{"id":11217,"date":"2023-06-13T08:24:09","date_gmt":"2023-06-13T15:24:09","guid":{"rendered":"https:\/\/www.qad.com\/blog\/?p=11217"},"modified":"2023-06-13T08:25:58","modified_gmt":"2023-06-13T15:25:58","slug":"top-considerations-around-reshoring-in-todays-supply-chain","status":"publish","type":"post","link":"https:\/\/www.qad.com\/blog\/2023\/06\/top-considerations-around-reshoring-in-todays-supply-chain","title":{"rendered":"Top Considerations Around Reshoring in Today’s Supply Chain"},"content":{"rendered":"

[vc_row][vc_column][vc_single_image image=”11218″ img_size=”full”][vc_column_text]It\u2019s no secret that putting all of your eggs in one basket probably isn\u2019t the best idea, but that\u2019s exactly what manufacturers around the world have been doing for years in offshoring production to China.\u00a0<\/span><\/p>\n

Starting in the late 1980s, packing up shop and moving abroad made sense. Benefits such as low-cost labor, raw materials, cheap transportation, favorable regulations and proximity to suppliers were too good to pass up. The trouble is, that was then and this is now.\u00a0<\/span><\/p>\n

The COVID-19 pandemic, geopolitical tension, inflation, trade issues and environmental and labor concerns exposed existing vulnerabilities in global supply chains and wreaked havoc like none of us have known before. Suddenly, it became all too apparent that a consolidated global supply chain reliant on a single nation for many raw materials and finished products wasn\u2019t such a good strategy after all.<\/span><\/p>\n

Had the <\/span>Auto Supply Chain Prophets<\/span><\/a> podcast been around in the 1980s and 1990s, I like to think that Cathy Fisher of Quistem, Jan Griffiths of Gravitas Detroit and I would have seen this tidal wave of supply chain disruption coming and played a role in safeguarding our industry. We can\u2019t change the past, but we can help you prepare for the future and one way we do that is by sharing insights like those found in our <\/span>Delivering on the Promise of Delivery<\/span><\/a> white paper discussing our vision, \u201cThe 24 Essential Supply Chain Processes\u201d.<\/span><\/p>\n

Recent trends have made it clear that diverse supply chains, strong supplier relationships and risk management strategies like reshoring are more important than ever. We recently had the opportunity to take a deep dive into the latter in a <\/span>two-part series<\/span><\/a> with the queen of reshoring herself, Rosemary Coates, Executive Director of <\/span>The Reshoring Institute<\/span><\/a>, and we have a few takeaways any leader considering such a move should take into consideration.<\/span><\/p>\n

The Supply Chain is an Umbrella \u2013 a Big One<\/span><\/h2>\n

It\u2019s easy to think about the global supply chain as a single entity, but it\u2019s important to remember that it\u2019s really thousands of smaller ones that work together to some degree. The same holds true for your internal supply chain operations.\u00a0<\/span><\/p>\n

\u201cWe need to think about supply chain as being an umbrella term,\u201d explains Rosemary in the <\/span>first<\/span><\/a> of our two-part series. When people think about supply chain, purchasing is usually the first thing that comes to mind, but all of your enterprise\u2019s operations fall under the same umbrella. That includes front-end forecasting and planning, procurement, manufacturing, logistics and import\/export.<\/span><\/p>\n

Most leaders considering reshoring start with total cost of ownership methodologies, but it\u2019s important to widen your scope beyond purchasing and look at the entire umbrella.\u00a0<\/span><\/p>\n

\u201cInstead of just looking at total cost of ownership, or the cost benefit analysis, or reshoring, or just the basic economics, now we\u2019re considering risk and strategies in global manufacturing,\u201d continues Rosemary.<\/span><\/p>\n

Reshoring to the US Doesn\u2019t Have to Be All or Nothing<\/span><\/h2>\n

Many automotive players felt the heat when China shut down during the pandemic and car sales plummeted, but it\u2019s not too surprising considering more than <\/span>80%<\/span><\/a> of the world\u2019s auto supply chain is connected to the nation. Talk about a domino effect.<\/span><\/p>\n

