Right-Shoring: Why OEMs Are Outsourcing Manufacturing Domestically

Posted by Craig Zoberis

May 20, 2014 9:00:00 AM

outsourcing manufacturing domestically Discover the new normal of OEM outsourced manufacturing: meeting local demand and achieving competitive innovation domestically.

As a manufacturing executive, you've probably investigated the feasibility of outsourcing manufacturing to countries like China. Finding affordable labor and ample real estate in developing nations was a common choice for OEMs (original equipment manufacturers) throughout the '90s and early 2000s.

However, offshoring has lost its edge due to an uneven global recovery from a worldwide recession. Demand, not just supply, has emerged in these foreign markets, along with increasing foreign labor costs.

Because of this shift in globalization, OEMs are becoming less focused on channeling lower labor costs and are setting their sights on the following new outsourced manufacturing elements:

  • Diverse and flexible production location
  • Rich network of innovation-oriented partnerships
  • Strong focus on technical skills
  • Reliable, responsive partners
  • Dependable, quality-controlled production

The above elements have created a shift in outsourcing manufacturing back to developed markets, but this transfer is currently moving beyond reshoring and onto a "right-shoring" perspective of preemptive strategies.

According to McKinsey, more than two-thirds of global manufacturing now takes place near its demand.

Outsourced manufacturing has been most affected by the growth of regional demand in industries such as automobiles, machinery and fabricated metals.

The Benefits Of Right-Shoring For Outsourced Manufacturing

Right-shoring is gaining ground in two burgeoning areas of manufacturing strategy: proximity to demand and proximity to innovation.

When it comes to demand and innovation, it's simply beneficial to have a base of suppliers that are capable of identifying and meeting local needs.

Right-shoring is a potential solution to any or all of the following of your OEM needs:

  • Strengthening your company's ability to respond quickly to end-users' demands in fluctuating conditions
  • Reducing the chance of losing intellectual property rights (patents, process secrets, etc.)
  • Increasing innovation because manufacturing and R&D (research and development) are in close proximity
  • Gaining better control over quality, consistency and continued improvement
  • Reducing inventory by working in a just-in-time (JIT) fashion
  • Reducing shipping costs from overseas and the unpredictable time your products spend in customs
  • Reducing the risk of regulatory compliance
  • Reducing fuel costs once needed to ship in product from overseas
  • Increasing production flexibility with constant, clear communication

When deciding on how to outsource your manufacturing, it's important to evaluate all of the above criteria if you're going to achieve a competitive advantage.

The new era of global outsourced manufacturing has arrived, and the old strategies are fading fast. For the future of your manufacturing company, you need to facilitate your operations through the lens of shifting demand and innovation opportunities.

Ready to discover more right-shoring benefits from outsourcing your manufacturing domestically? Call me, Craig Zoberis, at 630-323-4115 or click on the button below to speak with an outsourcing-manufacturing expert at Fusion OEM.

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