In recent years, an increasing number of manufacturers have brought operations back to the U.S. According to the Reshoring Initiative, 265,000 manufacturing jobs returned to the U.S. between January 2010 and July 2016. And while large companies’ embrace of reshoring isn’t new, today even many smaller companies are looking to make the move.
Some companies are motivated by the expiration of tax breaks from foreign countries and aim to save money as labor, facility, material and logistics costs in offshore locations increase. In other cases, business-friendly policies in some U.S. states have attracted manufacturing operations home. Further, some manufacturers are concerned about the poor protection of intellectual property in offshore regions.
Reshoring can hold great promise for manufacturers. Over time, organizations can substantially reduce transportation and warehousing costs. In addition, U.S.-based operations can offer manufacturers more oversight and control over the ultimate quality of their product. Manufacturers also get closer to their supply chain, including top vendors and customers, when they reshore. This can lead to improved product quality, better service, and more collaborative and rewarding relationships.
Plan Thoroughly to Ensure a Smooth Reshoring Process
It’s one thing to look at the trends across the industry and decide to move manufacturing operations back to the U.S. But executing a reshoring move is an extraordinarily complex process with many moving parts that requires thorough planning and resource management.
Companies need to understand from the start that reshoring is a step-by-step transition — not a single, large-scale flip-the-switch moment. As a result, companies should take a controlled and methodical approach. They need to clearly outline short, intermediate and long-term goals, and identify how the reshoring plan melds with the company’s overall business strategy.
Since reshoring will require significant upfront expenses in terms of investment in facilities, equipment and technology, manufacturers also need to perform a thorough cost-benefit analysis to ensure they will benefit over the long term by moving operations back to the United States.
Once a manufacturer checks all those boxes, it can begin the hard work necessary to execute the move. The good news is manufacturers today have a potentially game-changing advantage in advanced cloud ERP systems.
Embrace Simplicity and Scalability in the Cloud
Cloud ERP solutions on the market today free manufacturers from complex and costly hardware installations that were required with traditional, on-premises ERP solutions. This can be crucial during a reshoring operation. For example, if a manufacturer seeks to make a reshoring move but has an on-premises ERP system, it would need to perform systems integrations and re-deployments to get the system up and running in the new location. This could slow the reshoring process and potentially lead to gaps in service. By contrast, the cloud offers simplicity and scalability, allowing a company to deploy it once and then provide access to anyone, anywhere.
The cloud also improves financial control for manufacturers by enabling them to pay for the tools they need and easily add resources to accommodate increased transactions, products, customers, users or business locations. Instead of a large upfront investment, the cloud allows manufacturers to pay recurring operational expenses. And since upgrades and bug fixes happen automatically in the cloud, manufacturers can be certain they are operating on an up-to-date system at all times. This also saves them the time they would otherwise have to devote to additional software purchases and installations.
Further, today’s systems include advanced functionality right out of the box, ensuring manufacturers can begin realizing efficiency gains and benefits almost immediately. Intelligence tools allow manufacturers to track inventory, containers, vessels or vehicles in transit, or the transactions that take place in multiple warehouses. All of this enables smarter decision-making, planning, and clearer tracking of operations, which are all crucial during a reshoring move.
Enhance Supply Chain Relationships and Recruitment
A cloud ERP system also helps manufacturers improve supply chain relationships by eliminating the portals that were used to allow vendor and customer access to legacy ERP systems. With the cloud, connecting vendors and customers to a manufacturer’s ERP system is as simple as sharing a web link. This ability to easily engage with customers and vendors on the platform and share large amounts of data and information (including complex designs and technical specifications) ensures fewer mistakes and closer supply chain relationships.
An added, tangential benefit of cloud ERP is its potential impact on recruitment. Younger workers today live in a world of advanced, collaborative and mobile technology. If a manufacturer continues to operate within the outdated confines of an on-premises ERP system, it may be difficult to attract and retain the high-quality, younger workforce it needs to propel the business forward long term. A cloud ERP system, on the other hand, offers the responsiveness, flexibility and collaboration tools younger workers have come to expect from technology. The emerging workforce will view the manufacturers with these advanced tools as the cutting-edge employers that can help advance their careers.
Enable Long-Term Business Growth Through the Cloud
When a manufacturer seeks to bring its operations back to the U.S., it should deploy its new cloud ERP system before its offshore location reduces its services and the new U.S. location begins operations. This ensures the company has time to test and fine-tune business processes and adequately train users in the new location.
But the benefits of cloud ERP go well beyond reshoring. Even after the reshoring move is complete, cloud ERP can enable continuous improvement and growth. With cloud ERP, it is easy for a manufacturer to activate the new functionality needed to grow its business, add new lines of business and offer new services.
Amid all the benefits related to advancements in ERP and the emergence of the cloud, one persistent concern for manufacturers is cybersecurity. It’s important to understand that the major technology companies behind these systems are putting significant resources into the cloud and therefore work tirelessly to maintain high standards of security for the data that companies store in the cloud. Manufacturers can further quell their fears with proactive security measures like penetration testing, cybersecurity risk assessments and vulnerability scanning. These crucial best practices, which every manufacturer should carry out on a regular basis, allow manufacturers to enjoy the advantages of cloud ERP without excessive worry.
The cloud represents the future of ERP. And while a successful reshoring project starts with a comprehensive, well-conceived business plan that complements the company’s overall strategy, cloud ERP can play a major role in facilitating a successful reshoring move. It can help ensure a manufacturer makes the transition as easily as possible without disruption to its business while also re-establishing its operations in the U.S. primed for growth.
Evert Bos and Lee House are leaders in Sikich’s technology practice.