For decades, one of the major manufacturing challenges globally has been the need for labor. Factories require workers to manage machinery, equipment, supplies, shipping, and other critical tasks. And, for many years, American manufacturers frequently turned to offshoring, or shifting some portions of their supply chain offshore, to reduce costs.
Now, however, with the effects of shipping and port disruptions from the global pandemic causing lingering hiccups in the supply chain, and the increasingly high cost of fuel, offshoring no longer looks like an attractive option. Some companies are “reshoring” or moving aspects of their supply chain back to the United States.
But with reshoring comes many challenges. These manufacturing challenges have no easy answer but need to be addressed individually before making the move back onshore.
Critical Labor Shortage
The United States also faces a critical labor shortage. As of October 2022, there were around 6 million unemployed workers to fill about 10 million U.S. jobs. Although that number fluctuates, manufacturers frequently bemoan the loss of skilled labor. This labor shortage is one of the many manufacturing challenges of reshoring.
Another challenge manufacturers face in their move to reshore operations is the lack of infrastructure. Because companies went to the offshore model for such a long time, many former factories and warehouses have been converted to other uses. Available real estate for building new manufacturing infrastructure may be limited or too expensive, or local zoning laws may have changed.
Compounding the issue are transportation challenges. Manufacturers need an efficient and inexpensive way to get goods to market: rail, road, or waterways that welcome the opportunity to transport materials. That isn’t always available in areas where real estate to build factories is cheap. It takes time and ingenuity to overcome manufacturing challenges related to reshoring and the local infrastructure.
Energy costs continue to skyrocket, too. This is a global problem, but within the United States, both the cost of electricity (to run factories and operations) and fuel (to transport goods) has risen exponentially in the past several years. When manufacturing was mostly onshore decades ago, fuel was cheap. Now these price increases need to be factored into the cost of goods and the cost of reshoring operations.
Lastly, although manufacturing operations add jobs to the local economy, they can also bring opposition from the community. Some fear the increased traffic in the area from trucks will degrade the quality of life; others believe that all manufacturing operations add pollutants to the air, water, and land.
Working with your local community leaders and helping the public understand the nature of your operations is one way to offset these fears. Increasingly, companies are working with public relations experts to proactively address community concerns. Once you’ve found a location for your reshoring needs, you can begin to actively work with the community to listen to and respond to their needs.
Reshoring may continue to be a trend in the near future as supply chains remain uncertain. Although they come with many manufacturing challenges, the industry has always faced, and overcome, every challenge.
Emerald TC provides software and consulting for manufacturing companies. We can help you choose the right accounting software, ERP system, payroll, or other software for your needs. Contact us or call 678-456-6919 for more information.