It’s called reshoring, and it’s the process by which companies manufacturing in what have in the past been considered as cheaper overseas countries decide to move their product back home. It’s an awkward sounding word, but we believe that it’s one that will increasingly become part of our global trading language as the true and mounting cost of overseas manufacturing is recognised and factored in to the sales cycle.
The statistics are persuasive. According to the Manufacturers’ Organization, the EEF, one in six British companies manufacturing in China re-shored in the last three years, and of these around 40% reported that turnover increased as a direct result, with 3% reporting a fall. Around 60% reported a moderate rise in profits and employment, with the main reason given for moving production back being to improve the quality of products and components being produced, an increase in the certainty of timely delivery, the speed of delivery, and cost.
But there are more reasons than these. As Niels Morch, IES MD says, “IES’ customers are re-investing in UK manufacturing not just because of rising costs in developing economies but because there is a huge wealth of experience and expertise here that is simply not available in these countries.”
And will the trend increase in speed? Niels again, “We provide factory relocation and field engineering support worldwide so we have a very good feel for how global economies are fairing. What we’ve seen in the last fifteen years or so are our customers moving production to countries with lower labour costs such as China, Eastern Europe and also South America. We’re witness to this trend slowing and the reverse happening. We’re seeing high value added producers expanding production capability here in the UK, particularly in high technology sectors, and in some cases we are reinstalling lines that we had previously moved out of the country.
Experience has shown that there are a number of factors that should be worked out in detail before action is taken, including:
1. Planning and scheduling: It’s vital to have a clear overview and defined plan of everything that needs to happen, how it’s going to happen, when and what costs will be incurred.
2. Information: It’s all in the detail. Collect and collate as much information as possible in advance. Decide what is to be relocated and what is involved in doing this. Are there specific problems attached? What additional support is required?
3. Communications: Ensure that all the parties involved receive adequate, appropriate and regular information and updates to enable them to do their job.
4. Expertise: Call in the experts! Engage with knowledgeable and experienced relocation people as soon as possible.
5. Project management: Make sure you have a robust project management team in place with the authority and structure to allow good decision making with strong communications
And if you’re thinking of re-shoring why not give us a call; we’d be happy to advise.