Although reshoring has been a hot topic over the last several years, the conversations have become even more serious as a result of the pandemic, and the significant supply chain disruptions caused by Covid that have occurred in the past two years. Lockdowns, skyrocketing freight costs, port congestion and long lead times have caused major headaches. As a result, reshoring is one mitigation strategy that manufacturers are employing to reduce supply chain risk, especially in light of the potential for continued disruptions. For those reasons and more, many customers have begun sourcing production domestically again. D&M has been ready to help.
The situation is volatile and changing practically day to day. Right now, parts of China are still under lockdown to control the spread of Covid, a strategy that has been implemented in almost every major city as Covid cases increase. Areas covering roughly 30% of China’s GDP were affected by the outbreaks, according to Goldman Sachs Group Inc. And even while some of the lockdowns have eased recently and then have been reinstated when Covid reappears, ports have been at a virtual standstill and overall manufacturing production has been severely impacted with long lead times causing huge delays. In addition to delays, there are often quality concerns, and issues of traceability, especially in the instance of medical parts manufacturing.
Additionally, freight costs from China to the U.S. have also been volatile. According to Freightos, costs during the second week of June 2022 were at $9,585 per 40-foot container to the West Coast from East Asia. Those numbers have come down 57% from the peak of $22,173 in September 2020, but it is still up more than three-fold from $2,700 at the pandemic start.
Not only have freight costs increased, the processing and transit times to get a container out of China is currently double what it was just a few months ago. That doesn’t include the time to get it processed in the U.S. — only the time from a manufacturer’s dock in China to making a landing at a U.S. port.
Many manufacturers have historically not considered the full landed costs of offshoring their production. They have focused on direct manufacturing costs and transportation costs but have not considered end-to-end production costs and risks. Although part costs may be lower, total offshore production costs are often higher, and when supply chain risks are factored in, the costs become an order of magnitude higher.
The current situation has changed the calculus. Many domestic businesses are experiencing both the costs and the risks of manufacturing offshore. These companies are looking to reshore or near-shore operations to mitigate these issues. We have been able to help.
Many of our customers are moving programs from overseas and only considering domestic suppliers for new programs. If you’re looking for a new resource to help reshore your manufacturing, look to D&M.
Find out why our customers have sourced their parts right here in the U.S. since our inception 50 years ago. Let us quote your next project and learn how we can help you bring your manufacturing stateside again.
All my best,
Chip