed emphasis on postponement, the practice of delaying the customization of a generic product until it reaches a production site close to its ultimate market. Elements such as consumer packaging can be performed at this stage, for greater efficiency and responsiveness to customer needs.

According to Kilzer, postponement is the most popular practice related to the shift in manufacturing today. "My experience is not universal," he acknowledged, "but the decision is being driven largely by the technology component and the cost of transportation." The implications for consumer goods producers, he added, are "huge."

To view video in its entirety, click here


Keywords: supply chain, supply chain management, manufacturing reshoring, near-shoring, international trade, inventory management, supply management, global logistics, supply chain planning, sourcing solutions