Modern technologies, diverse suppliers and regional production facilities can help companies mitigate supply chain disruption, but that doesn\u2019t mean there isn\u2019t still a strong incentive to do business in the Asia-Pacific market. The region\u2019s automotive market alone was valued at nearly <\/span>$128 billion<\/span><\/a> in 2021 and is expected to grow at a compound annual growth rate (CAGR) of more than <\/span>7.1%<\/span><\/a> through 2028.\u00a0<\/span><\/p>\n

\u201cA mistake companies make is thinking about reshoring [as] bringing all your production back to the U.S. \u2014 that\u2019s not really the way global companies think these days,\u201d explains Rosemary. \u201cInstead, they\u2019re looking at the global manufacturing landscape, and determining if they should keep some of their production in Asia \u2014 specifically, because it\u2019s a huge growth market, especially for automotive.\u201d<\/span><\/p>\n

\u201cWhen we talk about reshoring, we are talking about expanding manufacturing in the US or bringing some manufacturing back. But it\u2019s within the context of a bigger global strategy that companies are considering at this point,\u201d continues Rosemary.<\/span><\/p>\n

Local-for-Local Manufacturing and Reshoring are Compatible<\/span><\/h2>\n

Manufacturers have been producing goods locally for local sale for longer than any of us can remember. Hundreds and perhaps even thousands of years ago, farmers and crafters sold wares locally for the good of their local economies and dispersed the surplus through the earliest supply chains.\u00a0<\/span><\/p>\n

The benefits of this practice remain clear today. When you use local labor, procure raw materials locally and center production in the same area, the benefits flow into the nearby economy in the form of job growth and financial stability. The practice also reduces the risk of child and human labor concerns, cuts down on carbon-intensive shipping and supports other environmental, social and corporate governance (ESG) criteria.\u00a0<\/span><\/p>\n

\u201cIf you have a growth market in China, and you plan to sell your products there, you probably ought to be manufacturing there. And the same thing is true for the US,\u201d says Rosemary.<\/span><\/p>\n

Through this lens, it\u2019s easy to see that local-for-local manufacturing and reshoring are complementary, but they\u2019re also part of a bigger picture. Manufacturers and suppliers can reshore some operations to the US, or whichever country they call \u201chome,\u201d in alignment with their global strategy and drive economic growth and sustainability improvements at the same time.\u00a0<\/span><\/p>\n

Positive, Proactive Control Over Supply Chains is Mission Critical for ESG<\/span><\/h2>\n

Wherever you decide to do business, <\/span>ESG requirements<\/span><\/a>, forced labor concerns in China and policies like the US Uyghur Forced Labor Prevention Act make it clear that business leaders absolutely must keep a close eye on production facilities and supply chain operations, but the process isn\u2019t one to fear.\u00a0<\/span><\/p>\n

\u201cWe\u2019ve been preaching this for a while: You can\u2019t just expect everybody to mind all the laws and do all the right things. You have to go out there and look at your supply chain,\u201d shares Rosemary.\u00a0<\/span><\/p>\n

We recommend making surprise visits to your facilities to ensure there aren\u2019t any labor violations and using supplier management software, like <\/span>QAD’s Supplier Management<\/span><\/a>, to share data between companies, suppliers and regulatory agencies. As discussed in a recent <\/span>blog post<\/span><\/a>, regulatory compliance is key and violations can be bad for your company\u2019s reputation and bottom line.\u00a0<\/span><\/p>\n

Since the Uyghur Forced Labor Prevention Act took effect, US Customs has reportedly detained thousands of shipments valued at nearly <\/span>$1.4 million<\/span><\/a>. Supplier management software, data sharing, strong relationships with suppliers and feet on the ground at production sites can help minimize the risk of trade issues and keep your supply chain flowing.<\/span><\/p>\n

Other Countries Offer Low-Cost Labor, but Building Supply Chains Takes Time<\/span><\/h2>\n

The Uyghur Forced Labor Prevention Act and other policies have many manufacturers looking for places outside of China to set up operations, but their choices aren\u2019t limited to the US or another home country. India, Africa, Vietnam and Mexico also offer low-cost labor, but supply chains there must also be managed ethically and take time to build.<\/span><\/p>\n

\u201cThat\u2019s a very important message for global manufacturers \u2014 [which] the automotive industry has consistently aspired to be: This idea of local for local means that they have to really be on their game \u2014 from a supply chain perspective \u2014 to be able to manage those different localities and optimize their supply chains globally as well,\u201d shares Cathy.<\/span><\/p>\n

