What is Reshoring?

Reshoring

If you’re considering reshoring a good or service, you may be wondering if it is an effective decision for your company.

Frankly speaking, the decision to reshore is not a one size fits all scenario and widely depends on your business model and goals.

After doing some research, we’ve put together some points we thought would be valuable knowing overall.

What is reshoring?

So, exactly what is reshoring? Reshoring is the returning of manufacturing jobs to the originating country.

For example, during the industrial revolution, high volume steel manufacturing was performed within the U.S.A.

Over time, these same manufacturers found the benefits of offshoring and slowly began to move their facilities and jobs into other countries.

Now, let’s say this same manufacturer decided that they are going to bring back the steel manufacturing facility and jobs to the U.S.. That would be reshoring.

According to EPSNews, manufacturing jobs reshored to the United States went up 50% from 2016 to 2017. Since 2010, over 576,000 jobs have returned from offshore areas around the world.

Why would a company reshore?

There are many reasons why a company may decide to reshore. Here are two of those reasons:

1. Trade embargos

Many times with trade embargos, the reason behind them is to force organizations to reshore their business.

Often, these organizations have a business model where they engineer goods or services domestically and offshore the labor to another country.

Essentially, this is done with the intent to sell that good or service back into the originating country for higher profit margins.

In effect, trade embargos can be a tool to help domestic economies grow or stabilize.

2. Taxes

Taxes play another role when considering reshoring. For every product that enters or exits a country, there are taxes.

Depending on the product’s country of origin and international trade agreements, import taxes and export taxes can either make or break the bank when it comes to profit margins.

So, when a company is thinking of reshoring their production, they may be thinking about tax incentives that governing agencies are providing to help reduce tax creep into their profit margins.

What happens when a manufacturer reshores?

When a manufacturer reshores production there is an economic impact that occurs. Generally speaking, that economic impact is a positive one for neighboring towns, cities and states.

Furthermore, it can act as a form of stimulus.

Reshoring stimulates the economy

Consider the following. When a company reshores production, new trades and jobs are created.

Also, it generates a flow of money and when money begins to flow, a compounding effect occurs.

In this scenario, compounding means that money is being used on new construction, roads, and facilities.

Plus with more jobs, more money is spent at the neighborhood grocery store, clothing is being purchased, sales taxes are generated, grants are handed out and so on.

Also, it generates a flow of money and when money begins to flow, a compounding effect occurs.

Technology and reshoring

Technology makes the case for reshoring now when it couldn’t a few years ago. Before, offshoring was used when the costs for labor and automation technology was too high.

But, now the cost of automation technology has come down and the labor force has changed to reflect the direct need for manufacturing.

Additionally, we are seeing an era where 3D printing machines are now household consumer items being sold for less than a cellphone.

Taking that into consideration, where human hands once were, robotic hands now operate.

And, those human hands are now managing software which operates the machinery.

Is reshoring still growing in 2019?

According to EPSNews updates, reshoring is on a small decline since 2018.

Trade disputes, inflation, and dysfunction have attributed to slower reshoring rates. However, an estimated 131,000 jobs were added in 2018 from reshoring.

Should I be encouraged by reshoring? Yes, you should.

The United States is continuing to reduce regulations, become more environmentally conscious, and growing in sustainability as the years pass by.

This is a very exciting growth and potential for reshoring in manufacturing.

If we are considering reshoring, how can Venubi Marketplace help?

Buyers who use Venubi Marketplace, use it to locate, qualify and purchase directly from manufacturers and vendors that meet their purchasing requirements.

In many cases, these purchasing requirements mean only buying from domestic entities.

So, by having your company within the Venubi Marketplace and positioning it as a new domestic entity, we can help expose your business to a market that may be overlooked by traditional methods.

Check out all the reasons why manufacturers are migrating to Venubi Marketplace