3 Reasons to Consider Reshoring Your Manufacturing
With President Trump’s promise to “make America great again” comes much debate about offshore manufacturing and reshoring jobs in the U.S. If you are considering moving manufacturing abroad or bringing your manufacturing production back to the U.S., here are some benefits to reshoring worth considering.
Boost Your Products’ Credibility
A “Made in the USA” label on a product can increase consumer trust, depending on what kind of products you produce. This can be especially important for food items, clothing and items where consumer safety is paramount, like in children’s and baby products. As a small retailer, this may require spending a little more money on per unit production costs. But if you are selling products that consumers expect to be made in America, an increase in per unit sales of American-made goods can help balance out the additional costs.
One larger company that has experienced this benefit of reshoring firsthand is Amway. The direct sales giant does a large portion of their business in Asia. When exploring international manufacturing options, they found that in their nutrition bars and health products, two key markets that drive their sales in Asian countries, a “Made in the USA” labeled carried a lot of value for their target audience. For this reason, they found it beneficial to their business model to continue producing health and food items in the U.S.
Avoid Tax Penalties
Since the recent presidential election, reshoring has become a hot topic in the mainstream media. The newly-elected President Trump made bringing more jobs back to the U.S. by penalizing companies that have moved manufacturing production of their products overseas a key talking point of his campaign. Companies that do this and then sell them in the American market can expect to see as high as a 35 percent tariff on those goods from the Trump administration. For small retail companies, that high of a fee on internationally manufactured products can sharply decimate any profit margins that would be increased by saving money producing merchandise abroad.
While it is still too early in Trump’s presidency to know for sure what changes there will be in tax penalties for businesses that manufacture their goods abroad, the potential for this change is enough to make many large companies rethink their plans to offshore manufacturing and make moves to reshore instead. For instance, Intel just announced plans to invest over $7 billion to create the most advanced semiconductor factory in the world in Chandler, Arizona. The project was previously been halted in 2013, but has now seen new life.
Reduce Shipping Costs
If your business produces large, heavy products, costly shipping rates or long shipping times can make international manufacturing more expensive of an option than American manufacturing. For instance, if you have a small business designing and manufacturing furniture, while it may be less expensive to make a table or a sofa in China, shipping those items to your customers may cost so much more that it offsets your manufacturing savings.
For large companies, the difference in shipping costs can be even more, depending on the average amount of products manufactured each month. Companies also typically end up spending more money on logistics and planning to ensure the goods make it from point A to point B in a timely manner.