\u201cWe tell our clients, you can\u2019t just snap your finger and redevelop your supply base,\u201d adds Rosemary. \u201cBecause as manufacturing went offshore to China, all the suppliers went with them \u2014 you have to redevelop all of that, and that\u2019s not a trivial task.\u201d<\/span><\/p>\n

When considering operations in a new market, companies also need to account for varying import, export and global trade requirements. As discussed in another recent <\/span>blog post<\/span><\/a>, companies that do business in the US should look into Foreign-Trade Zones (FTZ) for duty and tariff purposes. We also recommend using solutions like <\/span>QAD’s Transportation Execution<\/span><\/a> to streamline the process for meeting regulatory trade requirements and avoiding trade risks.<\/span><\/p>\n

Cutting-Edge Supply Chains Make Data-Based Decisions<\/span><\/h2>\n

This is true from a best practices perspective, whether we\u2019re talking about reshoring or not. Rosemary, Cathy, Jan and I agree \u2013 and I\u2019m sure you will, too \u2013 that the days of exclusively relying on spreadsheets have come to an end. They still have a place, perhaps at the plant level, but no spreadsheet is going to deliver the visibility or control that a modern manufacturer needs to proactively <\/span>manage global supply chain operations<\/span><\/a>.<\/span><\/p>\n

\u201cSpreadsheets may be useful for a particular project or some work you\u2019re doing today. But longer term, it should be integrated with your ERP system, looking at data extracts that are the truth across all systems and all users,\u201d explains Rosemary.\u00a0<\/span><\/p>\n

Reshoring is driving a shift away from global manufacturing and supply chains toward regional versions in a way, but the nature of modern business is highly interconnected and leaders need the right data at their fingertips to make informed decisions. In this case, you might consider implementing a <\/span>Supplier Relationship Management<\/span><\/a> tool that can effectively track and map all the many capabilities of your supply chain.<\/span><\/p>\n

It\u2019s also important to remember, as we often say on the Auto Supply Chain Prophets podcast, that we can\u2019t apply the same principles to every aspect of our supply chain. As Cathy explains, it\u2019s a mistake for automotive manufacturers to approach semiconductor and fastener requirements the same way. They have completely different supply chains and require different planning procedures. Modern technologies streamline the process and manufacturers should use them to their full advantage.<\/span><\/p>\n

Is reshoring a conversation at your enterprise right now? If so, I highly recommend tuning into <\/b>part one<\/b><\/a> and <\/b>part two<\/b><\/a> of our conversation with Rosemary Coates of The Reshoring Institute. Cathy, Jan and I take pride in helping you prepare for the supply chain of tomorrow, today, and look forward to having you join us for the next episode of the <\/b>Auto Supply Chain Prophets<\/b><\/a> podcast.<\/b>[\/vc_column_text][\/vc_column][\/vc_row]<\/p>\n","protected":false},"excerpt":{"rendered":"

[vc_row][vc_column][vc_single_image image=”11218″ img_size=”full”][vc_column_text]It\u2019s no secret that putting all of your eggs in one basket probably isn\u2019t the best idea, but that\u2019s exactly what manufacturers around the world have been doing for years in offshoring production to China.\u00a0 Starting in the late 1980s, packing up shop and moving abroad made sense. Benefits such as low-cost labor, […]<\/p>\n","protected":false},"author":22,"featured_media":11218,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[182,2045],"tags":[2097,7,227,2590,2098,1332,92,1598,2696],"class_list":["post-11217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-featured","category-supply-chain-trends","tag-auto-supply-chain-prophets","tag-automotive","tag-automotive-industry","tag-esg","tag-industry-podcast","tag-supplier-management","tag-supply-chain","tag-supply-chain-disruption","tag-uyghur-forced-labor-prevention-act"],"yoast_head":"\nTop Considerations Around Reshoring in Today's Supply Chain | QAD Blog<\/title>\n<meta name=\"description\" content=\"Explore reshoring and supply chain considerations in the automotive industry, including ESG and Uyghur Forced Labor Prevention Act.\" \/>\n<meta name=\"robots\" content=\"index, follow, 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