But before spending valuable dollars to relocate production facilities, conduct a comprehensive cost-analysis of overall benefits, as well as company-focused advantages and disadvantages for every aspect of production.
Analyze All Factors Before Decision
Evaluating the overall benefits and consequences of staying in the current location versus reshoring is crucial to success and avoiding unexpected events and delays during relocation. Obviously, an important consideration is the cost associated with moving operations back to the U.S.
However, the costs related to the downtime required to facilitate a move to the U.S. and all of the possible “hidden” costs must also be part of the overall equation for a company considering reshoring. The total cost of moving production overseas is hefty, taking into consideration factors like engineering, pre-planning, and cost to package, transport and re-install production equipment and process lines in the U.S. Additionally, Duties, customs and other fees associated with exporting a company’s product should be compared to that of distributing the product in a new location. Other factors include language and cultural barriers as well as the cost savings or advantage of occupying the new location relative to other facilities when product design, model changes or communication is important.
However, reshoring presents significant challenges in some industries. Manufacturers face hurdles from new healthcare legislation, stringent EPA and emissions regulation guidelines and corporate tax rates in flux. A recent MIT survey reported that U.S. companies named corporate tax reductions, providing tax credits and R&D incentives as the top three government actions that will accelerate the reshoring process.
Manufacturers need to take a broad look at their business models and consider the big picture when thinking about reshoring. While improving one or two aspects of the business that are causing concern may save considerable amounts of money, the savings could be lost in other areas that are affected by the change.
The vetting process for companies considering reshoring also includes an examination of post-move factors, such as regulation, logistics and transportation. If environmental impact is a concern, companies should consider whether the environmental regulation (or proposed regulation) is more intense at the proposed location or the existing location of manufacturing, and any financial impact incurred as a result. A comparison of the transportation and shipping infrastructure, including the ease and economy of utilizing it, should also be evaluated, particularly if a company manufacturers and ships products.
Manufacturing companies cannot afford to ignore the reshoring movement. For certain manufacturing companies, reshoring to the U.S. can be a sound financial decision. But before spending valuable dollars to relocate production facilities, conducting a comprehensive cost-analysis of overall benefits, as well as company-focused advantages and disadvantages for every aspect of production, is a crucial part of the process.
Brian Gallagher is Director of Marketing and Dan Mollohan leads O’Neal’s Inc. Manufacturing Relocation Operations. For more than 38 years, O’Neal has been delivering capital projects in the automotive, pharmaceutical/biotech, process chemical, manufacturing, energy and pulp and paper markets worldwide.
